How to Calculate Your True Hourly Rate as a Solo Contractor
Most solo contractors set their rate by looking at what the other guy charges, or by taking their old wage and adding a few bucks. The trouble is that a wage paid you for every hour you were on the clock. Now you only get paid for the hours you bill, and you cover every cost yourself.
Step 1: Count the hours you can actually bill
Start with a year. 52 weeks × 40 hours is 2,080 hours. Then take out what isn't billable:
- Vacation, holidays, and sick days (say 3 weeks = 120 hours)
- Driving between jobs and to the supply house
- Estimates and site visits that don't turn into work
- Invoicing, phone calls, texts, and bookkeeping
Many solo operators find they bill somewhere between 50% and 70% of their working hours. In this example we'll assume 1,200 billable hours a year. Use your own number; track a couple of normal weeks if you're not sure.
Step 2: Add up what the business costs to run
List your yearly overhead: truck payment, fuel, insurance, licensing, phone, software, tool replacement, accounting help, advertising. Example: $18,000 a year.
Step 3: Decide what you need to take home
Pick the pay you want before taxes, say $65,000. Then set aside money for self-employment and income tax. The right percentage depends on your situation, so ask a tax professional. For this example we'll set aside 25%, which means you need about $86,700 before tax to keep $65,000.
Step 4: Do the math
($86,700 pay before tax + $18,000 overhead) ÷ 1,200 billable hours = about $87 an hour just to break even on your goals. Add a profit margin on top (10–20% is a common target) so the business can save for slow months and new equipment. That puts this example around $96–$105.
If that number is a lot higher than what you charge now, you're not alone. It usually means billable hours are lower than you thought, or overhead is creeping in unpriced.
Step 5: Use it on every estimate
Your rate only helps if it shows up in your bids. Estimate the labor hours, multiply by your rate, add materials with markup, and check the job still pays you after drive time.
Want the spreadsheet version?
The Know Your Number Pricing & Estimate Kit ($29) does this math for you, then carries your rate into an estimate sheet and a clean customer quote that doesn't show your costs. If you'd rather start free, grab the job-start checklist.