How to Calculate Your Contractor Hourly Rate to Cover All Costs
Most contractors set their hourly rate by looking at what competitors charge and picking a number somewhere in the middle. That's backwards. Your rate has nothing to do with what the contractor down the street charges - it has everything to do with what it costs you to operate your business and what you want to take home. A rate built on competitive observation tells you whether you'll win work. A rate built from your actual costs tells you whether you'll stay solvent while doing it.
The calculation has four components: your desired salary, your annual business expenses, your billable hours per year, and your profit target. The last one - billable hours - is where most contractors underestimate significantly. Working 2,000 hours a year doesn't mean billing 2,000 hours. Admin, estimating, driving, callbacks, and unbillable warranty work shrink that number fast. The BidFlow Contractor Hourly Rate Calculator accounts for all of it. This guide explains the math so you understand what you're calculating and why.