Your minimum hourly rate = (annual overhead + target owner pay + desired profit + direct labor cost) / billable hours per year. Most contractors set rates by copying competitors, which only works if their overhead and billable-hour count match yours. Work the number from your own costs first, then check it against the market.
Charging what the guy down the road charges is not a pricing strategy, it is a guess about someone else's cost structure. Enter your overhead, the pay you need and how many hours you can genuinely bill, and this gives you the floor below which the business does not work.
| Input | Value |
|---|---|
| Annual overhead | 60000 |
| Owner salary you need | 85000 |
| Annual direct labor cost | 0 |
| Working hours per year | 2000 |
| Billable utilisation | 65 |
| Target profit margin | 15 |
| Result | Value |
|---|---|
| Rate you should charge | $131.22 |
| Break-even rate | $111.54 |
| Billable hours per year | 1,300 |
| Revenue needed per year | $170,588.24 |
| Profit at that rate | $25,588.24 |
| Cost per billable hour | $111.54 |
A solo contractor working 2,000 hours rarely bills 2,000 hours. Estimating, quoting, invoicing, chasing payment, buying materials and driving are all real work that no client pays for directly. If you bill 65% of your time, every billable hour has to carry the other 35%.
List every fixed cost the business pays whether or not you work: insurance, truck payments, fuel, phone, software, accounting, licences, advertising, rent. Divide it across billable hours deliberately, or it comes out of your profit by default.
If your calculated rate is far above local pricing, the answer is usually lower overhead, higher utilisation or better job selection, not simply charging less than it costs you to operate.
There is no universal number, it depends on your overhead, the pay you need, your billable utilisation and your target profit. Calculate the floor from your own costs, then position against local market pricing from there.
Most clients prefer fixed price, and it rewards you for being efficient. Even when you quote fixed price, you still need an accurate hourly rate underneath, because that is how you price the labor inside the bid.
No. This calculator produces a labor billing rate. Materials, equipment and subcontractors are priced separately and carry their own markup.
WinkScope's free contractor hourly rate calculator determines the minimum hourly billing rate a contractor must charge. It divides annual overhead, owner pay and direct labor cost by realistic billable hours (working hours multiplied by billable utilisation, commonly 60-70%), then adds a target profit margin. The tool outputs break-even rate, recommended rate, annual revenue required and profit at that rate. Free, no signup.