Form CMB-015 Rate guidance
How Much Should a Contractor Charge Per Hour
The question every contractor asks at some point is deceptively simple: how much should I charge per hour? The answer depends on exactly three things: how much you want to earn, how much it costs to run your business, and how many hours you can actually bill. If your target take-home is $80,000, your overhead is $45,000 per year, you want a 15% profit margin, and you can bill 1,200 hours, the math gives you a definitive answer. The problem is that most contractors have never sat down with real numbers to work through this calculation. They pick a rate based on what competitors charge, what 'feels right', or what they charged five years ago plus inflation. This page gives you the math and the calculator to determine your specific rate based on your actual situation, not industry averages or guesses.
✓ How It Works
This calculator simplifies complex pricing decisions into clear, actionable numbers. Enter your specific values using the fields above. Trade presets provide industry-standard starting points that you can adjust for your situation. Results update as you type, giving you instant feedback on how each variable affects your bottom line. Every calculation runs in your browser with no data sent to any server. Save your inputs locally for quick access on return visits.
The formulas used are standard business accounting calculations adapted for the contracting industry. They account for the unique aspects of trade work: seasonal variation, weather delays, variable material costs, and the difference between billable and non-billable hours that salaried workers never think about.
✓ When to Use This
Use this calculator when preparing bids for new work, reviewing your current pricing structure, or planning for business changes like hiring employees, adding equipment, or expanding to a new service area. Run the numbers before making commitments that change your cost structure. Contractors who check the math before signing a lease, purchasing a vehicle, or setting new rates consistently make better financial decisions than those who rely on instinct alone.
✓ Frequently Asked Questions
What is the average hourly rate for contractors in the US?
Contractor hourly rates in the US range widely by trade and region. General averages: plumbers $75-150/hr, electricians $80-175/hr, HVAC $85-175/hr, painters $40-80/hr, landscapers $50-100/hr, roofers $60-120/hr. Metropolitan areas run 30-50% higher than rural markets. These are billing rates that cover all business costs, not take-home wages. A contractor billing $100/hr might take home $35-45/hr after overhead, taxes, and business reinvestment.
Why do most contractors undercharge for their work?
Three reasons dominate. First, they calculate their rate from what they want to earn per hour, forgetting that overhead, taxes, benefits, and non-billable hours mean they need to charge 2-3x their desired take-home. Second, they compare their rate to employee wages instead of other business billing rates. Third, they fear losing bids and default to the lowest rate that feels competitive. The fix is simple: calculate your actual costs and set a rate that covers them with profit. Use the calculator above to see your real number.
How do I raise my rates without losing clients?
Raise rates incrementally (5-10% per increase) rather than making large jumps. Notify existing clients 30-60 days in advance with a brief, professional explanation. Time increases to January or July when clients expect annual adjustments. Grandfather loyal long-term clients for 60-90 days if the relationship warrants it. Most importantly, deliver quality work that justifies the rate. Contractors who raise rates lose some price-sensitive clients but attract better ones who value quality over cost.
Should new contractors charge less than experienced ones?
New contractors often charge less because they work slower and are still building a reputation. However, charging too little signals low quality and attracts difficult clients. A better approach: charge 10-15% below established competitors while you build your portfolio and speed, then raise rates as you gain efficiency. Even at a lower rate, make sure your price covers all costs including overhead. A new contractor who charges $60/hr but has $45/hr in costs barely breaks even and cannot sustain a business.
How does location affect contractor hourly rates?
Location affects rates primarily through cost of living and market competition. A plumber in San Francisco needs $130-160/hr to cover Bay Area overhead (high insurance, expensive vehicle costs, high rent). The same quality plumber in a mid-sized Midwest city might charge $80-100/hr and earn similar take-home pay because overhead is lower. Urban markets also have more competition, which can compress rates. Rural markets have less competition but lower willingness to pay. Calculate your rate based on your local costs, not national averages.