Contracting Business/Kelly Faloon
Contracting Business/Kelly Faloon
Endeavor Business Media
Contracting Business/Kelly FAloon
Kelly L. Falloon
Contracting Business/Kelly L Faloon
Ahr2023 Profit Pricing 63e24378c6533

AHR 2023: Pricing for Profit

Feb. 7, 2023
Don't base your pricing on what your competitors are doing; base it on your overhead costs and billable hours.

The most critical thing contractors must pay attention to is billable hours, noted Ruth King during her Feb. 6 presentation at the 2023 AHR Expo in Atlanta. Training and meeting hours are not billable. Neither are vacations, holidays or sick days.

She stressed that the net profit per hour method — the profit generated for each billable hour — is the only way to “price for profit,” and that percentages on a profit and loss statement can be deceiving. This is where billable hours come in; determine how many billable hours you had last year and whether you're satisfied with that number.

“Keep an open mind; decide on the net profit per hour you want to earn,” she said. “Gross margins might look good, but pay attention to the revenue per hour — it’s the dollars that matter.”

Overhead costs per hour are calculated by the total overhead costs divided by the number of billable hours. Use this calculation to determine a profitable selling price:

net profit per hour + overhead costs per hour = gross profit per hour + direct costs = selling price

About the Author

Kelly L. Faloon | Freelance Writer/Editor

Kelly L. Faloon is a contributing editor and writer to Contracting Business magazine, Contractor and HPAC Engineering. The former editor of Plumbing & Mechanical magazine, Faloon has more than 20 years experience in the plumbing and heating industry. She started a freelance writing and editing business in 2017, where she has a varied clientele.

Faloon spent 3 1/2 years at Supply House Times before joining the Plumbing & Mechanical staff in 2001. Previously, she spent nearly 10 years at CCH/Wolters Kluwer, a publishing firm specializing in business and tax law, where she wore many hats — proofreader, writer/editor for a daily tax publication, and Internal Revenue Code editor.

A native of Michigan’s northern Lower Peninsula, Faloon is a journalism graduate of Michigan State University. You can reach her at [email protected].