How Do I Find My Labor Rate as a Company of One?

A Contractor University Member recently utilized the Ask-The-Expert Q&A feature within the member dashboard by submitting the following question and received the response below.

Contractor Question:

“As a one-person HVAC service business, how should I estimate my yearly billable hours, which W-2 wage should I use when calculating labor rate, and are service agreement discounts offset by charging full price to non-agreement customers?”

Contractor University Expert Response:

“If you are an owner-operator and currently a one-man shop, a good rule of thumb is to estimate about 1,200 to 1,400 billable hours per year after subtracting time spent on driving, sales, paperwork, and other administrative work.

When calculating your labor rate, use the wage you would pay a hired technician rather than your personal owner income. That helps keep your flat-rate pricing system realistic and scalable as your business grows.

For service agreement discounts, yes, the math assumes you recover that discount through better efficiency and by charging full price to non-agreement customers. Because agreement customers are typically easier and less expensive to serve, offering them a discount can still improve overall profitability.”

Contractor University members can click here to log in to their member dashboard and submit a question through the Ask the Expert portal.

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