Most contractors set their hourly rate by looking at what the shop down the road charges. That works right up until the year overhead climbs and the number stops covering it. This calculator goes the other way round: start from what the business actually costs to run, and work out the rate that covers it and leaves the profit you intended.
Why billable hours are the number that matters
A technician on the payroll for forty hours a week is not selling forty hours. Drive time, shop time, warranty returns, training, holiday and the mid-morning parts run all come out of that. Twenty-eight billable hours a week is a realistic figure for a well-run service operation; crews doing heavy install work often sit higher, and crews covering a wide rural territory sit lower.
This is the single input people get most wrong, and it moves the answer more than anything else. Take it from last year’s invoiced hours divided by the weeks worked, not from what the schedule says it should be.
What goes in overhead
Everything the business spends that is not the technicians’ own cost: rent, office wages, insurance, software, vehicles, fuel, marketing, accounting, licences, tools, bad debt. Technician wages are entered separately, burdened — wage plus payroll tax, workers’ compensation, benefits and the truck they drive.
Why parts margin is subtracted
If parts are marked up, that gross profit is already paying for part of the overhead. Subtracting it means the labour rate only has to carry what is left. A shop with a healthy parts margin can charge a lower hourly rate than an identical shop that sells parts at cost — which is exactly why comparing rates between companies tells you very little.
Break-even against target
The break-even rate is the point where the business makes nothing. It is not a price; it is a floor. Anything billed below it loses money on every hour sold, and no amount of volume fixes that. The second figure is the rate that delivers the net profit you set, and it is the one worth quoting.
The daily revenue figure is there because it is easier to manage. Most owners cannot tell whether a week was on track from a rate, but they can tell from a number the dispatch board has to hit.
Assumptions and limits
This is a time-and-materials model with one blended technician cost and one blended rate. Flat-rate pricing, maintenance agreements, after-hours premiums and apprentice rates all need their own pass. Sales tax is excluded throughout.
Common questions
My rate came out higher than anyone local charges. Now what?
Then one of three things is true: overhead is high for the size of the crew, billable hours are low, or the competition is not making the profit they think they are. All three are worth knowing. The usual fix is billable hours, not price.
Should I include the owner’s wage?
Yes. If you work in the business, your pay belongs in overhead. Profit is what the business earns after everyone, including you, has been paid.
What net profit should I target?
Ten to fifteen per cent is a common aim in residential service work, but it depends on how much capital the business ties up and what it needs to fund. The point of the field is that it is a decision, not a leftover.
Is anything sent to a server?
No. Everything is calculated in your browser.