Calculating a Labor Sell Price

The first step to making your business a success is to arrive at the correct hourly rate to meet your profit goals. You may have to ask your accountant for some information about your business as well as have a good estimation of other facts and figures. The following formula should give you a rough estimate of how much to charge for your labor to make a decent profit:

Yow! Don't worry if you don't understand this yet. Simply fill in the blanks in the Labor Calculator. If you want a more detailed explanation Click Here and follow the steps in the worksheet to arrive at the correct answer.

First we need to figure the ratio of hours worked by a technician to the hours sold for a given time period. You should have a pretty good idea how many hours you can bill out per eight hour day. Based on the performance at my old plumbing shop I'll suggest some numbers that I found realistic.

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PricePoint Labor Calculator 

 Average Hours Worked per day (try 8)


 Average Hours Billed to Customers per day (try 5)


 Hourly rate paid to employee (try $20)


 Labor Burden on an hour of labor (try $5)


 Benefits (try $2)

Now we need to ask your accountant what your overhead runs as a percentage of your total sales and how much profit you should shoot for

Overhead % (try 20%)


Profit% you want to make (try 15%) 


 Sell Price of Labor


You may be surprised at how high this ends up. This is the rate you need to charge to make a profit and to stay in business.

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