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Hourly rate calculator: what should your business charge?

The short answer

To work out your hourly rate, add what you want to pay yourself to your yearly overhead, divide by the hours you can actually bill in a year, then divide by (1 − your profit margin). For example, $120,000 ÷ 1,440 billable hours ÷ 0.8 is about $104 an hour. Anything you resell, like parts or materials, is marked up separately.

Your hourly rate has to pay you, cover your costs, and leave a profit, using only the hours you can actually bill. Enter your numbers to find the rate that does.

Your numbers

Truck, fuel, insurance, tools, phone, software, licenses, office. Your books or last year’s taxes have it.
Hours you can charge for, not driving, quoting or paperwork.
52 minus vacation, holidays and slow weeks.
As a share of the price. Up to 90%.

Charge at least

$98 an hour

Billable hours a year
1,440
Break-even rate (no profit)
$83.33 an hour
Revenue at that rate
$141,176 a year

Parts and materials are separate: mark them up on their own (see the markup calculator).

How it works

The calculator works backwards from what you need in a year:

  1. Add what you want to pay yourself and your yearly overhead.
  2. Divide by the hours you can bill in a year (billable hours a week × weeks worked). That’s your break-even rate.
  3. Divide by (1 − profit margin) to add profit. At 15% profit, that’s break-even ÷ 0.85.

The number most owners get wrong is billable hours. Driving, quoting, buying parts, returning calls and paperwork all take time you can’t bill. Thirty billable hours in a 50-hour week is common.

Charge for parts and materials separately with a markup: see the markup calculator.

Common questions

How do I calculate my hourly rate?
Add your yearly pay and overhead, divide by the hours you can bill in a year, then divide by (1 − your profit margin). The calculator does it for you.
What do plumbers charge per hour?
Rates vary a lot by region, license level and type of work. Rather than copying someone else’s rate, use your own costs: a rate that covers your pay, overhead and profit is the floor, whatever the market is.
What counts as overhead?
Everything it costs to run the business that isn’t a specific job’s parts: truck payments, fuel, insurance, tools, licenses, phone and answering, software, advertising, office and accounting.
Should I charge a trip or service call fee?
Many trades do, to cover driving and diagnosis time that can’t be billed by the hour. If you do, say so on the phone before you head out.

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