Repair or replace is a shop question before it is a speech in the kitchen. The customer hears one recommendation. You need two tickets. Same address, same drive, different hours, different materials, different invoices. The option that makes the shop money is the one that still looks acceptable after the equipment is at your cost and after a likely callback is included.
This is the shop-owner version of that choice for plumbing and HVAC. Homeowner guides about age and efficiency are a different search. Profitable plumbing jobs and profitable HVAC services are the mix. The numbers below are two pairs you can rerun.
Rates in every table here. Labor is $45 an hour unless a table says otherwise, the truck is $0.65 a mile, and overhead is $12 an hour. That $12 is a $1,920 monthly shop cost spread across 160 hours. These are the public calculator's starter numbers. On the phone, overhead is the monthly shop cost split across the hours you actually log that month, and the open month stays a draft until it closes. One labor rate covers the job. A helper's pay goes in other direct costs.
A water heater, repaired
An hour and a half on site, half an hour and 18 miles of driving, parts at your cost $95, invoice $385. On the phone the chip is Water heater. You are not guessing whether the tank is "old." You are pricing the visit you are about to offer.
Water heater repair
| Line | Math | Amount |
|---|---|---|
| What they paid | $385.00 | |
| Onsite labor | 1.5 h × $45.00 | $67.50 |
| Travel labor | 0.5 h × $45.00 | $22.50 |
| Vehicle | 18 mi × $0.65 | $11.70 |
| Materials, your cost | $95.00 | |
| Overhead | 2 h × $12.00 | $24.00 |
| Total job cost | $220.70 | |
| Net profit | $385.00 − $220.70 | $164.30 |
| Net margin | $164.30 ÷ $385.00 | 42.7% |
| Profit per hour | $164.30 ÷ 2 h | $82.15 / h |
Open this ticket in the calculator. Change the labor rate or the miles and the fee moves with them.
The verdict is solid — 35%+ net. Do more of this work. This invoice is $45.46 over the 35% price. Profit $164.30. Profit per hour $82.15. This is a good repair if the tank is likely to stay quiet. It is a bad repair if you already know you are buying a callback.
The same address, tank replaced
Three and a half hours on site, 45 minutes and 22 miles, the tank at your cost $980, permit $75, invoice $1,850. The permit is its own line so a fee change does not hide inside materials.
Water heater replacement
| Line | Math | Amount |
|---|---|---|
| What they paid | $1,850.00 | |
| Onsite labor | 3.5 h × $45.00 | $157.50 |
| Travel labor | 0.75 h × $45.00 | $33.75 |
| Vehicle | 22 mi × $0.65 | $14.30 |
| Materials, your cost | $980.00 | |
| Permits and fees | $75.00 | |
| Overhead | 4.25 h × $12.00 | $51.00 |
| Total job cost | $1,311.55 | |
| Net profit | $1,850.00 − $1,311.55 | $538.45 |
| Net margin | $538.45 ÷ $1,850.00 | 29.1% |
| Profit per hour | $538.45 ÷ 4.25 h | $126.69 / h |
Open this ticket in the calculator. Change the labor rate or the miles and the fee moves with them.
The verdict is OK, not a winner. Fine if this is filler between high-margin installs. To hit 35% net with this cost stack, the invoice needed to be $2,017.77 (you charged $1,850.00). Profit $538.45 against $164.30 on the repair. Profit per hour $126.69 against $82.15. The replacement wins the dollars. The repair wins the hour. Both can be the right offer. The wrong move is to talk the customer into the replacement because the check is larger, then discover the tank price left you a weaker percentage than the repair you were afraid to sell.
Gross on the replacement, before overhead, is 31.9%. Job net is 29.1%. If your rule is "50% on everything," you will either overprice replacements until you lose them, or you will enter the tank below what you paid. Plumbing profit margin is the longer version of that distinction.
The callback that the cheap repair forgot
You saved them money. You are back. Forty-five minutes, half an hour, 16 miles, $12 of parts, and you do not charge because the first repair was supposed to hold.
Return visit, no charge
| Line | Math | Amount |
|---|---|---|
| What they paid | $0.00 | |
| Onsite labor | 0.75 h × $45.00 | $33.75 |
| Travel labor | 0.5 h × $45.00 | $22.50 |
| Vehicle | 16 mi × $0.65 | $10.40 |
| Materials, your cost | $12.00 | |
| Overhead | 1.25 h × $12.00 | $15.00 |
| Total job cost | $93.65 | |
| Net profit | $0.00 − $93.65 | -$93.65 |
| Net margin | No invoice | — |
| Profit per hour | -$93.65 ÷ 1.25 h | -$74.92 / h |
Open this ticket in the calculator. Change the labor rate or the miles and the fee moves with them.
The screen asks you to enter what the customer paid. Without revenue this is just a cost pile — useful for callbacks, not for pricing. The repair's $164.30 is now $70.65 once this row exists. A shop that recommends the repair to be helpful, and then deletes the memory of the return trip, will keep recommending a ticket the books do not support. Log the callback. The chip is there so it does not get typed in as another water heater sale.
A no-cool repair against a change-out
The diagnostic and the small repair are one shape of HVAC work. The change-out is another. Here the repair is the no-cool ticket: invoice $385, an hour and a quarter on site, half an hour and 16 miles, parts $64.
No-cool repair
| Line | Math | Amount |
|---|---|---|
| What they paid | $385.00 | |
| Onsite labor | 1.25 h × $45.00 | $56.25 |
| Travel labor | 0.5 h × $45.00 | $22.50 |
| Vehicle | 16 mi × $0.65 | $10.40 |
| Materials, your cost | $64.00 | |
| Overhead | 1.75 h × $12.00 | $21.00 |
| Total job cost | $174.15 | |
| Net profit | $385.00 − $174.15 | $210.85 |
| Net margin | $210.85 ÷ $385.00 | 54.8% |
| Profit per hour | $210.85 ÷ 1.75 h | $120.49 / h |
Open this ticket in the calculator. Change the labor rate or the miles and the fee moves with them.
The verdict is solid — 35%+ net. Do more of this work. This invoice is $117.08 over the 35% price. Profit per hour $120.49. This is the service department's good hour.
The change-out is a full day. Eight hours on site, an hour and 28 miles of driving, equipment at your cost $4,100, permit $125, and $220 for a helper. The helper is other direct, because the app has one labor rate per job. Profit per hour divides by the hours you typed, which are yours, so the helper's hours are not in that rate. The $220 still reduces profit.
Change-out with a helper in other direct
| Line | Math | Amount |
|---|---|---|
| What they paid | $8,200.00 | |
| Onsite labor | 8 h × $45.00 | $360.00 |
| Travel labor | 1 h × $45.00 | $45.00 |
| Vehicle | 28 mi × $0.65 | $18.20 |
| Materials, your cost | $4,100.00 | |
| Permits and fees | $125.00 | |
| Other direct | $220.00 | |
| Overhead | 9 h × $12.00 | $108.00 |
| Total job cost | $4,976.20 | |
| Net profit | $8,200.00 − $4,976.20 | $3,223.80 |
| Net margin | $3,223.80 ÷ $8,200.00 | 39.3% |
| Profit per hour | $3,223.80 ÷ 9 h | $358.20 / h |
Open this ticket in the calculator. Change the labor rate or the miles and the fee moves with them.
The verdict is solid — 35%+ net. Do more of this work. This invoice is $544.31 over the 35% price. Profit $3,223.80 at 39.3% job net. The dollars dwarf the repair. The percentage does not. Profit per hour is $358.20, against $120.49 on the no-cool call. A shop that only watches the contract price will call the change-out the better day. A shop that watches the hour might rather run service. You can want the change-out anyway, because $3,223.80 funds a lot of ordinary weeks. You should want it with the condenser at the supplier invoice, not at the number on the proposal.
How to recommend without fooling yourself
- Price both options before you talk. The calculator holds the one they did not buy. The phone holds the one they did.
- Put equipment in materials at your cost the day you know it. A markup is revenue, not a smaller cost.
- If a repair is only attractive because you skipped the drive, put the drive back. Both options share the roll. Neither one gets it free.
- If you would not want the callback, say so, and show yourself the zero-revenue row first. The customer's age-of-equipment conversation can still go wherever the equipment is. Your price has to survive the return trip.
- Electrical is the same shape when a repair and a panel are both on the table. Cost the service call and the panel as siblings. The electrical how-to already runs that pair.
The option that makes the shop money is the one you would still be glad they picked on Friday, after the hours and the supplier bill are in. The other option can be a kindness. Kindness with a row is a choice. Kindness without a row is a leak.
Frequently asked questions
How should a shop compare a repair and a replacement?
Cost them as two tickets with the same drive and different hours, materials, and invoices. The one with the bigger check is not automatically the better job. Compare net profit and profit per hour after the equipment at your cost.
Should the equipment markup hide a weak install?
No. Put the supplier invoice in materials. A percentage that only works because the condenser was entered at the proposal's budget number is a wish. The dollars can still be large. You should know the percentage on purpose.
What if the cheap repair will just come back?
Add the callback you expect. A callback with no revenue is a cost pile on top of the repair. A repair that looks solid until the return visit can lose the advantage over a replacement.
Do I log both options?
Log the one they bought. Keep the other in the calculator so the recommendation was priced, not remembered. If you often sell both shapes, you will have real rows of each within a month.
Cost the water heater repair
Then change the invoice, the hours, and the equipment cost and look at the replacement.