# Hourly Rate Calculator for Contractors: What to Charge *Finance · 8 min read · Published 2026-09-02 · Moil Insights* > Work out what your hour has to sell for. A free calculator plus the formula: overhead, the pay you want, real billable hours and your margin. Canonical URL: https://blog.moilapp.com/article/contractor-hourly-rate-calculator --- ## What Should You Charge Per Hour? Take everything you spend in a year whether or not you work, add the pay you actually want, divide by the hours you can genuinely bill, and divide that by one minus your profit margin. That is your rate. Most owners get a number 30 to 60 percent higher than what they have been charging, and the gap is almost always the same two mistakes: counting worked hours instead of billable hours, and forgetting to pay themselves before calling the rest profit. The calculator below does the arithmetic; the rest of this guide explains each input so the answer holds up. ### Hourly rate calculator Add your yearly overhead to the pay you want, divide by the hours you can actually bill, then divide by (1 − your profit margin). | Input | Value | | --- | --- | | Yearly overhead | $42,000 | | What you want to earn | $75,000 | | Billable hours a year | 1,200 | | Profit margin you want | 15 % | | **Your cost per billable hour** | **$98** | | **Rate to charge** | **$115** | | **Revenue at that rate** | **$137,647** | The number that comes out is a floor, not a ceiling. It is what your hour must earn for the business to survive a normal year. What you can actually charge on top of that depends on how fast you answer the phone, how you look on arrival and whether the customer trusts you — but you should never quote below the floor because a competitor does. They may simply be going out of business more slowly than you would. ## Input 1: Your Real Overhead, Not Your Job Costs Overhead is everything you pay in a year whether or not a single job comes in. It is not materials, and it is not subcontractor labor — those belong to the job. Owners routinely undercount this by half because the small recurring charges never feel like a business expense. - **Vehicle:** payment or lease, commercial auto insurance, fuel, maintenance, tires. - **Insurance:** general liability, any bond your customers ask for, and workers compensation once you have an employee. - **Licensing and professional:** trade license renewals, permits you carry, accountant, bookkeeper. - **Tools and technology:** replacement tools, phone, scheduling and invoicing software, the website. - **Marketing:** whatever you spend to keep the phone ringing, including the lead platforms you would rather not pay. - **Premises:** shop, yard or storage unit, and the corner of your house if the business genuinely pays for it. Add twelve months of bank statements rather than estimating. The estimate is always low. If your business plan already lists these — and it should — that section is your input. [Moil Professional at $25/month writes the plan](https://blog.moilapp.com/article/how-to-write-a-business-plan-small-business) with the overhead schedule and the break-even in it, in English and Spanish. ## Input 2: Pay Yourself Before You Call Anything Profit The most common pricing error in a service business is treating whatever is left at the end of the month as the owner's pay. That is not a wage, it is a residue, and it means every bad month comes directly out of your household. Decide what the job of running this business should pay — what you would have to pay someone else to do it — and put that number in as a cost. Profit is separate, and it comes after. Profit is what buys the second truck, absorbs a slow quarter and gives the business a value beyond your own labor. A business that only pays its owner a wage is a job with extra paperwork. ## Input 3: Billable Hours Are Not Worked Hours This is the input that breaks most rate calculations. You cannot bill for driving, quoting, chasing invoices, buying materials, or the Tuesday a customer cancelled. A solo operator working a full week rarely bills more than 25 to 30 hours of it, and that is before holidays, sick days and the slow season. Field-service benchmarks put solo owner-operator utilisation at 45 to 60 percent, because quoting, sales and admin all land on one person. | Metric | Value | | --- | --- | | Hours in a working year | 2,000 | | Solo utilisation | 45-60% | | Realistic billable hours | 1,000-1,300 | | Effect of using 2,000 | Rate ~40% too low | Run the calculator once with 2,000 hours and once with 1,200 and look at the difference in the rate. That gap is the money most owners lose without ever seeing it leave, because the arithmetic was wrong before the first quote went out. **Track it for two weeks:** Write down every hour you actually invoice for. Two weeks is enough to know whether your billable share is 50% or 70%, and it is the single input that moves your rate the most. ## Input 4: The Margin You Want Dividing by one minus the margin is the step people skip. Adding 15% to your cost does not produce a 15% margin — it produces about 13%, because the margin is a share of the final price, not of the cost. On a $100 cost, a 15% markup gives $115 and a margin of 13%; a 15% margin needs $117.65. Small on one job, several thousand dollars a year across a full book. ## Hourly Rate, Flat Rate, or a Service Call Fee? Most residential service businesses quote a flat price rather than an hourly rate, and customers strongly prefer it — they want the number before you start, not a meter running. That does not make this calculation irrelevant. It is how you check that your flat prices are profitable: estimate the hours a job takes, multiply by the rate this calculator gives you, add materials and their markup, and compare it to what you have been charging. Any flat price that comes out below is a job you are subsidising. | Pricing model | Works well for | The risk | | --- | --- | --- | | Flat rate per job | Repeat residential work you can estimate accurately | You absorb the cost of a job that goes long | | Hourly plus materials | Diagnostic work, remodels, anything unpredictable | Customers fear an open meter and compare rates directly | | Service call fee then flat repair | Emergency and diagnostic-led trades | The fee has to genuinely cover the trip | | Monthly agreement | Maintenance you can schedule in the slow season | Underpricing it locks in a bad rate for a year | ## What to Do With the Number - **Check your last ten invoices against it.** Divide each by the hours it took. Anything below the floor was charity. - **Raise in steps, not in one jump.** New quotes go out at the new rate immediately; existing customers get notice and a reason. - **Expect to lose some price-only customers.** If a 15% rise loses you 10% of your work, you are ahead on both money and hours. - **Recalculate when your costs move.** Insurance renewal, a new truck payment or a fuel spike all change the floor. Raising prices is easier with a script than with nerve. [How to raise prices without losing customers](https://blog.moilapp.com/article/how-to-raise-prices-without-losing-customers-the-trade-s-guide-to-profitable-pri) covers the wording, and [contractor profit margins](https://blog.moilapp.com/article/profit-margins-decoded-what-you-should-actually-be-making) covers what should be left at the end of the year once the rate is right. ## Put the Rate in the Plan A rate you worked out once and never wrote down drifts back to whatever the last customer resisted. The number belongs in your business plan next to the overhead it came from, so the next decision — the hire, the truck, the second crew — is made against the same arithmetic. Moil Professional at $25/month writes that plan from your own trade, service area and prices, in English and Spanish, and Market Pro at $75/month adds the Moil360 calendar that keeps the schedule full enough to hold the rate. ## Frequently asked questions ### How do I calculate my hourly rate as a contractor? Add your yearly overhead to the pay you want, divide by the hours you can genuinely bill in a year, then divide that figure by one minus your target profit margin. For example, $42,000 of overhead plus $75,000 of pay across 1,200 billable hours is $97.50 an hour of cost; at a 15% margin you would charge about $115. Most solo operators bill 1,000 to 1,300 hours, not 2,000. ### How many hours a year can a contractor actually bill? Far fewer than they work. Driving, quoting, buying materials, invoicing and cancellations are not billable, so a solo operator working full time typically bills 1,000 to 1,300 hours a year rather than 2,000. Using 2,000 in a rate calculation understates the rate by roughly 40%. ### Should I charge hourly or a flat rate? Most residential customers prefer a flat price they hear before the work starts, so quote flat where you can estimate the job reliably. Keep the hourly figure as your internal check: estimate the hours, multiply by your calculated rate, add materials, and if your flat price comes out lower you are subsidising the job. ### Is markup the same as margin? No, and confusing them costs money on every job. Markup is a percentage of your cost; margin is a percentage of the price you charge. Adding 15% to a $100 cost gives $115 and a 13% margin. To actually earn a 15% margin you divide by 0.85, which gives $117.65. ### What if my calculated rate is higher than my competitors charge? That is the normal result, and it usually means the competitor has not done this arithmetic rather than that they are more efficient. Quoting below your floor means every hour worked loses money, which no amount of volume fixes. Compete on response time, professionalism and trust instead of on price. **Put your rate in a plan that holds it** — Moil Professional at $25/month writes your business plan with the overhead schedule, pricing tiers and break-even that this rate comes from, in English and Spanish. Market Pro at $75/month adds the Moil360 marketing calendar. [Start Professional at $25/month](https://moilapp.com/business) --- *Reviewed and published by the Moil team. Drafted with Moil, the AI co-founder this blog is published by.* --- ## Related guides - [How Much Should a Plumber Charge Per Hour? (2026)](https://blog.moilapp.com/article/how-much-should-a-plumber-charge-per-hour.md) - [How Much Should an Electrician Charge Per Hour? (2026)](https://blog.moilapp.com/article/how-much-should-an-electrician-charge-per-hour.md) - [Premium Pricing for Technicians: How to Earn $200 an Hour](https://blog.moilapp.com/article/the-200-hour-technician-how-to-command-premium-pricing.md) - [Break-Even Calculator: How Many Jobs a Month You Need](https://blog.moilapp.com/article/small-business-break-even-calculator.md)