HVAC Overhead Costs: What They Should Be

The average HVAC company spends 28–35% of revenue on overhead. Top-quartile operators keep it under 22%. That 10-point gap — on a $2M company — is $200,000 of bottom-line profit disappearing every year into costs that feel fixed but aren't.

Most HVAC owners know their overhead is too high. What they don't know is which overhead category is the primary leak, what the right benchmark is for their revenue band, and how to tell the difference between overhead that scales with the business (acceptable) and overhead that compounds without producing revenue (not acceptable). This article breaks all three down.

What Counts as Overhead in HVAC

Before benchmarking, you need to be working from the right definition. Overhead in HVAC is everything that supports the business but doesn't directly produce revenue on a job. It does not include direct labor (technician wages, field labor burden), direct materials (parts, equipment, supplies used on jobs), or sales commissions tied to closed revenue.

What overhead does include: owner salary (the portion not tied to field work), office and dispatch staff wages, rent or vehicle lease costs not tied to a specific job, insurance premiums, software subscriptions, advertising and marketing spend, phone and communications, accounting and legal fees, uniforms and shop supplies, and any equipment or tool costs that aren't billed through to a job.

The critical point: owner compensation is overhead. Many HVAC owners understate their overhead number by not including their own salary — or by including only a fraction of it. If you own a $2M company and pay yourself $80K while working 50 hours a week, you're undercounting overhead and overcounting margin. A real overhead calculation includes market-rate compensation for every role you fill, including yours.

"I thought I was running at 24% overhead until we actually pulled the numbers with a real definition. Turned out my truck payments were split across three categories in QuickBooks, my phone bill was in materials, and my own salary was in a separate account. Real number was 31%. I had no idea." — HVAC owner, 7 trucks, $2.1M revenue

2025 HVAC Overhead Benchmarks by Revenue Band

Overhead as a percentage of revenue naturally compresses as a business scales — fixed costs spread across more revenue. A 28% overhead rate at $800K looks very different from 28% at $3M. Here are the 2025 benchmarks by revenue band.

How overhead rate connects to net profit

In a healthy HVAC business at the $1.5M–$3M range, the math works like this: gross margin of 50–58% (after direct labor and materials), minus overhead of 18–24%, equals net profit of 26–34%. If your gross margin is in range but your net profit is low, overhead is the leak. If your net profit is low and your gross margin is also low, you have both a pricing problem and an overhead problem — and overhead reduction alone won't save you.

This is why the gross margin benchmarks article and this one are meant to be read together. Overhead rate and gross margin are the two levers that determine net profit. You need to know where you stand on both before deciding where to put your energy.

The 4 Overhead Categories That Kill HVAC Margin

Not all overhead is equal. Some overhead is structural — you can't meaningfully reduce it without shrinking the business. Other overhead is discretionary or poorly managed — it's costing you margin without producing proportional revenue. These four categories account for the majority of above-benchmark overhead in HVAC companies under $5M.

How to Calculate Your Overhead Rate Right Now

Pull your last 12 months of financials — P&L from QuickBooks or wherever you track it. You need total gross revenue for the period and a clean separation between direct costs (field labor, parts, equipment on jobs) and overhead (everything else that supports the business).

Add up every expense category that isn't direct field labor or direct job materials. Include owner compensation at full market rate for the hours you work — if you work 40 hours a week in the business, include a salary equivalent to what you'd pay someone to do your role. Divide total overhead by total gross revenue. That percentage is your overhead rate.

If you can't do this calculation in under 20 minutes, that's the first signal — you don't have clean enough financial visibility to manage overhead proactively. Most businesses running above-benchmark overhead aren't overspending because the owners are careless. They're overspending because the categories are mixed in a way that makes the real numbers invisible until they cause a cash problem.

Reducing Overhead Without Hurting the Business

The most common mistake when trying to reduce overhead is going after the wrong line items first. Many operators start with the most visible costs — software, supplies, miscellaneous — and achieve minor savings while leaving the major categories untouched. The four categories above drive 80% of above-benchmark overhead in most HVAC businesses. Those are where the real leverage is.

The second most common mistake is cutting overhead that actually produces revenue. Marketing at 8% of revenue with full attribution is not overhead to cut — it's investment. Cutting it to improve your overhead rate while leaving untracked channels running is exactly backwards. The goal is not a lower overhead number. The goal is a lower overhead number with the same or better revenue output.

A practical 90-day overhead reduction plan for most HVAC businesses looks like this: in month one, do the full pull-from-bank-statements software audit and cut dead subscriptions. In month two, build a per-truck cost and revenue model and identify any vehicle with unfavorable economics. In month three, set up attribution tracking on every marketing channel and commit to cutting any channel that can't prove its cost per closed job within 60 days. Done in that order, most $1M–$3M HVAC companies find 3–6 points of overhead reduction without touching a single employee or operational process.