Set an hourly planning rate using billable capacity

Written by the Offertje editorial team. Examples are illustrations, not market-rate research. Reviewed November 5, 2026.

A full workweek does not mean every hour is billable. Estimates, customer calls, purchasing, bookkeeping and gaps in the schedule still need to be funded. An hourly planning rate helps connect those realities to the prices you put in front of customers.

Build a revenue target from your own costs

Consider an illustrative annual plan: $60,000 of owner compensation before personal taxes, $18,000 of operating expenses and $6,000 reserved for contingencies or reinvestment. That totals $84,000 of required revenue before sales tax. None of these amounts is a claim about a typical contractor's income or overhead.

Review the cost list carefully. Equipment replacement, insurance and software may belong in overhead. Job materials that you charge separately should not also be fully recovered a second time in the hourly overhead allowance. This calculation is not a paycheck or self-employment-tax calculator: the amount available after personal taxes depends on your circumstances.

Use billable hours rather than hours at work

Assume 35 billable hours per week for 40 weeks, giving 1,400 billable hours. Divide the target by that capacity: $84,000 ÷ 1,400 = $60 per billable hour. Time outside that assumption must cover the rest of running the business, holidays, illness and unfilled capacity.

Test the downside as well. If only 1,200 hours can be billed, the rate needed for the same revenue becomes $70. Keeping the $60 rate at 1,200 hours produces $72,000, which is $12,000 below the original target. The point is to see the gap early rather than assume a busy calendar will fix it.

Translate the result into an estimate

Eight planned job hours at $60 produce a $480 labor amount before separately priced materials and applicable tax. Include the work needed to deliver the result, not just time spent physically doing the main task. On a fixed-price project, compare that calculation with realistic scope and risk before deciding the offered price.

The result is not a guaranteed market rate or an instruction to charge every customer the same amount. Specialized expertise, urgency, customer alternatives and the value delivered can change a commercial price. Your calculator cannot prove willingness to pay.

Close the loop after the job

Compare estimated hours with actual hours and note why they differ. Update the assumptions when your costs or billable capacity change. Use the hourly rate calculator to compare scenarios and the estimate tool to describe the work those numbers cover. Keep sales tax collected separate from business revenue.