Costs and pricing
Break-even hourly rate calculator
Overheads plus the wage you want, divided by the hours you can actually bill. The number most small trades have never worked out.
Everything the business costs to keep open for a year, before you pay yourself: vehicles, insurance, licensing, rent, tools, staff wages, software, accountant and advertising.
Your own wage for the year, before tax. This is the number most owners leave out, which is why their rate never covers it.
Not hours worked — hours a customer pays for. Quoting, driving, parts runs and paperwork do not count.
52 minus holidays, sick days and the quiet weeks.
Profit left in the business after everything above is paid — for slow months, replacing tools and growth. Set to 0 to see break-even only.
What this number actually is
Your break-even rate is the point where the business stops losing money — not the point where it makes any. It is every cost of staying open for a year, plus the wage you want to draw, divided by the hours a customer will actually pay you for. Charge below it and you are subsidising the job out of your own pocket, however busy the diary looks.
The target rate above it adds the profit that stays in the business. That is what replaces a failed van, covers a slow February and funds the second truck. A business running at exactly break-even survives only until something breaks.
Billable hours are not hours worked
This is where most rates go wrong. A 50-hour week is rarely more than 30 billable hours once you subtract quoting, driving between jobs, parts runs, chasing invoices, warranty callbacks and the hour lost to a customer who was not home. If you divide your costs by 50 instead of 30, your rate comes out roughly 40% too low, and the shortfall comes straight out of your wage.
Track it honestly for two weeks before you trust the number. Most owners are surprised, and the surprise is always in the same direction.
What belongs in overheads
- Vehicle costs — payments, fuel, insurance, maintenance, tires
- Insurance, licensing, bonding and certification renewals
- Rent, power and waste disposal if you hold premises
- Tools and equipment finance, plus what you replace each year
- Staff wages, including anyone part-time or on the phones
- Software, phone, accountant and advertising
What to do with the result
Treat it as a floor, not a price. It tells you which jobs are worth taking and which quotes you should walk away from. If the rate looks higher than what everyone locally charges, that usually means the others have not done this calculation — not that the number is wrong. Competing below your break-even rate is a race you win by going out of business first.
The last line of the results is the one worth pinning up. Losing five billable hours a week — one bad callback, one no-show — moves the rate you need by more than most owners expect.
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