What It Costs to Run an HVAC Business in Metro Detroit
Is your Shop Healthy?
Here's a question I ask HVAC owners that almost nobody answers cleanly: is your shop healthy? Not busy, healthy. The two aren't the same, and you can't tell them apart without a benchmark. Busy means the phone rings. Healthy means the money stays.
Most benchmarks online are national averages, and a big chunk of what it costs to run an HVAC business is local. Your equipment isn't, a condenser costs about the same in Detroit as in Dallas, priced and freighted nationally. But your labor is local. Your insurance is very local. Your city taxes are local. So this is the Metro Detroit picture, in real 2026 numbers, and how to read your own P&L against it.
What your techs actually cost
Labor is the biggest lever you control and the one input that genuinely moves by market. Shown on the right is where Michigan HVAC pay sits, straight from the Bureau of Labor Statistics.
Two things to notice.
First, Metro Detroit is the deepest HVAC labor pool in the state by a wide margin. The talent is here, but so is every competitor bidding for it.
Second, base pay is not what a tech costs you. Load it: add payroll taxes, workers' comp, benefits, and the hours you pay for that aren't billable like drive time up I-75, shop time, the callback you ate. A $64,000 tech is closer to $85,000-$95,000 fully loaded before he turns a wrench for profit. Price off base pay and you're pricing to lose.
Don't know how to calculate that full loaded rate? Check out our post here where we dive in with more detail. And don't forget to grab the free calculator resource.
Detroit-area HVAC mechanics run roughly 3% above the national mean, and Metro Detroit is by far the state's largest HVAC labor market (about 5,740 mechanics). Base pay is not loaded cost - add payroll taxes, workers' comp, benefits, and non-billable time to get true cost per tech.
What it costs to put a truck on the road here
Michigan is the most expensive commercial-auto market in the country and Detroit the priciest metro - no-fault PIP, congestion, and a high-litigation environment all load the premium, and a service van rates higher than a sedan. Your PIP tier (unlimited vs. a $250K cap vs. opting out with qualifying health coverage) swings the number the most. As of January 2026 Michigan replaced its 6% fuel sales tax with a flat 52.4¢/gallon road tax, and the state's rough roads quietly add to maintenance. Every one of these lands before you book a single job.
This is where Michigan stings. Because of the state's no-fault law, Michigan is the single most expensive commercial-auto insurance market in the country and Detroit is the most expensive city in it. A properly covered service van or pickup here runs roughly $4,500 to $6,000 a year, against a national contractor norm closer to $3,000 to $4,800.
Michigan replaced its 6% gas sales tax with a flat 52.4-cent-per-gallon road tax in January, so fuel is now taxed by the gallon no matter the pump price. And the rough roads and abundant potholes that tax is meant to fix quietly bleed you on tires, alignments, and suspension all year long. The point isn't the exact total; it's that every truck carries three to six thousand dollars or more in fixed cost before the first job of the day. "Just add a truck" is one of the most expensive sentences in this trade, and it should be a decision your books make, not a hunch.
What Metro Detroit shops charge
A full furnace-and-AC replacement runs roughly $9,000 to $14,000 installed in 2026. National project data lands the average around $11,000 to $14,000, with the Midwest near that baseline (well under the West Coast). The switch from R-410A to R-454B refrigerant added an estimated 8–10% to equipment prices this cycle, so the number's still climbing.
Useful as a sanity check: if your average replacement ticket is well under the local going rate, the question isn't whether you're cheap, it's whether you can see your own costs well enough to price with confidence.
Michigan's long heating season also skews the calendar: furnace and heating service carry the winter, then a shoulder-season lull tests everyone's cash flow. Your revenue here leans more heating than a Sun Belt shop's which changes which department margins matter most to watch.
The two numbers that decide it: Gross & Net Margin
Net margin tells you whether you have a problem. Gross margin tells you where it is. That's why you need both and why staring at the bank balance hides the real story.
Start with gross margin: revenue minus direct job costs like tech labor, materials, equipment. Keep your own pay out of it. Then split it by department, because service and install behave completely differently.
If your gross margin is below the healthy band (service under 55%, install under 42%, blended under 45%), then the problem is on the job. It means you're underpricing, inefficient, or labor and materials are running hot. No amount of overhead-cutting fixes a pricing problem. If your install margins are running soft, part of it may also be the market. A lot of metro Detroit's work is in older housing, Dearborn, the inner-ring suburbs, Detroit proper, where tight mechanical rooms, undersized returns, and aging ductwork add labor hours a new subdivision wouldn't. That's a real cost. The question is whether you're pricing for it or eating it
But if your gross margin is healthy and your net is still thin, the leak is below the gross line so you need to look at overhead like admin, marketing, facilities, fleet bloat. The gap between gross and net is your overhead load, and that's where you go looking.
Most HVAC shops net 5–12%. Well-run ones land 8–18%, and net climbs with scale as fixed overhead spreads across more revenue. If you can't pull gross margin by department, or better yet by job, out of your books in about five minutes, that's not a math problem, it's a bookkeeping problem.
Gross margin is revenue minus direct job costs (tech labor, materials, equipment) - keep owner pay out of it. Most HVAC shops actually net 5-12%; well-run ones land 8-18%, and net climbs with scale as fixed overhead spreads across more revenue. Benchmarks aggregated from 200+ residential HVAC P&Ls.
Frequently Asked Questions
What's a healthy net profit margin for an HVAC business?
Generally 8-18% net once the owner takes a real wage. Below that, the usual culprits are labor inefficiency, soft pricing, or untracked overhead; not a lack of work.
What should labor cost as a percentage of revenue?
Fully loaded field labor commonly runs 25-35% of revenue for a healthy shop and it only means something measured against booked revenue, which is why clean books come first.
Why is Michigan commercial auto insurance so high?
The state's no-fault law produces the highest commercial auto claim costs in the country. Trucks and vans run $4,500-$6,000 per vehicle per year, so every truck carries a heavier fixed cost here than almost anywhere else.
Does Detroit city tax apply to my crew?
If you're located in Detroit, on everyone. If you're a suburban shop working in the city, on the apportioned share of pay tied to city work. See more details in our Michigan Money Guide.
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Related Resources
New Here?: https://acc4t.com/hvac-bookkeeping-detroit
HVAC Bookkeeping: https://acc4t.com/hvac
The Phases of HVAC Growth: https://acc4t.com/hvac-bookkeeping-by-stage
Free Resources for all HVAC Owners: https://acc4t.com/resource-5908
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