To work out a sustainable hourly rate, you add up everything your business needs to earn in a year, then divide it by the hours you can realistically bill — not the hours you work. Most tradies undercharge because they divide by total hours worked, forgetting that a large share of their week isn’t billable.
Step 1: Add up what you need to earn
Start with the income you want to take home. Add your business overheads for the year — vehicle, fuel, tools, insurance, phone, software, accounting. Add the superannuation you should be paying yourself. Add a buffer for tax. That total is what the business has to bring in over a year.
Step 2: Work out your actually-billable hours
This is where it goes wrong for most people. You don’t bill 40 hours a week. Take your working weeks in a year, multiply by realistic hours per week, then cut it down hard for everything unbillable: quoting, invoicing, paperwork, travel, admin, slow weeks. What’s left — often much less than people assume — is your billable hours.
Step 3: Divide
Divide the total you need to earn by your realistic billable hours. That’s your minimum viable hourly rate — the floor below which you’re going backwards. Anything you charge above it is real profit.
Step 4: Sense-check and adjust
Compare your number to the market — not to copy it, but to understand where you sit. If your rate is well above the going rate, you may need to compete on value, speed, or specialisation. If it’s below, you’ve got room. Either way, you now know your real number instead of guessing.
The shortcut most tradies overlook
Notice that billable hours are the lever. The more of your week you claw back from unbillable admin, the more hours you can bill without working longer — which effectively lifts your income without touching your rate. Cutting admin time is what TradieO is built for: voice invoicing, automatic payment chasing, and self-lodging compliance certificates hand back the hours that were never earning.
Frequently asked questions
Should I include my own wage as a cost?
Yes — pay yourself as a line in the business’s costs, then add profit on top. Your take-home and the business’s profit are two different things.
What billable-hours percentage should I assume?
Be conservative. Many tradies bill far fewer hours than they work once quoting, travel, and admin are removed. Under-estimate rather than over.
Does raising my rate lose me customers?
Some price-shoppers, maybe. But a rate that doesn’t cover your costs loses you the whole business eventually. Charge properly and compete on doing good work.