How to set your prices as a contractor
Start from what you want to earn, count your real billable hours, and charge a price that keeps the business alive. The method, step by step.
Why other people's prices tell you nothing
Looking at what other pros charge is the most common reflex, and the most misleading one. You do not know their expenses, their business structure, how many hours they actually bill, or whether they pay themselves a decent wage. Copying a price means copying a situation you cannot see.
The market price is useful for one thing only: checking at the end that your rate is not wildly out of line. It should never be where the calculation starts.
The backward calculation
Start from the take-home pay you want each month, add your fixed expenses (truck, insurance, shop, phone, software, tools), then account for the share of revenue that goes to taxes. That gives you the yearly revenue the business needs.
Divide it by the hours you actually bill in a year. The result is your floor hourly rate: below it, you are losing money even with a full schedule. Our free hourly rate calculator does this math in a few seconds.
Billable hours, where it all happens
A workday is never a billed day. Driving, picking up materials, estimates, calls, follow-ups and bookkeeping often take four hours out of ten. Add vacation, holidays, sick days and slow weeks, and it is not unusual to bill barely more than 1,000 hours a year, while a full-time employee works around 2,000.
That is why two contractors charging the same hourly rate can earn very different amounts: the one who groups jobs by area and prepares estimates faster bills more of their hours, without raising prices.
Flat rate or hourly rate
Customers almost always prefer a flat price: they know what they will pay. For you, a flat rate pays off on work you know well and do quickly; it becomes risky on a job full of unknowns.
A simple rule: flat rates for repeatable, well-defined work, and hourly rates or a detailed estimate for everything else, with a clear clause for surprises discovered along the way.
Charge the right price
A low price does not buy loyalty. It attracts customers who choose on price, and who will move on to the next cheaper option. The customers who stay choose on trust: fast replies, a clear estimate, showing up on time.
Review your rates every year with a modest increase announced in advance. And when a customer finds the price too high, explain what it includes instead of lowering it: a discount given under pressure becomes the new baseline.