What’s the Average Overhead for an HVAC Company?

Jan 22

If you’ve ever looked at your books and wondered whether your overhead costs are normal for an HVAC business, you’re asking the right questions. (And the answers aren’t always obvious!)

Overhead is the quiet category of expenses that pile up month after month and eat into your revenue if you’re not watching closely. It’s also one of the biggest reasons HVAC companies struggle with cash flow, unpredictable margins, and surprise tax bills.

At Therapeutic Tax Solutions, we’re intimately familiar with the financial pressures HVAC companies face: fleet costs that spike without warning, insurance increases, admin and dispatch staffing, seasonal slowdowns, fluctuating fuel and materials pricing, and more.

Without a clear grasp of your overhead percentage, pricing becomes guesswork—and guesswork is what leads to underbidding, thin margins, and year-end financial stress.

In this article, we’ll break down the average overhead for HVAC companies, what actually counts as overhead, how to calculate your own overhead percentage, and practical ways to strengthen your margins without sacrificing service quality or growth potential.

What’s the Average Overhead for HVAC Companies?

Overhead ranges for HVAC firms can vary widely depending on company size, service mix, and operational efficiency, but 30-40% is fairly typical for HVAC businesses.

Well-managed companies often stay in the 20-30% range, while smaller shops often have overhead percentages of 40% and upward because they have fewer jobs to spread fixed costs over.

Service-heavy businesses tend to have more favorable margins because of consistent revenue and smaller job costs.

Regardless of size or business model, businesses with high operational efficiency tend to have healthier overhead costs and higher margins by making the most of their resources and avoiding unnecessary costs.

What’s Actually Included in Overhead?

Here’s a breakdown of typical overhead cost categories for HVAC businesses:

Rent and utilities
Insurance (including general liability, workers’ comp, health plans, vehicle, and equipment)
Fleet expenses (including fuel, maintenance, depreciation, repairs, and licensing)
Admin and support staff pay (dispatch, customer service, bookkeeping, and estimating)
Office and admin expenses such as supplies, software subscriptions, communication, phones, and internet
Marketing-related costs (such as lead generation, advertising, website management, and SEO)
Training, certification renewals, and continuing education
Non-billable time (like staff meetings, scheduling, admin tasks, and quoting jobs)
Licensing, permits, and compliance costs

Overhead can include dozens of line items or more, which is why HVAC companies often lose track of what they’re really spending.

How To Calculate Your Own Overhead (Quick Formula)

Figuring out your overhead percentage is easy if your income and expenses are accurately documented. All it takes is some simple math:

Step One: Add up all your overhead costs (meaning all your fixed/indirect expenses not specific to a job) for a given period—monthly, quarterly, or annually.

Step Two: Divide that number by your total revenue for the same period.

This is your overhead ratio, or overhead as a percentage of your revenue.

You can also divide your total overhead costs by total billable hours to calculate the overhead cost per labor-hour rate, which can be useful when quoting.

Regularly calculating your overhead ratio helps catch hidden cost increases so you can avoid expense creep eating away at your profit margins.

How Overhead Affects Pricing + HVAC Profit Margins

When overhead exceeds 35-40%, profit margins on jobs get squeezed. This can be tricky to spot at first, because your gross margin can still look healthy. (Another reason why it’s important to calculate your overhead frequently.)

Pricing also plays a big role. If overhead recovery isn’t built into your labor and materials markup, you’ll chronically underprice jobs—especially installations, which have tighter margins than service.

Healthy HVAC companies tend to hit the sweet spot of:

Lower overhead ratio
Accurate labor burden calculations
Strong job costing
Consistent markup strategy on parts and labor
A service mix that balances high-margin repair work with installation revenue

Maintenance agreements are one of the strongest levers in stabilizing overhead because they generate predictable, recurring revenue even during slow seasons. (Plus, maintenance customers often convert into larger replacements or install jobs.)

Strategies To Maintain Healthy Margins (Without Cutting Service Quality)

Here are practical, achievable ways HVAC companies can keep overhead in check:

Monitor and audit overhead quarterly: Review all recurring expenses, subscriptions, fleet costs, utilities, insurance, etc. Compare with past quarters to track whether overhead has increased, decreased, or remained steady.
Optimize scheduling, dispatch, and fleet efficiency and costs: Minimize travel with efficient routing and job stacking to reduce fuel and time waste, schedule preventive maintenance to avoid expensive breakdowns, and track depreciation carefully.
Increase service and maintenance contracts for recurring revenue: Stabilize your cash flow and ease the financial burden of seasonal dips with predictable revenue through service and maintenance agreements that make overhead costs less painful in off-peak seasons.
Tighten your job costing and pricing strategy: Whenever possible, offer flat-rate pricing, and always build overhead recovery into your quotes or estimates. Avoid underbidding based on competitor price alone.
Leverage with a lean admin and support team: Grow your team slowly and intentionally, outsourcing or automating low-value tasks, and limiting overhead burden from full-time admin where possible.
Manage inventory control and materials strategically: Avoid overstocking, track parts usage, and negotiate vendor pricing to reduce material cost waste. When possible, try to spread out your costs over time to avoid multiple large purchases all in one season.
Avoid unnecessary overhead creep: Cancel any unused or underutilized subscriptions and tools, re-evaluate your insurance and vehicle costs, and maintain lean operations, especially in slow seasons.

Therapeutic Tax Solutions - We Help HVAC Contractors Control Overhead and Protect Their Margins

Overhead isn’t the enemy — uncertainty is.

Most HVAC owners don’t struggle because their overhead exists. They struggle because they don’t have clear visibility into it, aren’t recovering it properly in pricing, or don’t realize it’s creeping up until margins disappear.

When you understand your overhead and build it into your financial systems, everything gets easier: pricing, cash flow, planning, and growth.

Here’s how we help HVAC contractors get overhead under control without cutting corners:

✓ Clean, accurate bookkeeping that clearly separates job costs from overhead

✓ Overhead analysis to understand where your money is really going each month

✓ Job costing and pricing support so overhead is recovered on every job

✓ Cash flow planning that accounts for seasonality and fixed expenses

✓ Margin tracking so you can spot overhead creep before it hurts profitability

✓ Strategic financial guidance tailored specifically to HVAC businesses

You don’t need to guess whether your overhead is “normal.”

You need numbers you can trust — and systems that support smart decisions.

If you want help calculating overhead, tightening margins, or getting real clarity around your finances…

BOOK YOUR FREE DISCOVERY MEETING

FAQs

How Often Should HVAC Companies Calculate Overhead?

As a business owner, you should calculate your overhead at least quarterly. Overhead costs such as fuel, utilities, insurance, and subscriptions fluctuate. New expenses are frequently added and forgotten. Quarterly financial reviews catch cost creep before it erodes margins.

Is 30% Profit Margin Too High?

Not necessarily. Many companies target around 30-40% gross with 20-30% overhead for net profit margins to land somewhere between 10-20%. A 30% net profit margin is ambitious (and rare), but 30% gross is absolutely realistic for well-managed service and maintenance-heavy firms.

Do Small HVAC Companies Usually Have Higher Overhead?

Often, yes, simply because smaller HVAC companies tend to have fewer billable hours to spread fixed overhead across. Small shops may also lack efficiencies and resources in routing, admin, and purchasing that larger firms tend to manage better.

Does Flat-Rate Pricing Help Cover Overhead Better?

Yes, and that’s one reason Therapeutic Tax Solutions recommends flat-rate pricing to our HVAC industry clients. Flat-rate pricing lets you build overhead recovery into every job, and it helps you avoid underbidding when jobs run long or unexpected costs arise. It makes revenue more predictable and ultimately better protects your margins.

Can HVAC Software Help Control Overhead Costs?

Absolutely! Field service management (FSM) tools, scheduling and dispatch software, inventory/job-tracking systems, and bookkeeping tools reduce inefficiency, limit wasted time and materials, and help you monitor profitability per job, lowering overhead drain.

When your tools integrate with one another, are intuitive to use, and can be easily accessed by you or your team on the go, keeping them up-to-date and accurate is easy, which in turn makes your life easier when you’re conducting a financial review or making strategic business decisions.

The Bottom Line

Healthy HVAC companies typically land somewhere in the 20-35% overhead range, though some reach 40% depending on size, seasonality, and operational structure.

What matters most isn’t the exact percentage, but understanding your overhead clearly, tracking it consistently, and adjusting your pricing and operations based on real numbers.

When you keep a pulse on your overhead ratio, build it into your pricing, and closely monitor any creeping costs, you leave room for real profit and have fewer surprises at tax time. Plus, you’ll be able to stay competitive and grow your business.

If you want support calculating overhead, improving margins, or getting a clearer picture of your financials, that’s exactly what we help HVAC companies do every day at Therapeutic Tax Solutions.

Check out our accounting and financial advisory services or get in touch to find out how we can support your growth.

Alicia Bishop - TTS