What to Charge an Hour to Make $40,000 a Year
Charge at least
$62.83 per hour
48 weeks, 40 hours a week, 70% of them billable, $36,000 of annual overhead and 10% profit.
How that number is worked out
These are the figures this page was built with and every line the calculator produces from them. Change anything above and all of it moves.
- What you want to earn a year40000 $
- Annual overhead: truck, insurance, phone, office, software36000 $
- Weeks you actually work48
- Hours a week on the tools40
- Percent of those hours you can bill70 %
- Profit on top, as a margin10 %
Charge at least$62.83 per hour
| Hours worked a year | 1,920 |
|---|---|
| Billable hours at 70% | 1,344 |
| Pay plus overhead to cover | $76,000.00 |
| Break even rate | $56.55 /hrat this rate you make zero profit |
| With 10% profit margin | $62.83 /hr |
| Day rate, 8 hours | $502.65 |
| Revenue this implies | $84,444.44 a year |
Billable share of the week compared
Billable percent is the whole game. Nothing else on this page moves the rate as far.
| Billable share of the week | Charge at least | Billable hours at 70% |
|---|---|---|
| 50% | $87.96 per hour | 960 |
| 60% | $73.30 per hour | 1,152 |
| 70% | $62.83 per hour | 1,344 |
| 80% | $54.98 per hour | 1,536 |
| 90% | $48.87 per hour | 1,728 |
What else matters here
Forty thousand of pay plus $36,000 of overhead is $76,000 that has to come out of 1,344 billable hours. Break even is $56.55 an hour and the rate with profit is $62.83, which is $502.65 a day and $84,444 of revenue.
Split $40,000 across a full 2,080 hour year and it is $19.23 an hour, which is what an employee doing this work would be paid. Charging $62.83 to take home the equivalent of $19.23 looks absurd until you list what the difference actually pays for, and that list is the overhead field on this page.
One item on that list is invisible to employees and is not in the $36,000 default. Self employment tax is 15.3 percent of net earnings, and an employee pays only half of it because the employer pays the other half. Working for yourself, you are both, The half an employer would have covered is about $3,000 on $40,000 of profit, and the full 15.3 percent is about $6,000, none of which is in the overhead default on this page.
What this calculator assumes
- Billable percent is the whole game. Estimating, driving, buying material, chasing payment and answering the phone are all real hours that no customer pays for. 70 percent is optimistic for a one man operation.
- Profit is separate from your pay. Your pay is a cost of the business. Profit is what the business earns for carrying the risk, and it is what funds the next truck.
Questions people ask
What hourly rate do I need to make $40,000 a year?
$62.83 an hour at 1,344 billable hours a year, with $36,000 of overhead and 10 percent profit. Break even is $56.55.
Why is the rate three times what the hourly pay works out at?
Because $40,000 spread over 2,080 hours is $19.23, and only 1,344 of your hours are billable at all. The rest of the gap is overhead and self employment tax, neither of which an employee sees.
Is my pay the same thing as profit?
No, and mixing them is the most common reason a busy contractor has no money. Your pay is a cost of the business, the same as a wage you would pay somebody else. Profit is what the business earns for carrying the risk, and it is what buys the next truck.
The hourly rate calculator takes any dimensions you like and hands back the same list.