Profit Margin
Understand profit as a share of your revenue.
Business & Work · FREE TO USE
Contractor Rate
Build a rate around your income, overhead, and billable time.
02EXAMPLE RESULT
Target hourly rate
86.96
currency units/hour
Eight-hour day rate695.65currency units/day
Required annual revenue120,000currency units
Annual billable hours1,380hours
Target business profit12,000currency units
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How this calculation works
Work backward from annual business revenue needed to cover compensation, overhead, and a profit margin. Use billable hours, excluding administration, sales, and time off.
Rate = (owner compensation + overhead) ÷ (1 − margin) ÷ annual billable hours
Your calculation, step by step
- Billable hours = 30 × 46 = 1,380 per year.
- Required revenue = (90,000 + 18,000) ÷ (1 − 0.1) = 120,000.
- Hourly rate = 120,000 ÷ 1,380 = 86.956522.
A worked example
90,000 compensation, 18,000 overhead, 10% margin, and 1,380 billable hours imply about 86.96/hour.
Work through an example.
Inspect the assumptions and limits before applying a result.