Count the hours you can actually bill
A 40-hour workweek does not automatically mean 40 billable hours. Time spent quoting, traveling, ordering supplies, scheduling, and handling paperwork still needs to be supported by the work you sell.
Write down a realistic estimate of annual billable hours. Use your own schedule rather than assuming every working hour becomes a paid customer hour.
Build a cost-based starting point
Add the annual amount you want to pay yourself and the annual business costs your labor rate must cover. Divide that total by expected billable hours.
$60,000 owner compensation + $24,000 overhead = $84,000.
$84,000 ÷ 1,200 billable hours = $70 per billable hour.
That is a planning starting point before any additional profit target or costs you have not included. Avoid counting the same overhead in both the hourly rate and a separate job charge.
Account for the work you are taking on
A rate also needs to reflect the job’s demands: specialist work, difficult access, unusual equipment, or a tight deadline may change your costs. If materials are billed separately, say so clearly.
Compare your cost-based rate with customer expectations and comparable work in your area. If the numbers do not fit, revisit the scope, costs, or customer segment rather than dropping the rate without understanding the result.
Test the rate on completed jobs
Track estimated hours against actual hours, including setup and cleanup. A job quoted at four hours that takes seven tells you something about your estimating process.
Review a few real jobs each month. Update your assumptions as you learn where time and money go. Use the contractor pricing calculator to translate labor and other costs into a project price.
Take the next small step.
Explore our free tools and practical starting points.