Shop rate calculator for trade shops and machine shops

Add a year of labor cost and overhead, divide by the hours you bill, then add your profit margin.

Break-even rate = (labor cost + overhead) ÷ billable hours

Shop rate = break-even rate ÷ (1 − profit margin)

Example: 3 techs cost 40 dollars per paid hour each, for 2,080 hours a year, and bill 70% of those hours. That is 4,368 billable hours and 249,600 dollars of labor. With 150,000 dollars of overhead, the break-even rate is 91.48 dollars. At a 15% margin, the shop rate is 107.63 dollars.

Cost per paid hour is the wage plus payroll taxes, comp and benefits. The labor burden calculator works it out for each tech.

Divide everything the shop spends in a year by the hours customers pay for, never by the hours you pay for.

Freelancer calculators divide by all 2,080 paid hours. Your techs also spend paid time driving, cleaning up, on callbacks and in training. Federal rules count travel from job site to job site during the workday as hours worked (29 CFR 785.38), so you pay for it even when you can’t bill it.

Example: the shop above spends 399,600 dollars a year. Divided by 6,240 paid hours, that looks like 64.04 dollars an hour. Divided by the 4,368 hours it bills, break-even is 91.48 dollars.

Every cost you can’t put on one job: rent, office and owner salaries, insurance, trucks, software, marketing, utilities and accounting.

Federal contract cost rules group these indirect costs and spread them over one base shared by all the work (48 CFR 31.203). In a shop, that base is billable hours.

• Overhead per billable hour = yearly overhead ÷ billable hours
• Leave out tech wages, which are already in labor cost.
• Leave out machine costs you price by the machine hour.

Example: 150,000 dollars of overhead over 4,368 billable hours is 34.34 dollars of overhead in every hour you bill.

Paste last year’s P&L into step 4 and it keeps the expense lines. See the overhead and profit calculator to turn them into a markup.

Price each machine on its own and add it to the labor rate for the hours it runs.

Machine cost per hour = ((price − resale) ÷ years + maintenance + floor space cost) ÷ run hours a year + kW × electric rate

The first part is straight-line depreciation, the same amount each year over the machine’s useful life, as IRS Publication 946 describes it. Use the years you expect to run the machine, which can differ from the tax schedule.

Example: a 150,000-dollar CNC mill resold for 30,000 after 10 years, running 2,500 hours a year. Depreciation is 4.80 dollars an hour. Maintenance of 5,000 dollars and 200 square feet at 14 dollars add 3.12. Power at 15 kW and 14 cents adds 2.10. It costs 10.02 dollars a run hour, or 11.79 with a 15% margin.

For trucks and heavy equipment, use the equipment hourly rate calculator.

Fewer billable hours spread the same costs thinner, so the rate goes up.

Example: the 3-tech shop needs 107.63 dollars an hour at 70% billable. At 65% it needs 115.91 dollars; at 75% it needs 100.45. Dropping from 70% to 69% alone adds 1.56 dollars to every hour.

Billable percent = hours billed ÷ hours paid. Get both from last year’s invoices and payroll. The table under the calculator shows your rate from 10 points below to 10 points above.