What Your Real Hourly Rate Is (Most Tradies Don't Want to Do This Calculation)

You charge out at $100 an hour. Your employee costs $35. The gap looks like $65 in gross profit. This calculation — which almost every trade business owner does in their head at some point — is missing most of the story.

The non-billable time problem: why 40 hours doesn't mean 40 billable hours

Research on trade business efficiency consistently finds that a typical field technician bills 30–50% of their working hours. The rest is travel between jobs, quoting time, parts pickups, site waiting, admin, callbacks from previous jobs, RDOs, leave, public holidays, and downtime between bookings. A 40-hour week on paper might be 18–22 billable hours in practice.

That means the real cost to generate one hour of billable work isn't $35 — it's closer to $35 divided by 0.4, or roughly $87.50 an hour when you account for the inefficiency. At $100 charge-out, the margin is thin. Thinner once overhead is added.

How to calculate your actual net hourly rate

Pull last year's accounts. Start with gross revenue. Subtract materials — what you paid, not what you charged. What's left is your gross margin on labour and markup. Now subtract all business overhead: van running costs, insurance, tools and equipment, fuel, phone, accounting fees, advertising, subscriptions, rent if any. Subtract superannuation. What remains is your actual income from the business.

Now divide that by the number of hours you actually worked — not billed, worked. Most sole-operator plumbers work between 2,000 and 2,400 hours a year including all the non-billable work.

The overhead hiding in plain sight: what your van actually costs per hour

A ute and trailer that costs $30,000 a year to run — loan repayments, registration, insurance, fuel, servicing — working 220 days a year is $136 a day before you pick up a wrench. Spread over an 8-hour day, that's $17 of overhead per billed hour before wages, before insurance, before anything else. Most plumbers know their loan repayment but forget fuel, registration, insurance, tyres, servicing, and the periodic cost of replacement.

What to do with this number

The point isn't to feel bad about the number. It's to make better pricing decisions. Until you know what you're actually making per hour, you can't know whether a job at $750 is worth doing. You can't know whether your call-out fee is recovering your costs. And you can't know whether raising prices by 10% would materially change your income — which, in most cases, it would.