How much should you charge per hour?

Ask ten tradespeople what they charge an hour and you'll get ten numbers, most of them guesses. The honest answer isn't a number you pick. It's a number you calculate from what you need to earn and how many hours you can actually bill.

This guide builds your hourly rate from the ground up, then shows what to do when a customer tells you it's too high. If you haven't yet, it pairs with the bigger picture in how to price a job - the labor rate you set here is Part 1 of that whole-job formula.

Why the wage you want is not the rate you charge

Here's the mistake that keeps solo trades poor: they want to take home, say, $40 an hour, so they charge $40 an hour. Then they wonder why there's never any money left.

The reason is simple. You don't get paid for every hour you work. The hour you spent driving to the supplier, the evening you spent writing three quotes, the Saturday morning chasing an unpaid invoice - none of it is billable, but all of it is time. If you only charge for the hours you're on the tools, every unbillable hour is unpaid. Your charge-out rate has to recover a full wage across the fewer hours you actually bill.

Billable hours: you don't sell 40 hours a week

Start by being honest about how much of your week is billable. A full 40-hour week rarely contains 40 billable hours. Between quoting, driving, buying materials, invoicing, and admin, most solo tradespeople bill somewhere around 60% of the hours they work - often less when they're starting out and doing everything themselves.

So a 40-hour week is really about 25 billable hours. Across a working year - call it 48 weeks after holidays, sick days, and slow patches - that's roughly:

That 1,200 is the number your whole rate hangs on. Everything you need to earn has to be recovered across those hours, not the 1,900+ hours you actually spend working.

The formula: build the rate in five steps

Work it top-down, from what you need to what you charge:

1. Set your take-home target. What do you need this business to pay you in a year? We'll use $48,000.
2. Count your billable hours. From above, about 1,200 a year.
3. Wage per billable hour. $48,000 ÷ 1,200 = $40/hr just to pay yourself.
4. Add overhead per billable hour. Total your yearly running costs - insurance, vehicle, fuel, phone, tools, software, licensing - and spread them across the same 1,200 hours. Say that's $24,000 a year, or $20/hr.
5. That's your cost rate. $40 + $20 = $60/hr. This is break-even on your time: charge exactly this and you've paid yourself and covered your costs, with zero profit left over.

Sixty dollars an hour is the floor. To actually get ahead, you charge above it - that gap is your profit. Add a 20% margin and your rate is $75/hr.

Loading overhead into the rate vs. charging it separately

In the build-up above we folded overhead into the hourly rate. That keeps your quotes simple: one rate, and every cost of being in business is already inside it. The alternative is to bill a lower "labor only" rate and add overhead as its own line on the job. Both land in the same place - the danger is only ever counting overhead twice (once in the rate and again as a line) or, far more common, forgetting it entirely. If your rate is just the wage you want, overhead is missing, and you're quietly funding your own business.

Sanity-check against your area, without racing to the bottom

Once you've built your rate from your own numbers, look outward - but only as a check, never as the starting point. If everyone around you charges $70–$90 and your math lands at $75, you're in the right country. If your math says $75 but the going rate is $120, you may be underselling yourself. If your math says $75 and locals charge $45, either your costs are high, your billable hours are too low, or that market is racing to the bottom and you don't want to win it on price.

The point is that competitors' rates tell you where the market sits, not what you need to charge. Anchor to your costs first, then position within the range you find.

When a customer says "that's too expensive"

You will hear it. Handling it well starts with knowing your break-even cold:

• Don't discount blind. You know your cost rate is $60. Any discount comes out of the $15 of profit, not below it. Drop under $60 and you're paying to work.
• Reduce scope, not rate. Instead of cutting your price, cut what's included - fewer coats, customer supplies materials, a simpler finish. The rate holds; the job gets smaller.
• Sell the difference. "Too expensive" compared to what? Cheaper quotes often skip insurance, cleanup, warranty, or the correct materials. Say what's in yours.
• Be willing to walk. A customer who only wants the lowest number is not your customer. Winning a job below break-even isn't winning.

The bottom line

Your hourly rate isn't a number you pick to sound competitive - it's what falls out when you divide a real wage and real overhead across the hours you can actually bill. Build it from your own costs, sanity-check it against your market, and never let a discount push you below the cost rate you calculated. Do that and "what do you charge?" stops being a nervous guess and becomes a number you can say with a straight face.