The replacement looks sound until freight, extra fittings, commissioning time and office costs hit the job. A written air conditioning tradie markup policy stops those costs disappearing between the site visit and the quote.
Settle the scope first. Build the direct cost in plain buckets. Choose one way to recover overhead. Then apply markup.
Lock the installation scope before setting markup
Inspect the site before costing the work. A model number tells you what unit you are buying. It does not tell the crew how the unit reaches its position, what connects to it or who repairs the surfaces around it.
Write the accepted scope so another tradie can understand the job without calling you from site. Name the equipment, accessories, controls, pipe-run length and elevation, condensate discharge point, electrical isolation, testing, commissioning and handover.
Name the equipment and commissioning work
Before naming equipment, record who owns system sizing and selection. Write the design conditions, airflow or zoning requirements, pipe route, wall or roof penetrations and available electrical supply into the scope; name any input owned by another designer or contractor.
Record the approved indoor and outdoor units, controls, sensors, pumps, grilles, supports, isolators and other included accessories. State the outdoor-unit support, required clearances and any noise or strata constraints.
Check the supplier record before sending the quote. Confirm which items ship separately, and put freight and delivery into the cost record when they belong to this job.
State what commissioning includes. Record who starts the system, tests its operation, sets the controls, labels the equipment and explains it to the customer.
If the approved unit becomes unavailable, stop. A substitute can change dimensions, pipe connections, controls, drainage, electrical work and installation time. Reprice the affected buckets before seeking approval. Use the air conditioning quote follow-up process to tie equipment approval to the quoted scope.
Assign delivery, access, protection and disposal
Walk the route from the delivery point to the final position. Check gates, stairs, roof access, ceiling access, lifting points and finished surfaces.
Assign the work. State who arranges lifting equipment, moves stored goods, protects floors, opens access panels and removes the old unit. Add these tasks to labour or other direct costs. Do not leave them as free work for the crew.
Record refrigerant recovery and disposal as job costs when the job creates them. The same applies to equipment hire, site-specific protection and restricted-access charges.
Separate your work from work by others
Record who handles the electrical supply, isolation, drainage changes, wall or roof penetrations, structural supports, patching, making good and control integration. If another contractor owns the task, name it as work by others.
Do not hide an unassigned task in a general exclusion. Someone must own it. If the customer has not appointed that person, state what must happen before your work can continue.
For regulated refrigerant work, check the current licence requirements on the Department of Climate Change, Energy, the Environment and Water refrigerant licensing page (opens in a new tab). Record the required licence against the scope before quoting that work.
Check the trade and contractor licence register for the state or territory where the site sits. For a NSW job, use the NSW Government builder and tradesperson licence check (opens in a new tab); for work elsewhere, use that jurisdiction’s official regulator register. Write the licence class against the work it covers.
Turn unknown conditions into assumptions
Record what you could not inspect. Existing wiring, drains, controls, framing, roof construction and concealed pipework may not match the proposed route.
Describe the condition you priced. State what is excluded if the site differs. The assumption must be specific enough for the customer and crew to recognise a change.
If the quoted pipe route cannot be used without extra access work, protection or making good, stop. Write a variation. Get approval. Then proceed.
Set the GST cost basis
Before costing the quote, confirm whether supplier costs should be recorded GST-exclusive or GST-inclusive. The usable basis depends on your GST registration and entitlement to input tax credits, so check the current treatment on the Australian Taxation Office page for claiming GST credits (opens in a new tab) or ask your accountant.
Use the chosen basis consistently across supplier costs, bucket markups, the quote, approved variations, the invoice and the completed-job review. Calculate the selling price on that basis, then show the correct GST treatment separately.
GST collected from the customer is not a substitute for markup or profit. Keep the tax split visible on the quote and invoice so the selling price and GST do not become one unexplained total.
Put licence, permit and worker-cover costs in the correct bucket. A permit or licence needed only for a particular job may be a direct job cost. A business-wide registration or annual cover may sit in overhead. The classification comes from your accounts and pricing policy, not from the label on the bill.
Build the direct job cost in plain buckets
Keep the buckets boring: labour, equipment, parts and consumables, subcontractors, and other direct costs. One materials total makes a miss hard to find.
Direct costs belong to this job. Overhead supports the business across many jobs. Draw that line before applying markup.
Price loaded labour from tasks and crew time
Break the installation into tasks. Include loading, travel when treated as direct labour, removal, access setup, installation, connections, testing, commissioning, cleanup and handover.
Assign the required crew and time to each task. Price the work that will happen, not the time you hope the invoice can carry.
Use this labour formula:
Loaded labour cost = estimated job hours × loaded labour cost per hour
Loaded labour can contain more than wages. Open your payroll, leave, superannuation, training and workers’ compensation records. Decide which employment costs belong in loaded labour and which belong in overhead. Write down that definition and use it on every estimate.
Ask your state or territory workers’ compensation insurer or regulator how cover applies to your workers. Then ask your accountant where that cost sits in your accounts. Put it in loaded labour or overhead under your policy, not both.
Build the HVAC equipment estimate from approved items
Use current supplier costs for the exact units and accessories in the accepted scope. Keep the main equipment cost separate from freight, lifting and handling where those charges can be identified.
An HVAC equipment estimate must include the complete approved system. Check the indoor unit, outdoor unit, controls, mounting items and factory or field accessories. A missing accessory is still a missing cost even when the supplier calls it optional.
Do not add a vague equipment allowance to cover an unfinished selection. Name the equipment or state a clear allowance with its boundary and approval process.
Count pipework, fittings and consumables
Count what connects, drains, supports, seals, protects, controls and labels the installation. Include cable, pipe, insulation, fittings, supports, fasteners, sealants and consumables taken from van stock.
Van stock is not free because it was bought before the job. Give stocked items a documented cost basis. Use that same basis in the estimate and the completed-job record.
Do not use markup to cover a missing quantity. Count the material first. Apply the pricing policy second.
Keep subcontractors and other direct charges visible
Enter each subcontractor quote as its own cost. Compare its scope with yours before carrying the amount into the customer quote. Check access, protection, testing, cleanup and handover.
Keep freight, equipment hire, disposal, permits, parking and job-specific protection visible when the job causes them. These costs do not become overhead merely because the office arranged them.
Set air conditioning tradie markup by cost bucket
One markup across the whole job is simple. Separate bucket rules are useful when labour, major equipment, stocked parts and subcontractors create different handling and coordination work.
There is no universal rate to copy. Use your accounts, supplier records, completed jobs and required return. The policy must state what cost receives markup, what the markup is meant to recover and who can change it.
Apply labour markup to loaded labour
Apply labour markup to the loaded labour cost defined in your policy. Do not apply it to the wage while expecting the same markup to absorb every other employment cost.
State where supervision, travel, training and paid non-job time sit. If site supervision is direct labour on installation work, record it there. If office scheduling sits in overhead, leave it there.
Labour and materials markup can differ. The rule matters more than making every bucket look the same.
Separate equipment cost from equipment handling
The supplier invoice records what you paid for the equipment. Your business may also specify, order, receive, store, move and inspect it. Your team may manage returns, damage and warranty administration.
Choose how the equipment selling price recovers that work. You can apply a documented equipment markup or record identifiable handling as a separate direct cost. Every task and hour sits in one bucket once. If receiving time is already in loaded labour, do not add it again as equipment handling.
Use one rule for stocked and special-order parts
Write down how stocked parts receive a cost. Use a documented inventory cost or another cost basis supported by your records. Use the same basis when reviewing the finished job.
Record special-order items from the current purchase record. Update the cost when the supplier information changes. A stale material cost cannot be repaired by arguing about the markup later.
Consumables need a rule as well. Use an item record, installation list or another repeatable method. Do not let every estimator invent a miscellaneous amount.
Recover subcontractor coordination openly
Subcontracted work still uses your time. Someone defines the scope, books the work, answers questions, checks completion and handles the customer record.
Put coordination in the subcontractor markup, direct labour or overhead. One bucket only. Keep the subcontractor’s cost visible in the estimate.
Recover overhead once
Overhead keeps the business operating across multiple jobs. Read your accounts before deciding what it contains. Office labour, accounting, communications, training, general insurance and non-job vehicle costs may sit there under your accounting policy.
Keep direct job costs out of the overhead pool. Freight for one unit, a hired lift for one site and disposal from one replacement should not be buried in overhead if you already charge them to that job.
Choose one recovery method:
- Build overhead recovery into the bucket markups. Do not add a second overhead charge.
- Keep overhead out of the bucket markups. Let those markups recover handling and the required job return only, then add the separate overhead recovery once.
Start with your own accounts and choose a recovery base that matches how the business uses resources. It may be direct labour cost, direct labour hours or total direct cost under your accounting policy.
Overhead recovery rate = overhead pool ÷ chosen recovery base
Apply that rate to the same base on each quote. If overhead recovery sits inside bucket markups, include the calculated overhead component in those markups. If it sits in a separate charge, apply the rate once after the direct buckets have been priced.
Reconcile recovered overhead against the overhead accounts on your chosen review cycle. If the base changes, recalculate the rate from your own figures. Do not recover the same cost through loaded labour, a bucket markup and a separate overhead charge.
Your air conditioning tradie markup policy must name the recovery base, the overhead pool and the person who reviews both.
Use the job pricing framework to map direct cost, overhead, markup and selling price without merging the buckets.
Use an HVAC pricing formula that shows every bucket
Run the formula separately for labour, equipment, parts, subcontractors and other direct costs:
Bucket selling price = bucket cost × (1 + bucket markup rate)
When overhead is built into the bucket markups:
Quoted subtotal before GST = sum of bucket selling prices
When overhead is recovered separately, define each bucket markup as covering handling and the required job return only:
Bucket selling price excluding overhead = bucket cost × (1 + handling-and-return markup rate)
Quoted subtotal before GST = sum of bucket selling prices excluding overhead + separate overhead recovery charge
Use one version. Your HVAC pricing formula should expose where every amount came from. It should not contain a balancing figure added because the subtotal feels low.
Keep confirmed work, allowances and options separate. An option is not part of the accepted scope until the customer accepts it. An allowance needs a named purpose and a written method for handling a different selection or actual cost.
Use this short policy record before the next quote:
Air conditioning pricing policy Cost basis: [define loaded labour, equipment, stock and GST basis] Recovery method: [bucket markups or separate overhead recovery] Policy owner: [name] Review trigger: [completed-job cause check or cost-basis change] Approved date: [date]
Approve the policy by matching its cost basis and recovery method to the accounts. Before sending the quote, match every selling-price bucket to a cost record and policy rule. A price without either one is a guess.
Keep markup versus margin straight
Markup measures the amount added against the defined cost base. Margin measures the amount left against the selling price. Before using either figure, state whether the cost base includes recovered overhead.
If job cost contains direct costs only, selling price minus job cost is the amount available to cover overhead and provide business profit. Do not call all of it final profit. If overhead has already been assigned to the job, state that before comparing the result.
Use these formulas only after defining the cost base:
Markup = amount added ÷ defined cost base
Margin = amount left after the defined cost base ÷ selling price
Oak Street worked example
The house example is an electrical job used only for the arithmetic. All figures are sample currency units, not an Australian rate card.
R. Chen’s quote Q-1847 at 14 Oak Street covered a bathroom exhaust fan, 150mm and ducted through the roof, plus four LED downlights. The original quote was 1,105. The job cost was 850, so profit measured against the original quote was 255.
1,105 − 850 = 255 profit
Markup = 255 ÷ 850 = 30%
Margin = 255 ÷ 1,105 ≈ 23%
The ceiling was lined and the quote excluded chasing. Extra cable and chasing were approved on site as a 160 variation, taking invoice INV-1847 to 1,265.
Do not calculate profit from the 1,265 invoice. The cost of the variation is not given. Combining the 850 original job cost with the final invoice would overstate the result.
Use the profit margin calculator with your own cost and selling price. Keep the cost definition the same as the one used in your estimate.
Test the policy against the next finished job
Close the job using the same buckets as the estimate. Compare estimated labour with actual labour using the same loaded-labour definition. Match supplier invoices, stocked-part issues, subcontractor invoices, freight and disposal to their quoted buckets.
Do not stop at total cost. A job can land near the quoted total while one bucket hides a miss in another. Find the cause before changing the price rule.
Check whether the miss came from incomplete scope, low quantities, excess labour, purchasing, a stock-record error or work completed without an approved variation. Fix that cause first. Change the markup only when the cost basis or recovery policy was wrong.
Use the air conditioning job-costing process to compare the estimate with actual labour, equipment and call-back costs. Run that check on the next finished job before changing your air conditioning tradie markup.