Most service contractors pick an hourly rate the same way. They look at what others are charging, add a little cushion, and settle somewhere that “feels about right.” For many, that number lands around $75 to $100 per hour.
On the surface, that seems reasonable. You stay busy, jobs are coming in, and customers are not pushing back too hard on price. But over time, something starts to feel off. Your schedule stays full, yet your bank account does not reflect the amount of work you are doing.
That disconnect is not random. It is a direct result of how that hourly rate was chosen.
The problem is that most hourly rates are based on external factors instead of internal requirements. Contractors tend to look at competitors, local market pricing, or what feels acceptable to customers. What they rarely do is calculate what their business actually needs to earn per hour in order to cover costs, pay themselves properly, and still produce a profit.
When you break that down, the gap becomes obvious.
Your hourly rate has to do more than just cover the time you spend on a job. It has to carry your entire business. That includes your overhead, your non-billable time, your materials handling, your travel, and your profit. If your rate is not built to account for all of that, it will always fall short, no matter how busy you are.
This is where many contractors underestimate what is really happening. They assume that if they are charging $100 per hour and staying booked, they must be doing well. But if only a portion of their time is actually billable, that $100 per hour quickly turns into something much lower when spread across the full week.
For example, if you work forty hours in a week but only twenty-five to thirty of those hours are billable, your effective hourly revenue drops significantly. That means your $100 per hour is not actually producing $100 per hour for your business. It is producing far less.
At the same time, your costs do not shrink to match. Your overhead is still there. Your expenses are still there. Your time is still being spent.
That is where the pressure builds.
The result is a business that stays busy but struggles to produce consistent profit. It becomes difficult to get ahead, difficult to build reserves, and difficult to feel like the work you are doing is truly paying off.
This is why simply choosing a round number like $100 per hour is not enough. It is not based on what your business requires. It is based on what feels acceptable.
A sustainable hourly rate has to be calculated from the inside out. It needs to start with your actual financial targets, your real expenses, and your true working capacity. Only then can you determine what each billable hour needs to produce in order for the business to function properly.
Once you know that number, everything changes. You are no longer guessing or reacting to the market. You are pricing based on what your business actually needs to survive and grow.
At that point, the question is no longer “What should I charge?” It becomes “Does this job meet my number?”
And that is a much more reliable way to run a business.
Stop guessing your hourly rate
Picking a rate that “feels right” is exactly why your bank account doesn’t reflect your hard work. You need to calculate your rate from the inside out based on your actual costs and capacity. Take 30 seconds to find the exact hourly revenue your business needs to survive and grow.
