Free tool
Hourly rate calculator
Work backwards from what you want to earn. Enter your income goal, a year of business overhead, the hours you work and how many of them you can bill, and a profit margin. You get the rate to charge per billable hour.
Rate to charge
$88.18 / hrper billable hour
- Billable hours per year
- 1,512
- Billable hours per week
- 31.5
- Costs to cover
- $120,000.00
- Revenue needed
- $133,333.33
- Break-even rate (no profit)
- $79.37 / hr
Labor only. Price materials separately.
Charge $88.18 per billable hour over 1,512 billable hours a year to bring in $133,333.33. Break-even rate without profit: $79.37.
How it's calculated
- Billable hours = hours per week × weeks per year × utilization
- Costs to cover = income goal + annual overhead
- Revenue needed = costs to cover ÷ (1 − profit margin)
- Hourly rate = revenue needed ÷ billable hours
How to use it
- 1Set your income goal. Enter what you want to pay yourself in a year, before personal income tax.
- 2Add overhead. Enter a year of business costs: insurance, truck, fuel, phone, tools, software, marketing, accounting.
- 3Enter your time. Enter the hours you work in a week and the weeks you work in a year, after vacation and holidays.
- 4Set utilization. Enter the share of those hours you can bill. Estimating, driving, ordering and paperwork aren't billable.
- 5Add profit. Enter the profit margin the business should keep on top of your pay, for slow months, equipment and growth.
Worked example
An $80,000 income goal, $40,000 a year of overhead, 45 hours a week for 48 weeks, 70% utilization and a 10% profit margin.
- Billable hours = 45 × 48 × 0.70 = 1,512
- Costs to cover = $80,000 + $40,000 = $120,000
- Revenue needed = $120,000 ÷ (1 − 0.10) = $133,333.33
- Hourly rate = $133,333.33 ÷ 1,512 = $88.18
Charge about $88 per billable hour. Without the profit margin the break-even rate is $79.37.
Sources
- FDIC and U.S. Small Business Administration, Money Smart for Small Business, Module 8: Profitability (participant guide, FDIC-029-2025). Accessed 2026-11-03.
Gross profit is revenue minus the cost of goods sold; net profit subtracts overhead as well. Profit margin = net profit ÷ revenue, shown as a percentage.
FAQ
Hourly rate calculator questions
Have a question we didn't cover? Book a demo and ask a product specialist.
Why not just divide my income goal by 2,080 hours?
Because you won't bill 2,080 hours, and your rate also has to pay for the truck, insurance and tools. At 70% utilization over 48 weeks of 45 hours you bill about 1,500 hours.
What utilization is realistic?
It depends on your trade and how much of your week goes to driving, estimating and admin. Track a few weeks of your own time: billable hours divided by hours worked is your utilization.
Is the income goal before or after tax?
Before personal income tax. If you're self-employed, remember self-employment tax and income tax come out of that figure.
Why add a profit margin on top of my pay?
Your pay is a cost of the business. Profit is what's left for slow seasons, replacing equipment, paying down debt and growing. The margin is a share of revenue, so the rate is divided by (1 − margin).
Does this include materials?
No. It's a labor rate. Price materials separately, with their own markup, so the hourly rate isn't eaten up by material-heavy jobs.
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