Ask a solo contractor what they charge per hour and most will say something like "$45" or "$60" — a number that sounds reasonable, sits close to what they'd pay a skilled helper, and is almost always too low. It's too low not because the work isn't worth it, but because it was never actually calculated. It was remembered from somewhere, or copied from a competitor, or picked because it felt fair. None of those produce a number that pays your bills.
The employee-wage trap
If you used to work for someone else, you have a wage number burned into your head — say $32/hour. The instinct when you go out on your own is to mark that up a bit and call it your rate: $45, maybe $50. That feels generous. It's also wrong, because your hourly rate now has to cover things your old paycheck never touched: your truck payment and fuel, tools and their replacement, liability insurance, workers' comp if you ever hire, marketing, the software or paperwork that runs the business, health insurance you're now buying yourself, and the hours you spend estimating jobs you don't win. An employee's wage pays for their labor. Your rate has to pay for your labor and your business.
Build the number, don't guess it
Start with what you need the business to generate in a year, then divide by the hours you can actually bill.
Step 1 — target income. Decide what you need to take home, then add taxes (self-employment tax alone is roughly 15.3% on top of income tax) and benefits you're funding yourself. A contractor who wants to net $70,000 is often looking at $95,000–$100,000 the business needs to generate before it's "take-home."
Step 2 — business overhead. Truck and fuel, insurance, tools, phone, software, licensing, a slow-month cushion. For a one-truck operation this commonly runs $15,000–$30,000 a year, more if you're carrying a crew's insurance and equipment.
Step 3 — billable hours, not total hours. This is where most solo contractors overestimate themselves. A full work year is around 2,000 hours, but a realistic billable year — hours actually charged to a job, not spent driving, estimating, ordering material, invoicing, or fixing a callback — lands closer to 1,200–1,400 hours for someone running their own outfit. Crew leads who do less admin can bill higher; anyone doing their own sales and bookkeeping bills lower.
Step 4 — divide. (Target income + overhead) ÷ billable hours = your rate.
$100,000 + $22,000 = $122,000. Divide by 1,300 billable hours: $93.85/hour, rounded to $90–$95. That's not a padded number — it's the number that makes the business solvent. It's also nearly double the "employee wage plus a little" instinct most people start with, which is exactly why so many solo operators stay busy and broke at the same time.
Where this connects to markup — and where it doesn't
This rate is different from the markup discussion (overhead, contingency, profit stacked on top of direct costs) in one important way: your labor rate needs to already include your overhead, before any markup gets applied. If you price your own hour at bare wage and then add 20% markup on top, you've marked up an already-too-low number — the error compounds instead of correcting. A helper you pay $25/hour and bill out at $45–$55 is a margin. Your own hour isn't a margin on top of a wage; it is the number, built from what the business actually costs to run.
Why contractors resist raising it
The usual fear is losing bids. In practice, a rate that's $10–$15/hour low doesn't win you meaningfully more work — it just means the jobs you do win pay you less to do them, for the same hours in the same truck. If you're consistently booked out, getting zero pushback on price, or finishing seasons without enough left over after expenses, that's the signal to raise the rate, not to work more hours at the old one. Review it at least once a year against actual costs — insurance and fuel move even when your habits don't.
Put it where you'll actually use it
The rate only helps if it makes it into every estimate without you re-deriving it each time. JobPencil lets you set a default labor rate (or several, for different task types or crew members) once, then apply it automatically as you build labor line items — so the number you calculated here is the number that shows up on every bid, not just the ones where you remembered to think about it. Try it free, no account required.