Rent, insurance, vehicles, office staff, software, marketing
Billable field staff only, not office or admin
Total paid hours, not just billable hours
What share of paid hours become billable (70-85% is healthy)
Wage plus payroll taxes, benefits, and burden. Not included in overhead above.
What you want to keep after all costs. 10-20% is a common contractor target.
Most contractors set prices without knowing their floor
Pricing by gut feel or by matching competitors puts your business in a vulnerable position. A competitor who prices lower may have a lower cost structure, different overhead, or simply be running at a loss. None of those situations help you.
The break-even rate answers a specific, practical question: given your actual overhead and your actual labor cost, what is the minimum you must charge per billable hour to keep the lights on? Once you know the floor, you can price above it with confidence rather than hoping the margin works out.
The utilization sensitivity table shows why getting one more billable hour per technician per day matters more than raising your rate by a few dollars. At 70 percent utilization, your overhead burden per billable hour is significantly higher than at 80 percent, on the exact same payroll.
Frequently asked questions
What is a break-even billing rate for contractors?
The break-even billing rate is the minimum hourly rate a contractor must charge to cover all costs, including fixed overhead and burdened field labor, without making any profit. Any revenue above the break-even rate contributes to profit. Knowing your break-even rate is the first step to setting prices that actually sustain the business.
What should I include in monthly fixed overhead?
Fixed overhead includes costs that stay roughly the same regardless of how many jobs you run: rent, utilities, vehicle payments, insurance, office staff salaries, software subscriptions, marketing spend, and loan payments. Do not include field technician wages in overhead if you are also entering burdened labor cost separately in the calculator. Field labor is a variable cost tied to billable hours.
What is a burdened labor cost?
Burdened labor cost is the full cost of employing a field technician, not just their wage. It includes payroll taxes (FICA, FUTA, SUTA), workers compensation insurance, health benefits, paid time off, and any vehicle or tool allowances. Contractors who use only the wage rate when estimating jobs are typically understating their true labor cost by 20 to 40 percent.
Why does utilization rate affect the required billing rate so much?
Utilization rate determines how many of your total paid hours actually generate revenue. At 70 percent utilization on a 40-hour week, a technician produces 28 billable hours. At 80 percent, they produce 32 billable hours. That 10-percentage-point difference spreads the same overhead and labor cost across fewer hours, requiring a higher billing rate to break even. This is why improving scheduling efficiency can lower the price you need to charge while maintaining the same margin.
How do I use the break-even rate to set prices?
The break-even rate is your floor. Add your target net profit margin on top of it to get your minimum billable rate. For example, if your break-even rate is $90 per hour and you want a 15 percent net margin, you need to bill at least $106 per hour. The table in the calculator shows you the required rate at 0, 10, 15, 20, and 25 percent margin so you can price for the profit level you are targeting.