Labor Rate Calculator

1. Enter your base tech wage. This is the hourly rate you pay a technician before any extras. If you pay different rates, use the average across your team.

2. Set the burden rate. This covers everything on top of wages: employer payroll taxes, workers comp, health insurance, retirement match, uniforms, and training. Most HVAC companies land between 25-40%.

3. Input PTO hours per year. Count vacation, sick days, holidays, and training days. Four weeks (160 hours) is standard. This reduces your available billing hours.

4. Set your utilization rate. This is the percentage of available hours your techs actually spend on billable work. The rest goes to drive time, paperwork, callbacks, and downtime. 40% is realistic for residential service.

5. Enter your team size and overhead. Annual overhead includes rent, trucks, insurance, software, marketing, office staff, and everything else that isn't direct labor or parts.

6. Choose your profit margin. This is the net margin you want after covering all costs. 15-25% is the target range for healthy HVAC businesses.

This calculator uses the ServiceTitan multi-step method that most HVAC business coaches teach. It builds your rate from the bottom up so every dollar of cost is covered.

Step 1 -- Loaded Wage. Take the base wage and add the burden rate. A $35/hr tech with 30% burden actually costs you $45.50/hr when you factor in taxes, insurance, and benefits.

Step 2 -- Available Hours. Start with 2,080 annual work hours (40 hrs/week x 52 weeks) and subtract PTO. This gives you the hours a tech is actually working.

Step 3 -- Billable Hours. Multiply available hours by the utilization rate. This is the number of hours you can actually charge customers for. The gap between available and billable hours is where most shops lose money.

Step 4 -- Overhead Per Hour. Divide total annual overhead by all techs' combined billable hours. This tells you how much overhead each billable hour needs to carry.

Step 5 -- Break-Even Rate. Add the loaded wage and the overhead per hour. This is the minimum you must charge to not lose money -- zero profit.

Step 6 -- Billable Rate. Divide the break-even rate by (1 minus your profit margin). A 20% margin means dividing by 0.80. This is the rate you actually charge customers.

Setting flat rate prices. Your flat rate book is built on a labor rate. If that rate is wrong, every single price in the book is wrong. Run this calculator first, then build your price book on top of the result.

Annual rate review. Costs go up every year -- insurance premiums, fuel, wages. Most shops set their rate once and forget it. Run this every January with updated numbers to make sure you are not falling behind.

Hiring decisions. Before adding a tech, plug in the new team size and see how it changes your overhead per hour and required rate. More techs spread overhead thinner, but only if utilization stays the same.