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How PriceBuilder Calculates Retail Prices

How PriceBuilder Calculates Retail Prices

Proper pricing won't solve ALL problems, but it will make plenty of problems solvable.

For decades, the HVAC business has been using multipliers and divisors to calculate the retail price of their jobs.

PriceBuilder was designed to support this traditional pricing method.

You can access PriceBuilder by visiting https://PriceBuilder.netlify.app.

 

PRICING VARIABLES

There are a handful of pricing variables that you must set in PriceBuilder for it to convert your wholesale prices into retail prices.

Here are the five PriceBuilder configuration steps required to fit your business:

  1. Upload your Wholesale Price List (as often as you get price changes from your distributor)
  2. Enter your Business Input variables (one-time setup with at least an annual review)
  3. Configure your Equipment Packages (one-time setup and adjusted as new system components are released)
  4. Review your Retail Prices (verify that the prices look reasonable and adjust setup variables if needed)
  5. Export Retail Prices to SilverBullet (automatically adjusts all retail prices in SilverBullet)

As you scroll down, we will walk you through each of these steps, in the proper order.

 

WHOLESALE PRICE LIST

PriceBuilder requires you to import a simple two-column spreadsheet into the pricing database. This data drives the equipment selections you will offer and the retail price calculations. 

On the left side of the black main menu bar displayed at the top of the screen, you will see the Import Pricing button.

To the left of the button, you will see the last date and time that pricing data was uploaded to your system.

When you click the Import Pricing button, this screen will be shown:

As you can see on the top section of the screen, the first column of the data file must contain the Model Number of the equipment and the second column must contain your Wholesale Cost.

The proper file format will look something like this:    

   
  MODEL NUMBER     WHOLESALE PRICE  
    ABC018     1500.00
    ABC024     1750.00
    ABC030     2000.00
    ABC036     2250.00
    . . .     . . .
   

 

To import your data, simply copy/paste the two-column file into the "Paste Data Here" box and click IMPORT PRICES.

Once imported, the Wholesale Price for each Model Number is used as the EquipmentCost value when calculating Retail Prices.

 

BUSINESS INPUTS

On the PriceBuilder Main Menu screen, you will see this image (below).

When you click "Get Started", it will allow you to enter several values used to calculate your retail prices.


 

Calculate Labor Rates

PriceBuilder was originally designed to accomondate the most common approach to installing residential jobs - the traditional 2-employee installation crew. However, we recognize that there are many contractors that use subcontractors to install their jobs. Please consult with your SilverBullet Success Coach for tips on how to setup PriceBuilder to accomodate how you handle this important issue.

The first section asks you to set INSTALLATION CREW LABOR RATE values used to calculate your BurdendedLaborCost per crew hour.

  • JourneymanPay = the direct hourly wage rate for a senior/lead installer
  • ApprenticePay = the direct hourly wage rate for a junior/helper installer

< NOTE >  Labor Burden Rate is important because it ensures that additional "indirect" costs of employment are not overlooked when determining true costs of employees.

Here is how to calculate your LaborBurdenRate:

  • IndirectPayrollCost = employment taxes; workers' compensation & health insurance premiums; and non-productive paid time off (holidays, vacation, training, etc.)
  • Direct Payroll Cost = gross payroll dollar amount
  • LaborBurdenRate = IndirectPayrollCost / DirectPayrollCost

With these three values, PriceBuilder can compute your "fully loaded" burdedned labor cost per crew hour.

  • BurdendLaborCost = ( JourneymanPay + ApprenticePay ) x ( 1 + LaborBurdenRate / 100 )
     

Set Selling Expenses

The next PriceBuilder setup section focuses on taxes, commissions, and discount recovery.

  • SalesTax% = Enter the highest tax rate percentage that you pay in your trade area. (If you are required to show sales tax separately on the customer's invoice, enter the number zero.)
  • SalesTaxOn (Retail or Cost) = Select "Tax on Cost" if you pay sales tax when you purchase equipment and materials, otherwise, select "Tax on Retail".

     

You can set different Commission and Discount Rates for each pricing tier.

  • CommissionRate% = The percentage of the total sales price set aside to compensate salespeople 
  • AvgDiscount% = If you routinely offer discounts to customers to help close sales, you can build that cost into your pricing. This allows you to offer discounts while still hitting your tagret profit margins.

     

<NOTE> Ideally, Overhead Percentage should be 35% or less, depending on your sales/service mix. To earn a reasonable return on investment, Desired Net Profit should be 10% or higher. These two numbers are the easiest ways to increase or decrease sales prices across the board.

To calculate your Overhead%, you must determine your TotalOperatingCosts and TotalSales. (Your accountant can help you with this question if needed.)

  • TotalOperatingCosts = regular expenses (rent, insurance, utilities, credit card costs, financing fees, bank fees, etc.) required to operate your business and not directly related to selling and completing a job
  • Overhead% = TotalOperatingCosts / TotalSales
  • NetProfit% = The percentage of sales that you want to retain after all job costs, sales costs, and operating costs have been paid.
     

CONFIGURE EQUIPMENT PACKAGES

The next step is to select the typical components you would use to assemble a system for your customers.

There are fifteen unique price pages you can set up in PriceBuilder. While they are typically defined as follows, you can define the systems in any way you choose:

1. AC w/80% Gas Furnace 6. Package AC 11. Air Handler
2. AC w/90%+ Gas Furnace 7. Package AC/Gas 12. 80% Gas Furnace
3. AC w/Air Handler 8. Package HP 13. 90%+ Gas Furnace
4. HP w/Air Handler 9. Package Dual-Fuel 14. Other
5. HP w/Gas Furnace 10. AC & Coil    15. Other

Please Note: SilverBullet comes pre-configured with Manufacturer-Branded equipment images to support each of these 15 categories. If you choose to modify how you want to use these 15 pages, additional fees may be charged to modify the images to your liking.

 

SYSTEM TYPES

PriceBuilder will price jobs based one, two, or three Equipment Components for a given system capacity. These Equipment Components are uploaded to PriceBuilder through the Wholesale Price list.

  • CrewHrs = Hours required for your 2-person crew to install the equipment. (If you don't use 2-person crews, consult with your SilverBullet Success Coach for ways to handle your current method of estimating labor costs.)
  • MaterialCost = The cost of additional items needed to install the equipment in a typical basic replacement situation. (If items like special communicating controls are requred for the proper operation of your system, include those costs in this Material Cost value since they are not optional.)
  • Components = The type of equipment (Condensers, Coils, Furnaces, etc.)
  • Series = The "family" of products included in the Component list and priced in your uploaded Wholesale Price List
  • Capacity = Model numbers selected from the Wholesale Price List for up to 7 equipment capacities for the given system type. NOTE: For typical high-efficiency units that do not come in half-ton capacities, always put the next size higher in the half-ton positions. For example, an ABC024 condenser would be placed in the 1.5 ton and 2.0 ton positions.
  • EquipmentCost1 = Wholesale Price for selected equipment component 1
  • EquipmentCost2 = Wholesale Price for selected equipment component 2
  • EquipmentCost3 = Wholesale Price for selected equipment component 3
     

PRICE CALCULATIONS

The final step in the PriceBuilder process is to review your retail prices and send them to SilverBullet.

 

Here is how PriceBuilder pulls all the data together to calculate your Retail Prices:

  • TotalEquipmentCost = EquipmentCost1 + EquipmentCost2 + EquipmentCost3
  • InstallLaborCost = BurdenedLaborCost x CrewHrs
  • EstimatedJobCost = TotalEquipmentCost + InstallLaborCost + MaterialCost
  • YourMultiplier = ( Overhead% + NetProfit% ) ÷ 100
  • SalesTaxOnRetail = ROUND ( ( ( TotalEquipmentCost + MaterialCost ) x YourMultiplier x TaxRate ), 2 )
  • SalesTaxOnCost = ROUND ( ( TotalEquipmentCost + MaterialCost ) x TaxRate, 2 )
  • RetailPrice [ TaxOnRetail ] = ROUND (SalesTaxOnRetail + ( EstimatedJobCost x YourMultiplier ) / ( 1 - CommissionRate% ) / ( 1 - AvgDiscount% ), 2 ) *See TIER NOTE
  • RetailPrice [ TaxOnCost ] = ROUND (SalesTaxOnCost + ( EstimatedJobCost x YourMultiplier ) / ( 1 - CommissionRate% ) / ( 1 -  AvgDiscount% ) , 2 ) *See TIER NOTE
  • Gross Profit = RetailPrice - EstimatedJobCost 

< TIER NOTE > CommissionRate% and AvgDiscount% is adjustable based on the pricing tier (Bronze, Silver, Gold, or Platinum). See SALES RELATED EXPENSES above.

 

 

We highly recommend that you Email, View, Download, and/or Print your pricing data to perform a good review to be sure everything looks reasonable before your export your prices to SilverBullet.

Once you are comfortable with the results, click the Export button and your fresh retail prices will be sent to SilverBullet.

 

NOTE: Be sure everyone is logged out of SilverBullet before you Export data from PriceBuilder. This will ensure that each user will have the latest prices in their system when they log back into SilverBullet.

 

If you need any assistance in configuring PriceBuilder for your business, please reach out to your SilverBullet Success Coach.

 

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