What your hourly rate really needs to be
The number on your quotes is not what you earn. Here is the arithmetic that turns a day rate into what actually reaches your bank account.
3 min read
Most electricians price off a number they arrived at years ago, adjusted upward now and then when it started to feel wrong. It usually feels wrong because it is.
The problem is not greed or modesty. It is that the hourly rate you quote and the hourly rate you earn are two different numbers, and almost nobody does the sum that connects them.
| The job | Count a year of genuinely billable hours, then a year of running costs. |
|---|---|
| The finding | Far less of the week is billable than the schedule suggests. |
| The fault | Van, tools, insurance, licensing, accountancy and unpaid time off all come out of that fraction. |
| The fix | Costs divided by billable hours. That is the floor your rate cannot go below. |
The hours you cannot bill
Start with a working week. Say you are on the tools five days.
Now take out the hours nobody pays for. Quoting. Driving between jobs. Collecting materials because the wholesaler had the wrong part. Chasing an invoice from six weeks ago. Certification and paperwork. The phone call that turns into a site visit that turns into nothing.
For a lot of one-van firms, the genuinely billable share of the week is well under what the schedule suggests. That is not a sign of a badly run business — it is simply what running the business costs, and it happens whether or not it appears on an invoice.
The costs that come out before you do
Then there is everything the rate has to cover before any of it is yours:
- The van, and what it costs to keep it on the road.
- Tools, test equipment, and calibration.
- Insurance, licensing, and certification.
- Accountancy, software, phone.
- Vacation and sick days, which for you are simply weeks with no income.
Every one of those is paid out of billable hours only. So the rate is not covering a working week — it is covering a working year, out of a fraction of it.
Why this matters more than winning more work
Getting the rate right first means every job you win afterwards is worth winning.
Do the sum before the next quote
Working out the floor your rate cannot go below
- Count your genuinely billable hours across a year. Not the hours you worked — the hours that appeared on an invoice.
- Add up what the business costs to run over that same year. The van, the tools and test equipment, the insurance and licensing, the accountancy, the software and the phone.
- Divide the second number by the first. What comes out is the floor — the point below which you are paying for the privilege of working.
$51 an hour
That is the number the sum produces on one set of figures. Yours will be different, and the point is not the fifty-one. It is that the floor exists whether or not you have worked it out, and it does not care what the going rate is locally.
Most people who do this properly are surprised, and not pleasantly. But it is far better to be surprised by a spreadsheet than by a year-end.
We built a true hourly rate calculator that does the arithmetic for you. It is free, there is no sign-up, and nothing you type leaves your phone.
Once you have the number, the useful question is what to do with it. Some work will never clear that floor, and most of it is recognisable before you accept it.