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What should you charge per hour?

Your billable rate has to cover far more than the hour a client sees. Model the whole year and find both your floor and your profit-aware target.

Quick answer

A business rate must cover the full year across the hours you can actually bill.

Start with owner income, overhead, and reserves. Spread that annual cost across realistic billable hours, then account for the desired profit margin. The result is an internal pricing benchmark—not a wage and not a guarantee that every market will accept the rate.

Billable hours = working weeks × weekly hours × billable percentage

Target rate = [(owner income + overhead + reserve) ÷ (1 − profit margin)] ÷ billable hours

Reviewed August 15, 2026

Step 1

Describe your business year

Income and costs
$

What you want the business to pay you before personal income tax.

$

Software, insurance, rent, equipment, marketing, and other annual costs.

%

Employer-side payroll taxes and business-funded benefits or retirement contributions beyond the pre-tax owner-income target. Do not add personal income tax here.

%

Profit retained by the business as a percentage of target revenue.

Time and capacity
/ year

Use fewer than 52 to allow for vacation, holidays, and downtime.

hours

All working time, including admin and sales—not just client work.

%

The share of working time you can realistically invoice to clients.

This is a planning estimate, not tax, legal, or financial advice. Check your assumptions with a qualified professional.

Understand this decisionHourly or fixed price? Choose based on risk.Use scope certainty, client control, repeatability, and change-order discipline to choose the safer pricing model.Read the guide →

Why the usual math fails

Salary divided by 2,080 hours is not a business rate.

A 40-hour week does not produce 40 invoiceable hours. Time goes to selling, estimating, scheduling, bookkeeping, communication, training, and collecting payment. Vacation and slow periods reduce capacity again.

OwnerClarify first estimates your annual billable hours. It then spreads owner income, overhead, reserves, and a chosen profit margin across only those sellable hours.

Review the exact formulas →

Questions worth asking

Before you use the number

What counts as business overhead?

Include costs the business must pay regardless of a specific job: software, insurance, rent, licenses, equipment, bookkeeping, marketing, phone, education, and similar operating expenses. Direct project costs belong in the project quote instead.

What should I use for billable time?

Solo service businesses often discover that billable time is materially below 100%. Review recent weeks, subtract sales, admin, travel, client communication, and gaps, then use the percentage you can sustain—not your best week.

Is the reserve a personal income-tax estimate?

No. The owner-income field is already a pre-tax target. Use the reserve for employer-side payroll taxes and business-funded benefits or retirement contributions beyond that target. Do not add personal income tax twice. Actual obligations vary by entity, location, and circumstances, so use qualified advice.

Should every client pay this exact rate?

Treat it as an internal pricing benchmark. Fixed-price work may command more because of speed, expertise, urgency, risk, or value. A difficult project can also require a contingency. What matters is that the effective rate does not quietly fall below your floor.