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True Trade Path

Calculator · Free

Effective Hourly Rate Calculator

See what you actually earn per hour worked — field time, admin, sales, and drive time included.

Business results
$/yr
$/yr

Everything except your draw — labor, materials, overhead.

$/yr

What you actually took out. Leave blank to use net profit.

Hours worked

Be honest — include every hour you spent on the business this year.

hrs/yr
hrs/yr

Estimates, invoicing, scheduling, bookkeeping.

hrs/yr
hrs/yr

Windshield time between jobs and supply runs.

Effective hourly rate

$30.36per hour worked

$85,000 divided across 2,800 total hours — field, admin, sales, and drive.
Total hours worked
2,800 hrs
Non-billable hours43% of your time never hits an invoice
1,200 hrs
Revenue per hour worked
$101.79/hr
Field-only rateIf you only count field hours — the optimistic number
$53.13/hr
Implied shop rateRevenue ÷ field hours only
$178.13/hr
Gap: shop rate vs. effective
$147.77/hr
Where your hours go
ActivityHoursShareCompensation per hour
Field / billable1,60057.1%$53.13/hr
Admin52018.6%Unpaid
Sales & estimating2609.3%Unpaid
Drive time42015.0%Unpaid
Total2,800100.0%$30.36/hr

You are earning less per hour than most employees in your trade

You bill an implied $178.13/hr in the field but take home $30.36/hr for every hour worked. The $147.77/hr gap is 1,200 hours of unpaid admin, sales, and drive time. Hiring part-time office help or raising prices closes this faster than working more field hours.

What this assumes

  • Owner compensation is your draw or net profit after expenses, whichever you enter.
  • All working hours count — field, admin, sales, and drive time.
  • Does not subtract estimated taxes; use the estimated tax calculator for after-tax take-home.

Important

A high shop rate means nothing if you work 70-hour weeks. This tool shows what you actually take home per hour of your life spent on the business.

Understanding the result

Shop rate and take-home rate are different numbers

Your shop rate is what customers pay per billable hour. Your effective rate is what you keep per hour you actually work — including estimates, invoicing, supply runs, and the drive home. Most owner-operators discover a $40 gap between the two.

Admin time is unpaid labor

Ten hours a week on estimates, scheduling, and collections is 520 hours a year at $0 billed. If you net $90,000 and work 2,600 total hours, your effective rate is $35/hour — even if you bill $125/hour in the field.

The goal is to raise effective rate, not just shop rate

Hiring an office manager, flat-rate pricing, and better routing all raise effective rate without changing what customers pay. A 10% shop rate increase that loses 15% of volume can lower your effective rate.

Common questions

What is an effective hourly rate for a contractor?
Effective hourly rate is total owner compensation divided by all hours worked — field, drive, admin, and sales. A contractor billing $130/hour who works 55 hours a week and nets $85,000 has an effective rate of about $30/hour.
What is a good effective hourly rate?
Owner-operators should target $50 to $80/hour effective — comparable to a skilled W-2 trade wage plus benefits. Below $35/hour, you are earning less than most journeymen while carrying all business risk.
How is effective rate different from shop rate?
Shop rate is revenue per billable hour. Effective rate is take-home per total hour worked. Shop rate of $125/hour at 60% utilization and 20 hours of admin per week yields an effective rate near $45/hour on a $90,000 net.
Should I include drive time?
Yes. Windshield time is work even when it is not billed. Excluding drive time inflates your effective rate and hides the cost of scattered job sites and poor routing.
How do I raise my effective hourly rate?
Reduce non-billable hours (hire admin help, improve routing), raise prices on low-margin work, drop unprofitable customers, and flat-rate common jobs to eliminate estimating time. Each cuts unpaid hours or raises revenue per hour worked.

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