One of the most common questions contractors ask — and one of the hardest to answer by feel — is: am I charging enough per hour?
Most contractors arrive at their rate by looking at what others charge and picking something in the middle. The problem: that rate might work fine for a contractor with different overhead and different goals. It might not work at all for you.
Two electricians in the same city can need very different hourly rates. One drives a paid-off van, works from home, and wants $50,000/year. Another leases a new truck, pays shop rent, carries full commercial insurance, and needs $90,000.
If the second copies the first one's $85/hr rate, he'll work every day and lose money doing it. Your rate is derived from your costs and goals — not from what your competitor happens to charge.
Annual Overhead: Every cost to keep your business open — vehicle, fuel, insurance, tools, phone, software, advertising, licensing. Add them all up for the year.
Desired Owner Pay: What you actually want to take home. Be honest. This is the entire point of being in business.
Tax Buffer: Plan for 28% of your combined overhead and pay going to taxes. Self-employment tax alone is 15.3% of net profit on top of federal income tax.
Add these three numbers together to get your total annual financial need.
Not every hour you work is billable. Driving, quoting, ordering materials, and admin all eat into your day. For a solo contractor, a realistic billable efficiency is 55–65% of total working hours.
Example: 48 weeks × 45 hours × 60% efficiency = 1,296 billable hours per year.
Your MVR = Total Annual Need ÷ Billable Hours. That's your floor — the minimum you need to charge before profit margin.
Solo plumber: $21,200 annual overhead + $70,000 desired pay + $19,600 tax buffer = $110,800 total need. With 1,152 billable hours: $110,800 ÷ 1,152 = $96.18/hr MVR.
If this plumber is charging $75/hr, he needs a 28% rate increase just to break even on his own goals — before adding any profit margin on top.
Reduce overhead: Every real cut here directly lowers your required rate.
Increase billable efficiency: Going from 50% to 65% has the same impact as a meaningful rate increase.
Compete on quality, not price: The cheapest contractor in any market is rarely the busiest. Reliability, speed, and professionalism command premium rates.
What you should never do: ignore the math and keep charging below your MVR. That path leads to working yourself to exhaustion for a business that can't support you.
The Trades Money Kit Dashboard includes a live MVR calculator — enter your overhead, desired pay, and hours, and your minimum viable rate calculates instantly.
Get the MVR Calculator — $47 Bundle