Another common thing consumers want to know is how much the company or contractor is actually making on the whole deal, hoping that they’ll be able to negotiate a “fairer” price if they have this key piece of information.
“How much of the quoted price are they pocketing just for installing the unit?”
The reality is that this varies of course, but some people use 50% as a general rule of thumb, which may be accurate in some cases and wildly off in others. HOWEVER, regardless, it is important to realize that the labour portion of the cost covers many things, it is not all profit.
In addition to the company’s fixed costs – which they have to pay no matter what – including insurance, licensing fees, vehicles and associated costs (fuel, commercial insurance, maintenance), technician salaries, office or storage space, administrator (to help with client support, paperwork, etc), phones & utilities, advertising & marketing, and so on, the company also has to cover costs related to each install.
Beyond the cost of the unit itself, there may be a range of other parts and labour required during the installation. And good technicians are always in demand and therefore don’t work for cheap.
Every home is different, and sometimes unforeseen costs part way through the installation can eat into the company’s narrow margins and even cause the company to lose money in the end. Because a price has already been agreed upon at this point, the contractor will typically absorb this cost.
In fact, it’s not uncommon for companies to occasionally install a furnace or A/C at a price that provides virtually no profit, simply to cover their fixed costs, keep their staff paid, and keep the whole machine running, so to speak.
HVAC contractors also need to cover the cost of future servicing covered by the labour warranty
Finally, because any company worth their salt will provide some form of labour warranty, this means that they also must account for a certain number of service calls and repairs that they will have to cover the cost of.
Now I’m not suggesting that everyone in the HVAC business is living hand to mouth and barely scraping by. Well-run companies, and hard working staff can certainly earn a comfortable living.
I’m simply hoping to illustrate that the price breakdown can be more complex than it appears, and consumers should avoid the temptation of thinking that if a company paid let’s say $1500 for the unit, and quoted $3500 to the customer, that it means that they’re trying to rip you off and will be walking away laughing with $2000 of pure profit.
The pie is split up into many pieces, but this allows good companies to retain high-quality staff and cover other important costs (like insurance, licensing, etc) so that they can deliver top notch service, good ongoing support – in short, heating & cooling solutions that Canadians and their families can depend on.
That being said, there are certainly companies out there who will charge whatever they can get away with, so this highlights the importance of dealing with reputable companies, with fair and transparent pricing.