Start from your costs, not a market number
Replacement jobs are big tickets, and it is tempting to price them off what the shop down the road charges. But their crew, equipment pricing and overhead are not yours. Use outside numbers only as a check. For example, Fixr's 2026 AC installation guide says most homeowners spend between $5,000 and $12,000 for central AC, depending on system type and home size, and notes labor runs $500 to $2,500 and permit fees $50 to $1,500. Those ranges vary by region and local labor rates, and they cover AC alone, not a full furnace and AC change-out.
Your price should come from the method below.
Step 1: Your hourly cost for an install crew
Work out your burdened labor rate: wages, payroll taxes, workers' comp, benefits and paid time off, divided by billable hours. Then add overhead per billable hour: rent, office, trucks, fuel, insurance, software and marketing divided by the same hours. Install crews and service techs often have different wages, so many shops figure a separate install rate.
Example: an HVAC shop's installers cost $72 per billable hour burdened, and overhead adds $80. Every install hour costs $152 before equipment.
Step 2: List every cost on the job
- Crew hours: installers times hours, including load-out, removal, startup and cleanup. Use your own past jobs.
- Equipment: condenser or heat pump, coil, furnace or air handler, at today's distributor cost. Confirm the refrigerant the new equipment uses and price the parts for it.
- Install materials: line set or flush, pad, disconnect and whip, thermostat, drain and condensate pump, duct transitions, filter rack, refrigerant, vent pipe, fasteners.
- Permit and the time to pull it and meet the inspection.
- Recovery and disposal of the old refrigerant and equipment.
- Subs if needed: electrician, crane, duct cleaning.
- Warranty reserve: a set amount for callbacks and labor warranty, so one callback does not erase the job's profit.
- Commission if a comfort advisor or tech is paid a percentage of the sale.
Step 3: Worked example, furnace and AC change-out
Example numbers only, for a 3-ton split system and gas furnace in an existing duct system.
| Line | How it is figured | Cost |
|---|---|---|
| Crew | 2 installers x 10 hours x $152 | $3,040 |
| Equipment | Condenser, coil, furnace (distributor cost) | $5,200 |
| Install materials | Line set, pad, disconnect, thermostat, drain, transitions | $650 |
| Permit | Local fee (example) | $250 |
| Recovery and disposal | Refrigerant recovery, haul-away | $100 |
| Warranty reserve | Set per job | $150 |
| Total cost | $9,390 |
Target net margin: 20%. Sales commission: 5% of the price. Because commission is a share of the price, it goes in the divisor, not the cost list:
Price = $9,390 / (1 - 0.20 - 0.05) = $9,390 / 0.75 = $12,520.
Check: commission is 5% x $12,520 = $626. Profit = $12,520 - $9,390 - $626 = $2,504, which is 20% of the price. Run your own job through the job pricing and markup calculator.
Step 4: Build three options from the same method
Price each option the same way, with its own equipment cost and hours. Example only:
| Option | What changes | Total cost | Price (20% net, 5% commission) |
|---|---|---|---|
| Good | Single-stage equipment, standard thermostat | $9,390 | $12,520 |
| Better | Two-stage equipment, smart thermostat, extra hour | $10,900 | $14,535 |
| Best | Variable-speed equipment, air cleaner, longer labor warranty | $13,100 | $17,467 |
Each option has the same margin, so the shop is happy whichever the customer picks. For how to present them, see good, better, best pricing.
Things that change the price, priced as add-ons
- Duct modifications, new returns or a new plenum.
- Electrical upgrades: new circuit, disconnect or panel work.
- Attic or crawlspace installs that add crew hours.
- Line set replacement when the old one cannot be reused.
- Condensate pumps, drain pans and float switches.
- Crane or extra crew for rooftop or tight access.
Write each one as its own priced line so the customer sees what they are paying for. Size the system properly; a load calculation backs up the recommendation and avoids a callback.
Common mistakes
- Pricing equipment from an old distributor price sheet.
- Leaving the second day out of crew hours when the job always spills over.
- Adding commission as a flat cost, so the margin shrinks.
- No warranty reserve, so one callback eats the profit.
- Offering one option only. Customers who want to compare will compare you with someone else instead.
How SWITCHBOARD handles this
In SWITCHBOARD, a comfort advisor builds Good, Better and Best options from the Price Book, sees live margin and markup against your target on each, and has missing costs flagged before the estimate goes out. The customer can pick, sign and pay a deposit on site. See it on the HVAC page.
Questions people ask
How do I include sales commission in an HVAC price?
If commission is a percentage of the sale price, divide total cost by one minus your target margin minus the commission rate. Adding commission as a flat cost understates it.
Should I quote HVAC replacements over the phone?
Give a broad range at most. Equipment size, ductwork, access and electrical all change the job, so the price should come after a site visit and load calculation.
What is a warranty reserve?
A set amount added to each replacement's cost to pay for callbacks and labor warranty work later, so they do not come out of one job's profit.
Should every option have the same margin?
Using the same target margin on each option keeps the shop neutral about which one the customer picks, which makes the recommendation more honest.
Sources
- How Much Does AC Installation Cost in 2026? | Fixr.com (checked November 10, 2026)