Free contractor tools
Hourly Rate Calculator
Most contractors charge too little because they price off a gut number. Work backward from the pay you want and the overhead you carry to the rate you actually need.
Vehicles, insurance, office, tools, software, admin.
Hours you actually bill — not hours worked.
Hourly rate to charge
$81.70
How do you calculate your hourly rate as a contractor?
Work backward from what the business has to cover. Add the pay you want to your annual overhead, divide by the hours you actually bill, then add your target profit margin on top:
break-even rate = (pay + overhead) ÷ billable hours
rate to charge = break-even rate ÷ (1 − profit%)
The trap is using worked hours instead of billable hours. Driving, quoting, invoicing, and chasing payment aren't billable — so a "40-hour week" is often 25–30 billable hours, and your real rate needs to cover the rest.
Why most contractors undercharge
They divide the salary they want by 2,080 hours and stop there — ignoring overhead, unbillable time, slow seasons, and profit. That number feels fine until the truck needs tires and there's nothing in the account. A rate that only covers wages isn't a business; it's a job that owns you.
Should profit be separate from my pay?
Yes. Pay yourself a real wage as a cost of the business, and treat profit as what's left on top to absorb risk, fund growth, and reward ownership. If your "profit" is really just your paycheck, a single bad job wipes out the year.
How Simple Contractor CRM helps
Once you know your rate, SCC's estimate builder applies it line by line with material costs and live margin, so every quote reflects the number you actually need to charge — and you can see the margin before you send it, not after the job's done.
Frequently asked
- What's a good hourly rate for a contractor?
- There's no universal number — it depends on your trade, market, overhead, and the pay and profit you need. That's the point of working backward: your rate should be whatever covers your real costs plus profit, not whatever the contractor down the street charges.
- What counts as overhead?
- Everything it costs to run the business that isn't a specific job: vehicles and fuel, insurance, tools and equipment, phone and software, office or shop, marketing, and admin time. Total it for the year and spread it across billable hours.
- How many billable hours are realistic?
- Often far fewer than hours worked. Between travel, estimating, invoicing, and downtime, many solo contractors bill 25–32 hours of a 40-hour week. Use your honest billable number — overestimating it is how rates come out too low.
- Should I charge hourly or flat-rate?
- Many contractors quote flat-rate to customers but use a true hourly rate internally to build those prices. Either way, you need to know your real cost-per-hour first, or your flat prices are just guesses.
Run the next job the simple way.
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