Free contractor calculator
Billable Hourly Rate Calculator
Turn annual compensation, overhead, profit, and realistic billable capacity into an hourly price floor your business can sustain.
Reviewed July 11, 2026 · Inputs are calculated locally in your browser
Build a rate your year can support
Separate owner compensation from business profit, then account for the hours that cannot be billed.
- Minimum billable hourly rate
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- Billable hours/year
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- Annual revenue target
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- Target annual profit
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- Annual cost to recover
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Saved only in this browser. BuildMetric does not receive these numbers.
How the formula works
Estimate annual capacity from working weeks × working hours per week, then multiply by the share of time that can actually be billed. This prevents estimating, purchasing, travel, and administration from being treated as customer hours.
Annual cost to recover = owner pay + overhead + loaded employee labor assigned to billable hours.
Revenue target = annual cost to recover ÷ (1 − target profit margin). The minimum rate is that revenue target divided by billable hours. A solo operator can leave employee labor at zero when owner pay already covers the owner’s work.
Worked example
A solo electrical contractor targets $85,000 in owner compensation, expects $60,000 of annual overhead, and targets a 15% net profit margin. The owner works 40 hours per week for 48 weeks and expects 70% of that time to be billable.
The schedule provides 1,344 billable hours. Owner pay and overhead total $145,000. To retain a 15% margin, annual revenue must reach $170,588.24, producing an internal rate floor of $126.93 and target annual profit of $25,588.24.
Frequently asked questions
How many billable hours are in a year?
There is no universal figure. Start with available work hours, then subtract holidays, leave, estimating, sales, administration, training, travel that cannot be charged, and expected downtime. Compare the estimate with prior time records and use a conservative figure.
Is owner pay the same as profit?
No. Owner pay compensates the labor and management the owner contributes. Profit is the return for taking business risk and supplying capital, and it funds reserves and growth. Combining them can hide an underperforming company.
What belongs in overhead?
Common overhead includes office and shop cost, general vehicles, software, accounting, licenses, insurance not assigned to jobs, marketing, nonbillable administration, and depreciation. Use your financial statements and avoid adding direct costs already priced elsewhere.
Should this rate be my advertised rate?
Treat it as an internal planning floor. Market positioning, service minimums, emergency work, project risk, warranty exposure, material handling, and local demand can justify a different customer-facing rate.
Sources and further reading
- U.S. Small Business Administration: Calculate startup costs — framework for organizing one-time and recurring business costs
- IRS Publication 535 — general discussion of business expense categories
- SCORE: Pricing products and services — small-business pricing context
Limitations
- The result assumes the entered billable hours are sold and collected. Bad debt, discounts, seasonality, and demand gaps reduce actual recovery.
- Material, subcontractor, equipment, permit, travel, tax, financing, and project contingency costs are not automatically included.
- A single blended rate can distort work performed by employees or crews with materially different loaded costs.
- The tool does not test local market willingness to pay or contractual pricing restrictions.
Use this result as a planning estimate. Confirm tax, insurance, wage, and contractual decisions with qualified professionals and your current company records.