Getting your margin right isn’t about being greedy.
It’s about making sure your business survives, grows, and actually rewards the hard work you put in.
If your margin is wrong, you can be flat out every week and still go backwards.
Here’s how to work out the right margin for your business, step by step.
Step 1: Understand Why Margin Matters
Your margin needs to do three things:
- Pay for every cost in the business
- Leave you with real profit
- Protect you when costs increase
If your pricing only covers labour and materials, you’re working for free.
Step 2: Know Your Three Core Numbers
Every job you price should cover all three of these.
1. COGS (Cost of Goods Sold)
These are the direct job costs:
- Labour
- Materials
- Parts
- Bonus pay
- Hire machinery
- Subcontractors
- Any other direct cost needed to complete the job
2. Overheads
These are costs that don’t stop when the phone goes quiet:
- Office rent
- Vehicles
- Fuel
- Insurance
- Office wages
- Software
- Warranty
- Marketing
- Training
- Tools and repairs
- All the everyday costs that keep the doors open
3. Net Profit
This is what’s left after everything is paid.
Profit lets you:
- Grow
- Replace vehicles
- Hire staff
- Build a buffer
Step 3: Work Out Your Target Percentages
A common structure for many HVAC and trade businesses looks like this:
- COGS: 55%
- Overheads: 35%
- Net Profit: 10%
Your numbers might be slightly different, but the rule stays the same.
👉 Your margin must cover overheads + profit.
So in this example:
35% (overheads) + 10% (profit)
= 45% gross margin
That’s your target.
Step 4: Price a Job Using the Correct Margin
Let’s say a job costs you $5,500 in labour, materials, and parts.
You want a 45% margin.
Use this formula:
Selling Price = Job Cost ÷ (1 – Margin)
$5,500 ÷ 0.55 = $10,000
That’s the price you need to charge to:
- Cover overheads
- Make a 10% profit
- Keep the business healthy
Step 5: See What Happens When Margin Is Too Low
Now let’s say you only price at a 40% margin.
$5,500 ÷ 0.60 = $9,167
Here’s the problem:
- Overheads (35%) = $3,208
- Profit left = $459
That’s roughly 5% profit, not 10%.
Same job.
Same effort.
Half the reward.
Do that repeatedly and the business slowly bleeds cash.
Step 6: Adjust Margins as Your Business Changes
Your margin isn’t locked forever.
- If overheads increase → margins must increase
- If labour or materials go up → margins protect you
- If efficiency improves → margins may ease slightly
The key is knowing your numbers — not guessing them.
The Bottom Line
To determine the right margin for your business:
- Know your COGS
- Know your overheads
- Set a clear profit target
- Use margin, not markup
Most trade businesses that struggle aren’t short on work — they’re short on margin.
That’s why brix is built around margin-based quoting, so every job pays its way and your business can grow with confidence.
Quick Summary
- A 45% margin is common for many HVAC businesses
- Small margin mistakes cost big money over time
- Every job must cover costs, overheads, and profit
Price with confidence.
Protect your future.
Build better with brix.