Hourly rate calculator for service businesses
Most service businesses undercharge because they spread their costs over every hour worked instead of the hours actually billed. Enter what you need to earn, what the business costs to run and how much of your time is billable, and see the rate that pays for all of it.
- Free, no sign-up
- About 2 minutes
- Nothing leaves your browser
Hourly rate calculator
How to use it.
- 1
What you need
The pay you want to draw in a year, and what the business costs to run: rent, insurance, software, vehicles and equipment.
- 2
How much you bill
Your working weeks and hours, and the share of those hours a client actually pays for.
- 3
The margin
A profit on top of your pay, so slow months and new equipment do not come out of your own pocket.
The arithmetic, in full.
No black box. This is exactly what the tool calculates, so you can check it by hand.
- Billable hours = working weeks x hours a week x billable share
- Break-even rate = (pay + business costs) / billable hours
- Hourly rate = break-even rate / (1 - profit margin)
- Day rate = hourly rate x hours a day, where a day is a fifth of your week
A worked example
Take $60,000 in pay and $18,000 in business costs, with 46 weeks of 40 hours and 60% of them billable: 1,104 billable hours. $78,000 over 1,104 hours is $70.65 an hour to break even, and with a 15% margin the rate is $83.12 an hour.
Common questions.
What counts as billable time?
Time a client pays for. Quoting, unpaid travel, admin, marketing and learning are unbillable, and your rate has to pay for them too.
Should I charge by the hour or a fixed price?
Many service businesses quote fixed prices built from an hourly rate. The rate is how you check that a fixed price pays; the customer sees the price of the outcome.
Why add a profit margin on top of my pay?
Your pay is a cost of the business, not its profit. A margin funds slow months, equipment and growth without cutting your own pay.
How often should I review my rate?
At least once a year, and whenever your costs or your billable hours change noticeably.
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