What an hour must earn

The floor is not the market rate

Most shops inherit their hourly rate: the old owner's number, a competitor's sticker, what feels defensible on the phone. None of those know your costs. The floor is different: it is the number an hour of your shop must earn before the shop makes anything at all. It comes from arithmetic you can do in an evening, and once you have it, every rate conversation changes: you are no longer guessing whether a price works, you are measuring it against your own floor.

The cost pile

• People

  Wages, and the payroll burden on top of wages: taxes, insurance, the costs of employing that never show on the pay stub.

• The trucks

  Payments, fuel, insurance, tires, the repairs. Each truck is a rolling monthly bill.

• The shop

  Rent, utilities, the shelf stock that waits to be used.

• The coverage

  Liability insurance, bonding, licenses: the cost of being allowed to do the work.

• The office

  Software, the phone, the bookkeeping, the person who answers.

• The quiet costs

  Tools that wear out, training, the bad debt you eventually write off.

Billable hours are fewer than paid hours

Here is where the arithmetic usually breaks. A tech's paid week is not a billable week. Drive time is paid and not billed. Quoting, supply runs, training, the callback done under warranty, the slow season. All paid, none billed. Count the hours a customer actually pays for, honestly, over a real year. The number is smaller than the calendar suggests, and it is the only honest denominator.

The division

The method is one line: the year's cost pile, divided by the year's honest billable hours, is the break-even hour. Work priced at that number earns the shop exactly nothing. It is the floor, not the goal. Decide the profit the company should earn on top (profit is not the owner's wages; those were in the pile) and add it. Then compare the result to what you charge today. The comparison is the whole point of the exercise, and for some shops it is the first honest look at why busy months still feel broke.

Your inputs, not our benchmark

Notice what this lesson did not give you: a number. Any rate printed here would be someone else's shop. The method is the teachable part: your pile, your hours, your floor. The free calculators on this site run this arithmetic from your own payroll, truck, and overhead figures, so the answer that comes out is yours and defensible. Redo it when wages move or a truck joins the fleet; the floor is a living number.