How to calculate your charge-out rate (and stop working for less than you think)

By the SKEDS Team · 13 January 2027 · 7 min read

Most trade charge-out rates weren't calculated. They were absorbed — from what the last boss charged, what the mate down the road charges, what felt sayable on the phone. Then costs rose yearly while the rate rose occasionally, and the difference came quietly out of the owner's pay, weekends and stress. The uncomfortable audit is worth doing once properly: work the numbers below and a large share of trade businesses discover their "profitable" rate doesn't actually cover a market wage for the owner plus real overheads — let alone profit on top.

Here's the calculation, step by honest step. You'll need an evening, your accounting file, and a willingness to believe your own arithmetic over your own folklore.

Step 1: total what a year of you actually costs

Start with the number most owners skip: your own market wage — what you'd have to pay a qualified person to do your on-the-tools work. Not your drawings, not "whatever's left": a real salary line. Then stack the true overheads from the accounts: vehicle running and fuel, insurances, tool replacement and servicing, phone and software, accounting fees, workshop or storage, compliance and training, marketing, and the admin time someone does (if it's your evenings, cost those too — they're real). The result — wage plus overheads — is your annual cost base. It is almost always bigger than you guessed.

Step 2: count billable hours like a pessimist

The rate-killing mistake happens here: dividing costs by 40 hours × 48 weeks, as if every working hour were chargeable. It isn't — quoting, travel, merchant runs, admin, callbacks, training and the quiet weeks of your season all eat time nobody pays for. Realistic billable utilisation for a hands-on owner is commonly 60–75% of worked hours — and if you're guessing yours, that's precisely what tracked time against jobs reveals within a month. Say 1,300–1,500 genuinely billable hours a year for a full-time owner-operator; measure your own rather than borrowing anyone's.

Step 3: the floor, then the margin

Divide: cost base ÷ billable hours = your break-even rate — the floor below which every hour is charity. It's routinely a shock; sit with it. Then add margin on purpose: the profit that funds slow seasons, gear, growth and the reason you carry the risk. Adding 15–25% to the floor is a common range, but it's a business decision, not a formula — the point is that margin becomes a chosen number instead of an accident. Now compare against your current rate. If the current rate sits below the floor, you haven't been underpricing — you've been quietly self-subsidising every customer.

Step 4: sanity-check against reality, both directions

Market check: rates vary by trade, region and specialisation, and being the cheapest is a strategy for staying busy and broke. If your calculated rate is above local norms, the answer is rarely "cut the rate" — it's usually utilisation (more billable hours from the same week via tighter scheduling and routing) or overheads. Data check: run the new rate against your own job costing — which job types would have been profitable at it, which still wouldn't? Job-level truth catches what averages hide: the job shape that always overruns, the customer type that always haggles, the callbacks eating margin invisibly.

Step 5: raise it without drama

Rate rises frighten owners more than customers. The mechanics that work: apply the new rate to all new quotes immediately (nobody renegotiates a signed quote), give account and repeat customers dated notice, and let the rate travel inside professional quotes where the number sits beside scope, photos and terms — context that makes it read as value rather than a bare price. The customers you lose at an honest rate are disproportionately the ones the numbers said were unprofitable anyway. And remember the rate isn't the only lever: billing every hour and material that actually happens often recovers as much as the rise itself.

Revisit yearly — the rate is a living number

Costs drift, utilisation shifts, your skill premium grows. Diarise the recalculation annually (insurance-renewal time works), and let the system feed it: a year of tracked hours, job costs and invoicing data turns next year's evening of arithmetic into fifteen minutes of confirmation.

Frequently asked questions

Should I charge different rates for different work? Often, yes — emergency callouts, after-hours and specialist work carry premiums; the calculation above sets the base the premiums stand on.

Do I show the hourly rate on quotes? For do-and-charge work, yes with terms; for fixed-price quotes, the rate is internal — it prices the hours, the customer sees the job price.

What about charging for apprentices and labourers? Each person on the tools gets the same calculation at their cost and utilisation — apprentice hours are billable at apprentice rates, and the blended crew rate goes into quotes.