Work out an honest hourly charge-out rate from cost, overheads, and target margin. Built for NZ trade businesses.
This tool works backwards from what you need to earn to what you have to charge per hour. Enter the income you want, your overheads, the weeks you work and the hours you can actually bill, and it returns a break-even rate and a rate with margin on top. If you want to build the overhead figure line by line, or work out your billable weeks from your leave and time off, there are two optional blocks for that, both blank until you fill them in.
Billable hours are the weeks you work, times the hours you can bill in a day, times five. Both of those inputs default low on purpose, and they are the numbers most worth arguing with before you trust the answer.
The hours field defaults to 7, not 8. The difference is travel between jobs, quoting in the evening, the run to the merchant, cleaning up, and the half hour talking to a client that never lands on a timesheet. Charging as though every hour on site is billable is the single most common way a rate comes out too low.
The weeks field defaults to 44, not 52. That is annual leave, statutory holidays, sick days and the weeks the weather takes off you. Divide a year's income by 52 and you have priced yourself as though you never stop.
Push those two numbers up to be optimistic and the rate falls; the money you needed does not. If you would rather build the weeks figure from your actual leave and time off, use the optional time off block described below.
Break-even is your income plus your overheads, divided by billable hours. That is the rate at which you make nothing. It is the floor, not a price.
The recommended rate divides the break-even by one minus your target margin, which is the same margin arithmetic the markup vs margin tool uses. It is a margin, not a markup, so a 15% target means 15% of what you invoice rather than 15% on top of your cost.
The annual revenue figure is a sense check: it is what you would turn over if every billable hour got sold at that rate. If it looks unreachable for your market, the inputs need revisiting rather than the output.
Both blocks are optional and start blank. Nothing in them is pre-filled, because the amounts are yours: take them from your last full year of bills and statements.
The overhead breakdown has seven yearly lines: vehicle, tools and equipment, insurance, ACC levy, phone and software, accountant and bank fees, and other. While any one of those lines has a number in it, the overhead used is the total of the lines, and the single Annual overhead costs box is not used. The page shows the total it is using. Clear the lines and the single box counts again. The two are never added together, so nothing is counted twice.
The time off block has three boxes: weeks of annual leave, public holiday days, and sick and rain days. While any one of them has a number in it, billable weeks are 52, minus your leave weeks, minus the holiday days and the sick and rain days added together and divided by 5. The page shows the weeks it is using, and the Billable weeks/year box is not used. Clear the three boxes and the weeks box counts again.
That is the whole calculation. Days are turned into weeks by dividing by five working days, and nothing else is added or assumed. If bad weather keeps you off site for a whole week, count it as five rain days.
These are made-up numbers to show the arithmetic for time off. Replace every one with your own.
For time off you put in 4 weeks of annual leave, 12 public holiday days and 6 sick and rain days. Billable weeks are 52, minus 4 weeks of leave, minus 18 days divided by 5, which is 44.4 weeks. At 7 billable hours a day that is 1,554 billable hours a year.
Put your own take-home figure and overhead lines in the calculator above. It shows the break-even rate, the charge-out rate with your margin, and the yearly revenue you need.
A charge-out rate is only as honest as the hours and overheads you feed it. Check both against your last full year rather than an estimate, and confirm the result with your accountant before you reprice.