How to calculate your overhead hourly rate
Overhead is everything you pay to stay in business whether or not a crew is on a job today. Rent and utilities, trucks, insurance, office staff, software, phones, marketing, the accountant. List them by month, add them up, and multiply by twelve. That is the annual overhead the work has to carry.
Next, count the hours that carry it. Not the hours you pay for, the hours you bill. Start with the number of field workers whose time you invoice, multiply by the hours each one is paid in a year, then by the share of those hours that ends up on an invoice. The rest goes to driving, loading the truck, warranty callbacks, training, and slow days. Overhead divided by billable hours is the overhead hourly rate.
With the starting numbers on this page, $8,800 a month is $105,600 a year. Three workers at 2,080 paid hours with 70% billed gives 4,368 billable hours. Overhead per billable hour is about $24.18. Those numbers are a worked example of the arithmetic, not a description of a typical shop.
Why billable hours matter more than paid hours
The most common way to underprice overhead is to divide by paid hours. It makes the rate look smaller, and the shortfall is invisible until the books close. Every hour you pay for but cannot bill still has to be paid for by the hours you can.
The same logic applies to labor. If a technician earns $30 an hour and burden adds 30%, an hour of that technician costs $39. If only 70% of paid hours are billed, each billed hour has to recover $39 ÷ 0.70, about $55.71. The calculator shows that as labor per billable hour, then adds overhead per hour to get a break-even hourly rate.
From break-even to a billing rate
The break-even rate covers wages, burden, and overhead and leaves nothing. To keep a margin, divide by one minus the margin. A 20% margin divides by 0.80. That is the hourly price where profit is 20% of what the customer pays. If you are used to thinking in markup, the markup vs margin calculator converts between the two and shows why they are not the same number.
The overhead per hour from this page plugs straight into the overhead field of the service call fee calculator. Use the button under the result to open it with your overhead, wage, burden, and margin already filled in. For the hourly labor rate on the repair itself, the Fieldkit labor calculator covers that side.
Keep the overhead list honest
Do not count a cost twice. If vehicle fuel and depreciation are in your mileage rate on the service call calculator, leave them out here or set the mileage rate to cover only what is left. If office staff are in overhead, keep them out of labor burden. Revisit the list when a big cost changes: a new truck, a new hire in the office, a new lease. The rate only works if the inputs are yours.