General
Hourly Rate Calculator
Calculate what you need to charge per hour to hit your income and overhead goals.
You need $80,000 income + $20,000 overhead = $100,000/year. At 75% billable (1500 hrs/year), your breakeven rate is $67/hr. Add 15% profit margin → charge at least $78/hr. If you quote by the job, divide the job hours by this rate to set your floor.
How to set your hourly rate as a contractor
Start with how much money you need to take home per year. Add in overhead costs like insurance, truck payments, tools, fuel, marketing, phone, and anything else that keeps the business running. Then divide by the number of billable hours you actually work in a year. Not total hours. Billable hours. Most contractors only bill about 1,200 to 1,500 hours per year once you subtract driving time, estimating, admin work, and days off.
What most contractors charge per hour
Rates vary a lot by trade and location. General handymen charge $50 to $80 per hour. Electricians and plumbers typically charge $75 to $150 per hour. HVAC techs are in a similar range. Specialty trades can go higher. These rates include overhead and profit, not just what the worker takes home. If you are only charging $40 an hour, you are probably losing money once you account for all your costs.
Do not forget overhead in your rate
Your hourly rate is not your paycheck. Out of every dollar you charge, you have to cover insurance, fuel, vehicle maintenance, tools, licenses, bookkeeping, marketing, and taxes. For most small contractors, overhead runs 30 to 50 percent of revenue. If your overhead is 40 percent and you charge $100 per hour, $40 goes to overhead, leaving $60 for labor and profit.
Common Questions
Should I charge by the hour or by the job?
Charge by the job whenever you can. Hourly work punishes you for being fast and experienced. Flat rate pricing lets you make more money as you get better at the work.
How do I raise my rates without losing customers?
Give 30 days notice, explain that your costs have gone up, and raise by 5 to 10 percent at a time. Most good customers expect it. The ones who leave over a small increase were not worth keeping.
What is a good profit margin for a contractor?
Aim for 15 to 25 percent net profit after all costs including your own pay. Anything under 10 percent and one bad job can wipe out a month of work. If your margins are thin, your prices are too low.
Do I charge for drive time?
Most contractors build drive time into their overhead or set a service area limit. If a job is way outside your normal area, add a trip charge. Do not eat an hour of driving each way for free.
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