Your Warranty Callbacks Are Probably Costing You $70,000 a Year (And You’re Not Tracking It)

A client of Jobtable brought up warranties last week, the usual conversation: if you’re a reputable contractor, you stand behind your work. That led Kosta to pull some numbers, and the numbers are worse than most contractors think.

 

The Real Cost of a Callback

Take a mid-sized HVAC shop doing $1-2 million a year, running 1,500 to 2,000 service calls annually. A typical callback rate sits around 5%. That’s roughly 110 callbacks a year.Each callback runs about $650 once you stack tech labor, office time, insurance, truck costs, and overhead. Add in the lost opportunity of a paid job you didn’t run instead, and that shop is bleeding out roughly $71,500 a year through callbacks and warranty work.Drop that callback rate from 5% to 2%, and you save around $50,000 a year.Most contractors have never run this math on their own business. As Johny put it on the episode, it’s just filed away as “the cost of doing business.” But $70K a year isn’t a rounding error, it’s a number worth knowing.

 

Most Callbacks Aren’t Your Fault, But You’re the One Who Pays

Here’s the part that gets missed. A lot of warranty callbacks trace back to the equipment, not the install. Johny is currently dealing with a hot water tank, a $50,000 unit, that’s required six return trips. The internals are defective. The manufacturer sent a technician, tried swapping parts, and nothing has worked. Johny estimates he’s out roughly $3,000 in labor and time he can’t bill for.The job was bid and spec, meaning the engineer chose that specific manufacturer. Johny didn’t recommend the unit. He installed it correctly. But when it fails, the client doesn’t call the manufacturer. They call Johny.This is the dynamic across every trade. You’re not the one building the equipment you install, but you’re the face of it when something goes wrong. As Johny said: “Who’s the one that’s facing it? It’s the contractor.”Ask a homeowner what they think when their new AC fails a week after install, and most will say the same thing Kosta did on the episode: their first assumption is that the contractor messed up, not the manufacturer. If the contractor handles it well (sends someone fast, communicates honestly, fixes it), the relationship survives. If they say “that’s a manufacturer issue, call them yourself,” that contractor loses the client for good, even though the failure wasn’t their doing.

 

How to Actually Track Warranty Costs

The fix here isn’t complicated, but almost nobody does it. When a callback happens, go into the job costing for that completed job and add an expense category: warranty cost, or warranty labor. Log the hours, the rate, the cost. Now that callback is tied to the actual job instead of disappearing into general overhead.Johny’s addition: tag the vendor or manufacturer on that line item too. After a year of tracking, you can pull a report and see exactly how much a specific manufacturer’s products have cost you in callbacks. That’s the number you bring to the supplier conversation. Not a guess, not a feeling, an actual figure: “I bought $20,000 from you this year and had $1,500 in callbacks tied to your equipment. What are you going to do about that?”Without the data, it’s just a he-said-she-said argument. With it, you have leverage.

 

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Should You Build Warranty Cost Into Your Pricing?

Kosta asked Johny directly: should contractors price in 2-3% upfront to cover future warranty work? Johny’s answer was blunt. On most jobs, that 2-3% is the difference between winning and losing the bid. Pad your number for “just in case,” and you’ll lose to the contractor who didn’t. The margins get tighter the bigger the job gets. Johny pointed out that some of the largest GCs in North America are working multi-million dollar contracts on margins as low as 2.5-3%. The math only works at volume, and there’s no room left to pad for warranty risk on top of that.

 

What actually separates contractors isn’t the margin they build in. It’s how they respond when something breaks. Fast response and honest communication build the kind of reputation that gets you called back, even when the failure wasn’t your fault.

 

Why Suppliers Won’t Negotiate With You on Day One

Most trades businesses treat supplier pricing as fixed. They’ll fight a customer over a $200 line item but never ask their own supplier for a better rate, even as a repeat, predictable buyer.Johny’s experience: it doesn’t work until you hit volume. Early on, with two guys in a truck, there’s no leverage. But once you cross a certain threshold, the dynamic flips. Suppliers start coming to you. Manufacturers want to set up lunches, golf rounds, meetings, because they want more of your business.The real leverage shows up on bid and spec jobs, where every contractor is quoting the same material from different suppliers. If one supplier quotes $10,000 and another quotes $11,000 for the identical item, that gap tells you who’s padding their margin. Suppliers also remember who won and who didn’t, and they’ll call to ask why.Johny’s advice for a newer company under $1 million in revenue: treat your account manager like a business partner, not a vendor. Take them to lunch. Be upfront about what you’re building. Pay your bills on time. The account managers are the ones who can unlock better pricing, and reputation plus volume is what eventually gets you there.

 

The Boomer Exit Problem

A wave of trades business owners who started in the 80s and 90s are aging out right now, often with no succession plan. M&A activity in construction rose from 55% in 2024 to nearly 70% in 2025, driven largely by private equity rolling up contracting companies as that generation retires.Johny’s take: there’s no universal right answer. It depends entirely on where the owner is in life. Some want to hand the business to a kid who isn’t ready to run it. Some get private equity offers that come with multi-year earnout structures and performance targets that don’t fit how they’ve always operated. Some just want to wind down, collect what’s owed, pay off what they owe, and walk away.Johny mentioned an old boss who simply closed the business at 73 rather than deal with an unprepared successor or a drawn-out sale process. Construction is a cash-flow-heavy business, and sometimes the “exit plan” is just collecting the receivables on the last project and retiring on what’s left.

 

The One Thing That Actually Determines Sellability

Kosta, who’s been through an acquisition himself, made the sharper point: regardless of whether you plan to sell, the value of your business comes down to how dependent it is on you personally.If the business stops functioning the moment the owner is gone for two weeks, it’s not sellable, or it sells for next to nothing. This is true across most construction companies, but it doesn’t have to be. The fix is the same regardless of industry: build the business on processes and systems that don’t require you in the room.Every business changes hands eventually. Sale, succession, bankruptcy, or death, there’s no version where it doesn’t. The only choice is whether you build toward a version of that transition you’d actually want.If you’re not running on systems yet, that’s the place to start, long before you’re thinking about an exit.