Service Pricing Calculator
Calculate what you actually need to charge per hour — based on your income goal, business overhead, billable time and target profit — instead of guessing.
| Billable time | Price at recommended rate |
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How it works
The calculator starts from how much you need the business to generate, then divides by how many hours you can actually bill.
Formulas used
Billable hours: B = Weeks × Hours/week × Utilization Break-even rate = (Compensation + Overhead) / B Sustainable revenue = (Compensation + Overhead) / (1 − Reserve%) Recommended revenue = (Compensation + Overhead) / (1 − Reserve% − Margin%) Recommended rate = Recommended revenue / B
Worked example
Using the defaults above — $80,000 desired compensation, $20,000 overhead, 46 working weeks, 40 hours/week, 60% utilization, 10% reserve and 15% target margin:
- Billable hours: 46 × 40 × 0.60 = 1,104 hours/year
- Break-even rate: $100,000 ÷ 1,104 ≈ $90.58/hour
- Recommended revenue: $100,000 ÷ (1 − 0.10 − 0.15) = $133,333
- Recommended rate: $133,333 ÷ 1,104 ≈ $120.77/hour
Why billable utilization matters
Most service providers cannot bill 100% of their working hours — time goes to admin, sales, scheduling and unpaid follow-up. A freelancer working "full time" at 40 hours/week but only 60% billable has just 24 billable hours a week. Ignoring utilization is the most common reason service businesses underprice. See the billable utilization guide for how to estimate your own number.
Limitations
This is a planning estimate, not tax or accounting advice. It does not account for progressive tax brackets, entity-specific deductions, local market rates, or demand-based pricing. Two businesses with identical costs can reasonably charge different amounts based on positioning, experience and demand.
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Frequently asked questions
Is this the rate I should advertise to clients?
It is the rate your business needs internally to hit your income and profit goals. Market rates, experience and positioning may support charging more — or force you to charge less, in which case you may need to adjust your costs, hours or income goal instead.
What if my utilization is a guess?
Start with a conservative estimate (50-65% is typical for solo service businesses) and revisit it once you track actual billable vs. total hours for a month or two.
Why is the reserve modeled as a percent of revenue?
It keeps the math simple and conservative for planning. Your actual tax bill depends on your entity type, deductions and jurisdiction — consult a tax professional for exact figures.