What should you charge per hour?
Most people starting out set their rate by looking at competitors, then wonder why nothing is left at the end of the year. Start from what you want to earn and work back to the rate.
per billed hour, at minimum
- Billable hours per year
- –
- Pay + fixed costs to cover
- –
- Rate with no profit
- –
- Sales you need per year
- –
- Price of the typical job
- –
Estimate only. Amounts before sales tax and personal income tax. Works in any currency.
Want a second opinion on these numbers?
Send us your numbers. We’ll reply with what we would look at first to improve your margins.
How the numbers are worked out
Billable hours = weeks × hours per week × billable share
To cover = pay you want + fixed costs
Rate, no profit = to cover ÷ billable hours
Hourly rate = rate, no profit ÷ (1 − margin)
Job price = hours × hourly rate + materials × (1 + markup)
The margin is a share of the selling price, not a markup on cost: a 15% margin means 15% of every dollar you bill stays in the business.
Questions
Why can I only bill part of my hours?
Quotes, driving, buying materials, bookkeeping and phone calls are paid by nobody. For most self-employed people and small contractors, 50–70% of hours worked are billable.
What goes in fixed costs?
Everything the business pays over the year whether you work or not: vehicle, insurance, phone, software, tools, premises, accountant, advertising, licences.
Is the pay I want before or after tax?
Before tax. Put the gross amount you want to pay yourself. Personal income tax and contributions come out of it afterwards.
Why a margin on top of my pay?
Your pay covers your time. The margin covers risk, slow months and what the business needs to invest. With no margin, one bad month puts you in the red.
Is my data sent anywhere?
No. Everything is calculated in your browser. Nothing is stored or sent unless you use the form at the bottom of the page.
Want a second look at your pricing?
Pricing and cost structure are one of our three consulting practices. A free call first; we tell you plainly whether we can help.