What the result means
The result divides required annual revenue by annual billable hours. Billable hours depend on technician count, paid hours per technician and the share of time the team can bill. The calculation makes the efficiency assumption visible instead of treating every paid hour as billable.
This is a planning rate for labor and overhead. Price materials separately with your own markup, and account for other costs that are not included in the labor and overhead inputs.
How it's calculated
- Billable hours = technicians × paid hours × efficiency
- Required revenue = (labor cost + overhead) ÷ (1 − target margin)
- Billable rate = required revenue ÷ billable hours
- Break-even rate = (labor cost + overhead) ÷ billable hours
Margin is a share of revenue, not a markup on cost. Efficiency must be greater than 0%; margin must be below 100%.
Worked example
Sample numbers: 2 technicians, 2,080 paid hours each, 60% billable efficiency, $150,000 labor, $180,000 overhead and 15% target margin.
- Billable hours = 2 × 2,080 × 0.60 = 2,496
- Required revenue = $330,000 ÷ 0.85 = $388,235.29
- Billable rate = $388,235.29 ÷ 2,496 = $155.54/h
Break-even is $132.21/h. These are example inputs, not a recommended rate.
Reference table
The values below are computed from the same calculator functions used above. They let you compare common sizes and operating points without replacing the interactive calculation or its assumptions.
| Input | How to use it |
|---|---|
| Use your costs | Sample inputs are examples only; replace them with your own figures. |
| Review assumptions | Include the costs and operating limits that apply to your business. |
Reference values are examples based on the stated assumptions. Verify manufacturer data, conductor ampacity and local requirements before using a result.
Sources and assumptions
Margin is a share of revenue, not a markup on cost. Efficiency must be greater than 0%; margin must be below 100%. The formulas are published so you can check a result by hand instead of treating it as a black box.
Last reviewed . Spot an error? Email support@tiermenu.com.
FAQ
Does this include material costs?
No. Materials are priced separately with your markup. This rate covers the labor and overhead entered above.
What does billable efficiency mean?
It is the share of paid field hours that can be billed to jobs after travel, training, callbacks and other non-billable time.
Is target margin a markup?
No. Margin is profit divided by revenue. The formula divides cost by one minus the target margin.
Should every technician use the same rate?
That depends on your business. This calculator returns an average rate from the values you enter.
Using the result in your prices
The result is only as good as the costs you enter. Use what you actually pay for parts, your burdened labor cost and your real overhead, not the sample inputs.
Round the final price, not the inputs. If you round a price to a clean number, check the markup or margin again after rounding so you know what you are really keeping.
Rerun the numbers when your costs change: a supplier price increase, a wage or insurance change, a new hire or a new year's overhead budget. Then compare the result with the prices you charge now.
TierMenu provides these free calculators without an email gate. The results stay in this browser unless you choose to copy a shareable URL or print the page. A shared URL includes the calculator inputs in its query string; do not put personal or sensitive information in calculator fields.