Hourly rate calculator

1. Enter the take-home you want — the money that reaches your account, after tax.
2. Enter your annual business overhead: van, tools, insurance, phone, software, accountant.
3. Enter the weeks you actually work, after holiday, sickness and the dead week at Christmas.
4. Enter your billable hours in a typical week — hours a customer pays for, not hours at work.
5. Enter your unpaid hours: quoting, driving, invoicing, chasing, buying materials.
6. Enter your effective tax rate and the share of invoiced work you never collect.
7. Read the required rate, then check your utilisation figure — that is the lever.

If the rate that comes out is far above your local market, do not simply charge it. Look at utilisation first: raising billable hours from twenty to twenty-five a week does more for your income than a rate rise your customers will not accept.

There are 2,080 working hours in a standard year — fifty-two weeks of forty hours. Divide the money you need by that number and you get a tidy hourly rate. This is how nearly everyone does it, including most calculators, and it is wrong for two compounding reasons.

First, you do not work fifty-two weeks. Take out two or three weeks of holiday, a week of illness, and the days around public holidays when nobody books anything, and you are at forty-five or forty-six.

Second, and far larger: you do not bill forty hours in the weeks you do work. You quote, you drive, you go to the merchant, you write invoices, you chase the invoice from six weeks ago, you answer the phone to someone who was never going to book. A one-person trade billing twenty-five hours out of a thirty-seven-hour week is doing well, and that is a utilisation of sixty-eight percent.

Put those together and the divisor is not 2,080. It is closer to 1,150. The same target income spread over 1,150 hours instead of 2,080 produces a rate almost eighty percent higher — and the person charging the low one is working every hour they have and wondering why nothing is left.

Utilisation is billable hours divided by total hours worked. If you work thirty-seven hours and bill twenty-two, your utilisation is fifty-nine percent. It is the single most informative number about a one-person business and almost nobody knows theirs.

The reason it matters is that it is usually easier to move than your rate. A rate rise has to be accepted by customers who can go elsewhere. Utilisation is entirely within your control: it goes up when you quote faster, batch your merchant trips, stop driving across town for a twenty-minute job, or start charging for the site visit that currently costs you two hours.

Five extra billable hours a week at a hundred dollars an hour, over forty-six weeks, is twenty-three thousand dollars — and it needs nobody's permission. That is why the utilisation figure sits next to the rate in the result rather than buried in an assumption.

A word of caution on the other direction, though: utilisation above about eighty percent for a one-person business is usually a sign of undercounting rather than efficiency. Somebody is doing the quoting and the invoicing, and if it is you and it is not in your unpaid hours, the number is flattering you.

• The vehicle. Payments or depreciation, insurance, fuel that is not billed to a job, servicing, tyres, and the day it is off the road. For most trades this is the largest single line and the most underestimated.
• Insurance and compliance. Public liability, professional indemnity, tool cover, licence renewals, trade body membership, and any certification you have to redo periodically.
• Tools and equipment. Not the ones you buy for a specific job — the ones you replace because they wore out. Spread the cost of anything lasting several years across those years.
• Phone, software and admin. Your mobile, the invoicing app, the quoting software, the accountant, the bank charges, the website. Individually small, collectively a month of billable work.
• Training and downtime. The days you spend on a course, at a supplier, or dealing with the tax return. They are unpaid and they are unavoidable.

A useful sanity check: pull last year's business bank statement and total everything that was not materials for a specific job. Almost everyone who does this for the first time is surprised, and almost always in the same direction.

It is entirely possible for this calculator to tell you that you need a hundred and forty dollars an hour when everyone in your town charges ninety. That is real information, not a bug, and it means one of four things is true.

Your utilisation may be too low. That is the first place to look, because it is the most fixable and the improvement is invisible to customers.

Your overhead may be too high for your volume. A van and a full insurance stack are fixed costs; spread across twenty jobs a month they are heavy, and across forty they are manageable. This is why growth sometimes fixes a pricing problem that a price rise cannot.

Your target take-home may be ahead of what this business can currently support, which is worth knowing plainly rather than discovering over three years.

Or the market really is underpriced — which does happen, and is more common than people think in trades where everyone quotes by copying what everyone else quotes. If you have proof, availability and a professional presence, testing a higher number on the next five quotes costs you very little and tells you a great deal.

Plenty of trades never quote an hourly rate. You price the job, not the hour, and the customer sees one number. That is usually better commercially — it moves the conversation away from how long you take and towards what they get.

But the hourly figure still governs underneath. When you price a job at twelve hundred dollars, you are implicitly betting on how many hours it takes. If your required rate is a hundred and twenty and the job takes fourteen hours, you have quoted at eighty-five and you will not notice until the year is over.

The practical habit that fixes this: after each job, write down the hours it actually took and divide. Do that for ten jobs and you will know which kinds of work you are systematically underpricing — and it is almost never the ones you expect. Small jobs are the usual culprit, because the travel, the setup and the invoicing do not shrink with the job.