How to set an hourly rate that covers your costs
A rate that ignores your overhead leaves you working hard and earning little.
- Add up yearly costs. Include vehicles, insurance, tools, software, phone, rent and your own pay.
- Count billable hours. Not every hour is billable. Drive time and paperwork take a share.
- Divide costs by billable hours. This gives your break-even rate.
- Add profit. Add a margin so the business can grow and handle slow weeks.
- Review twice a year. Costs change, so check the rate again.
Common questions
Should my rate match competitors?
Use them as a reference, not a target. Your costs are your own.
Is flat rate better than hourly?
See our guide on flat rate versus time and materials.
See also the contractor guides and free tools.
General information, not legal or financial advice. Verify with your attorney or accountant.
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