True Hourly Rate

What you have to charge per billable hour to cover everything and still make money. Not what the guy down the road charges.

Your crew

Billable people Anyone who turns a wrench, not office staff

Weeks worked per year 52 minus vacation and holidays

Paid hours per week

Billable % Share of paid hours that hit an invoice

Your costs

Annual overhead Rent, trucks, insurance, office, advertising, your salary

Annual crew cost Wages plus burden for the billable people above

Target net profit % As a share of revenue — a margin, not a markup

Charge per billable hour

—

Billable hours per year: —
Break-even rate: —
Revenue at this rate: —
Profit at this rate: —

The number everybody gets wrong

A tech on the clock 40 hours a week is not billing 40 hours a week. Drive time, warranty callbacks, running for parts, quoting, shop cleanup and paperwork are all hours you pay for and nobody invoices. Divide your costs by paid hours instead of billable hours and your rate comes out roughly a third too low.

That single error is why a shop can be busy every day of the year and still have nothing in the bank in December.

Profit is applied as a margin, not a markup. A 20% target on a $100 break-even rate gives $125, not $120. If that surprises you, start with markup vs margin.

Worked example

Two techs, 50 weeks a year, 40 paid hours a week, 65% of those hours billable:

2 × 50 × 40 × 0.65 = 2,600 billable hours
$120,000 overhead + $140,000 crew cost = $260,000 to recover
$260,000 ÷ 2,600 = $100/hr break-even
At a 20% profit margin: $100 ÷ 0.80 = $125/hr

Charge $100 and you work all year for free. Charge $115 — which feels like a healthy bump — and you make about 13%, not 20%.

Common questions

What billable percentage is realistic?: Well-run service operations tend to land between 60% and 70%. Below 55% usually means dispatch or routing problems rather than a pricing problem. Above 75% is rare and worth double-checking — most shops counting that high have forgotten to include drive time.
Should my own salary go in overhead?: Yes, if you are not one of the billable people. Owner pay is a cost of running the business, and leaving it out makes the rate look affordable while quietly funding itself out of your pocket.
What counts as burden?: Payroll taxes, workers' compensation, liability insurance, benefits, paid time off and training. It commonly runs 20–40% on top of the wage, and workers' comp rates vary enough by trade and state that it is worth using your real number.
My rate came out higher than what anyone around here charges.: That happens, and it usually means the local rate is too low rather than the math being wrong — competitors underpricing themselves is the norm in trades, not the exception. The useful response is to check your overhead and billable percentage, then decide whether to compete on price or on being the shop that answers the phone and shows up.