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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What the default revenue target contains
The default example needs $133,333 in annual revenue. This is how each dollar is allocated before the rate is divided by billable hours.
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.
Turn the hourly rate into a pricing decision
Treat the recommended rate as an internal planning target, not an automatic quote. It tells you what the business needs to recover under the assumptions you entered. Your final client price can be higher when the work is urgent, specialized or unusually valuable.
Use the result well
- Compare the recommended rate with your last five profitable jobs, not with a single competitor quote.
- Convert the rate into half-day, full-day and project prices that are easier for clients to understand.
- Review actual billable time monthly and update utilization before changing your published prices.
Recheck these assumptions
- Owner compensation should reflect a sustainable salary, not total business revenue.
- Overhead should include software, insurance, admin time and equipment replacement.
- A low utilization estimate is often more realistic for a solo service business with sales and admin work.