Enter what your shop actually costs to run and this gives you two numbers: the hourly rate that covers everything, and the rate that also leaves the profit you want. Plenty of shops price off what the guy down the road charges, and a full schedule still does not turn into money in the bank. One common cause is billable efficiency — the share of paid hours you actually get to invoice.
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The values below are starting points. Replace every one of them with your own — the answer is only as good as what you put in.
Everything you spend in a year that no single job pays for: trucks, insurance, phones, software, rent, office help. The default is a starting point — pull yours off last year's P&L.
Anyone whose hours you invoice, including yourself if you still bill hours. Leave out office-only staff.
Hours you pay for in a normal week, not hours you bill. Include overtime you routinely pay.
52 minus vacation and shutdown weeks. Start at 50 and adjust to what you actually pay.
Invoiced hours divided by paid hours. The 65 percent loaded here is only a starting point to get numbers on the screen — it is not a benchmark. Pull four weeks of payroll hours and four weeks of invoiced hours, work out your own, and do not guess high.
Wage plus payroll taxes, workers comp and benefits — what one clock hour actually costs you, not the hourly wage. The $35 loaded here is a starting point, not a going rate; replace it with your own burdened cost off last year's payroll.
What is left after every cost including your own pay. Set the number you want, not the one you expect.
$90.51
Quote this rate. It covers overhead, labor and the profit you asked for.
Your floor. Price under this and the hour does not carry its share of overhead.
The hours you can actually invoice, rounded to the nearest whole hour. Every fixed cost has to be spread across these.
What you write checks for, before efficiency. The gap between this and your billable hours is what you pay for and never sell.
Your fixed costs per sellable hour. Add a truck or a phone line and this goes up.
What a sellable hour of labor really costs you, which is more than the wage once burden and unsold hours are counted.
What you keep on each billed hour if you hold the target rate.
What the business clears for the year, on top of the pay you already counted in overhead, if you hold the target rate on every billable hour.
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Two numbers come out of this calculator and they do different jobs. The break-even rate is the price where you cover every dollar you spend — the tech's pay and burden, plus your share of the truck, insurance, phone, software and rent — and take home nothing. Price an hour under it and that hour is not carrying its share of overhead. The target billable rate is break-even divided by one minus your profit target. That division matters. If you want 15 percent net and you simply add 15 percent to break-even, you land short, because profit is a share of the price you charge, not a share of your cost. Use break-even as the floor on a job you decide to fight for. Use the target rate as the number you actually quote.
You pay for 40 hours. You sell fewer. Drive time, shop time, parts runs, warranty callbacks, the estimate that never closed, the truck that would not start — all of it is paid and none of it is invoiced. Billable efficiency is invoiced hours divided by paid hours, and it is the easiest input to leave out of a rate. Leave it out and your rate is built on hours you will never bill, which is exactly how a shop stays booked solid and broke. Do not guess it. Pull four weeks of payroll hours and four weeks of invoiced labor hours out of your own records and divide. Whatever that number is, use it. If it comes back lower than you expected, use it anyway. If it comes back low, there may be room to sell more of the hours you already pay for.
Here is the arithmetic end to end. The figures below are invented to show how the pieces fit — they are not drawn from any survey, and yours will be different. Say you run two techs. Overhead is $60,000 a year: two trucks, general liability and workers comp, phones, software, a small shop lease. You pay $35 an hour fully burdened and you want 15 percent net. Two techs at 40 hours across 50 paid weeks is 4,000 paid hours. At 65 percent billable efficiency that is 2,600 hours you can actually invoice. Overhead lands at $23.08 per billable hour. Labor lands at $53.85, because you pay for the whole clock hour and only sell part of it. Break-even is $76.93 and the target rate is $90.51. Now run the same shop at 50 percent efficiency: billable hours fall to 2,000, overhead climbs to $30.00, labor jumps to $70.00, break-even to $100.00 and the target rate to $117.65. Same trucks, same techs, $27.14 an hour of difference.
Overhead is every dollar you spend that no single job pays for directly. Truck payments, fuel, insurance, phone and internet, software, rent, accounting, licenses, advertising, and the office help who never touches a wrench. Job materials do not belong here — those get quoted and marked up per job. Neither does field labor, since that is its own input, and counting it in both places inflates your rate and costs you work you should have won. One caveat this model does not handle for you: it spreads all of your overhead across labor hours. If the gross profit on your material markup is already covering part of your overhead, subtract that annual gross profit from the overhead figure before you enter it, or you recover the same overhead twice and price yourself high. The owner is the other judgment call. If you still turn wrenches, split yourself: the hours you bill go into labor cost at what it would cost to replace you, and the rest of your pay is overhead. If you no longer turn wrenches, your whole salary is overhead. Take the figures off last year's profit and loss, not off memory.
This is not a once-a-year number. An insurance renewal, a new truck payment, a hire, a shop move, a fuel swing or a raise all change the answer, and every one of them changes it quietly. Put a recurring reminder on the calendar — quarterly is a reasonable cadence — and rerun it with current figures. Two habits make it stick. First, keep tracking billable efficiency month to month. The worked example above shows how far your rate moves when it slips. Second, when the target rate comes back above what you have been charging, do not panic-raise every price at once. Quote the new number on the next job you bid and watch how it lands before deciding your market cannot carry it.
There is no single good rate — the right rate is the one that covers your overhead and labor and leaves the profit you want. Two shops on the same street can land a long way apart on price and both be right, because they carry different trucks, insurance, payroll and billable efficiency. Run your own numbers above. If your current price sits below the break-even figure, every hour you sell is falling short of covering its share of overhead.
Billable efficiency is the share of paid hours you actually invoice. Pay a tech for 40 hours, bill 26 of them, and your efficiency is 65 percent. The other 14 hours are drive time, shop time, parts runs, callbacks and estimates. It changes your rate because you pay for every hour and only get paid for some, so your true labor cost per billable hour is your hourly labor cost divided by that percentage.
Divide your annual overhead by the hours you can actually invoice in a year, then add your labor cost per billable hour. Billable hours are techs times hours per week times paid weeks times billable efficiency. Labor cost per billable hour is your fully burdened hourly labor cost divided by that same efficiency. Add the two and you have your floor. Anything below it is not carrying its share of overhead, no matter how busy the schedule looks.
No — divide, do not add. For 15 percent net profit the math is break-even divided by 0.85, not break-even times 1.15. Profit is a percentage of the price you charge, not of your cost. On a $76.93 break-even, adding 15 percent gives $88.47 and leaves you about 13 percent net. Dividing gives $90.51 and leaves you the 15 percent you actually asked for.
Split it if you still work in the field. The hours you bill belong in labor cost, priced at what it would cost to hire someone to do that work, and the rest of your pay — selling, estimating, dispatch, bookkeeping — is overhead. If you never touch a job anymore, your entire salary is overhead. Either way, pay yourself inside the model. A rate built on an unpaid owner breaks the day you hire your replacement.
Yes, and it matters more there. A flat-rate or bid price is an hourly rate with the hours hidden inside it. Calculate your target rate here, multiply it by the labor hours you honestly expect the job to take, then add materials with your markup. One check before you do: if that material markup is already helping to cover your overhead, take that contribution out of the overhead figure you entered, or you are recovering the same overhead in both places. And if the flat price you have been using implies a rate under your break-even, that job is not carrying its overhead whether or not the invoice ever shows an hour.
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