You hear “charge 45% margin” thrown around a lot.
Your mate says he runs at 40%.
Your supplier says 50%.
The bloke at the pub swears 35% is plenty.
So you pick a number that feels about right and hope for the best.
Here’s the problem.
None of those numbers might be right for your business.
The margin you actually need isn’t a guess.
It’s a calculation.
And it comes from two numbers you already have sitting in your books.
The Mistake Most Tradies Make
Most HVAC businesses set their margin based on:
- What mates are charging
- What they’ve “always charged”
- Gut feel
- What feels competitive in the area
None of those tell you if your business will survive the year.
Your margin has one job:
Cover your overhead + leave the profit you need.
If it doesn’t do both, the business goes backwards — no matter how busy the team is.
The Simple Formula
There’s really only one formula you need:
Required Gross Margin = Overhead % + Target Net Profit %
That’s it.
Two numbers.
Added together.
Let’s walk through each one.
Step 1: Work Out Your Overhead %
Overhead is everything it costs to run the business — not counting the cost of doing the jobs.
Things like:
- Office rent and electricity
- Office staff wages
- Insurance (workers comp, vehicles, business)
- Vehicle finance and maintenance
- Fuel and tolls
- Phones, internet, software
- Marketing and advertising
- Training
- Tools and repairs
- Warranty after care
Grab your P&L from last year.
Add all those costs together.
Then divide by your total revenue.
Overhead ÷ Revenue = Overhead %
Example:
- Total overhead: $250,000
- Total revenue: $1,000,000
- Overhead %: 25%
That’s the first piece.
Step 2: Set Your Target Net Profit
This is the reward for running the business.
It’s what’s left after everything else is paid.
Most healthy HVAC businesses aim for 10–15% net profit.
If you’re not sure where to start — use 10%.
Just pick a real number.
Don’t leave it blank.
Don’t leave it to “whatever’s left.”
Step 3: Add Them Together
Overhead % + Target Profit % = Required Gross Margin
In our example:
25% + 10% = 35%
That’s the margin your business actually needs.
Step 4: Apply It to a Job
Let’s say a job costs you $6,500 in labour, materials, and parts.
Use this formula:
Selling Price = Job Cost ÷ (1 – Margin)
$6,500 ÷ 0.65 = $10,000
The breakdown:
- Sale price: $10,000
- COGS: $6,500 (65%)
- Gross profit: $3,500 (35%)
- Overhead: $2,500 (25%)
- Net profit: $1,000 (10%)
Clean numbers.
Job pulls its weight.
Business stays healthy.
What If Your Numbers Are Different?
Now let’s say your overhead is higher.
Maybe you’ve got a bigger office, more admin staff, more vehicles, more marketing spend.
- Overhead: 35%
- Profit target: 10%
- Required margin: 45%
Same job, same $6,500 cost:
$6,500 ÷ 0.55 = $11,818
Your number isn’t 35%.
It’s 45%.
If you charge 35% using your mate’s logic, you’re leaving $1,818 on the table — every job.
Do 50 installs a year at the wrong margin and that’s over $90,000 of missing profit.
Every Business Is Different
Here’s what the required margin looks like across common combinations:
Overhead % | Profit Target | Required Gross Margin |
20% | 10% | 30% |
25% | 10% | 35% |
30% | 10% | 40% |
35% | 10% | 45% |
35% | 15% | 50% |
👉 Your margin isn’t one-size-fits-all.
It’s a reflection of your overhead and your profit goal.
Why This Matters
Most tradies copy a number.
Few actually calculate one.
That’s why:
- Some businesses look busy but bleed cash
- Two HVAC companies doing the same work end up with very different results
- A margin that works for your mate can quietly sink you
Your overhead is yours.
Your profit target is yours.
So your margin is yours.
Know your number — don’t borrow someone else’s.
Why brix Is Built Around This
brix is designed to price jobs using your real numbers.
- Set your overhead %
- Set your profit target
- Every quote is priced to cover both — automatically
You stop guessing on every job.
You stop second-guessing discounts.
You stop wondering why the bank account doesn’t match how busy you are.
No spreadsheets.
No maths in the van.
Just the right price, every time.
Quick Summary
To work out the margin your business needs:
- Calculate your overhead % (overheads ÷ revenue)
- Set your target net profit
- Add them together — that’s your required gross margin
Then apply: Selling Price = Job Cost ÷ (1 – Margin)
Every job must cover:
- Labour
- Materials
- Overhead
- Profit
Margin is how you make sure that happens on every single job.
Busy doesn’t mean profitable.
Knowing your number does.
Build better.
Price smarter.
Grow with brix.