How much should you charge per hour as a handyman?
Unfortunately, there is no simple answer. In fact, handyman hourly rates are all over the map. Some demand well over $100/hour because they know what their doing and do it efficiently, professionally, and immaculately. Then, there are the guys on craigslist that only charge $10/hour and still have trouble getting customers!
So, where do you fit in on this scale? What’s a good rate to base your service pricing on as a self-employed handyman, carpenter, or contractor doing small repairs?
That’s what I will answer in this article. I’m going to lay out a step-by-step process you can follow to help nail down a rate that will keep your business profitable and your schedule full.
Whether you are charging by the hour, quoting each job, or have flat rate pricing for common services, follow these steps to price for success.
How to Determine Your Hourly Rate
The purpose of your business is to sustain your lifestyle and you must charge enough to do so, otherwise your business just isn’t sustainable. I don’t care how cheap the competition is.
If you don’t charge enough, you’ll either kill yourself working too many hours for too little money, or your business will fail and you’ll be forced to get another job.
So, the only real rule for setting your rates is to charge enough to pay the bills at a minimum. This is called “Cost Based Pricing” and it’s how to guarantee you make a decent profit.
Basically, you must figure out the minimum you must charge to cover business and lifestyle expenses. Can you charge more than that? Of course you can and I recommend you do!
But this is the first step, so let’s get started.
Step #1 – List Your Living Expenses
How much does it cost for you to live comfortably and happy?
Write down a list of all of your expenses and an approximate monthly total for each. Spend time and try to think of all of your expenses, even the ones you only pay once a year. Assign a monthly value to each and add them into an excel spreadsheet (or just write them down).
Make sure not to leave anything out. Include entertainment and even a little extra for unexpected expenses. The idea here is see how much living actually costs for your area. If saving money for retirement is part of your lifestyle, make sure and include that, too. Need to pay for insurance? You’ll definitely want to include that as well.
#2 Business Expenses
Now, list your handyman business expenses and assign a monthly value to each expense. Once again, include everything. Here is a list of most handyman business expenses.
- Health Insurance
- Liability Insurance
- Vehicle Mileage and Maintenance
- Office Supplies
- Mailbox Rental
- Licensing Fees
(To get more detail on the expenses of running a handyman business, check out this complete pricing guide which details all of the expenses you will encounter as well as more advanced handyman pricing strategies.)
Now it’s time to figure out your tax responsibilities as a self-employed contractor. I’ve listed the common taxes directly below. However, this list is not all inclusive and you may have other tax obligations outside of these depending on where you live. I am not a tax professional and am only providing the following information as an example. Your specific tax obligations may be different and you may consider consulting with a professional.
Self Employment Tax – Since 2014, self employment taxes are set at 15.3% according to irs.gov. That 15.3% covers both social security and medicare taxes. As an employee, these taxes were automatically taken out of your paycheck. As a self-employed handyman, you’ll have to pay these out of your gross profits, which means you need to charge enough to cover therm. These do change each year, so you’ll need to keep up with this.
Federal Income Tax – As you probably already know, this tax depends on how much money you make each year. The more you make, the higher the percentage of taxes you will pay (assuming you don’t have a bunch of tax deductions). For the purpose of figuring out your hourly rate, you will need to estimate this tax. For most handymen, this will end up being about 15-20% of your profits.
State Income Tax – Check with your state to find out if you need to pay this tax.
Other Taxes – Depending on where you live, there might be other taxes. For example, in Canada, I know they have additional taxes to cover health care. You’ll want to include this.
Once you have an estimated percentage for each tax, add them all up to come up with your total tax percentage.
Let’s say your taxes are as follows:
Self employment: 13.3%
Federal Income Tax: 15.0%
State Income Tax: 0%
Total Taxes = 28.3% (example only)
#4 Billable Hours
The next step is to figure out how many billable hours you are going to work each month (assuming you have the business).
You may be thinking that 40 hours is a good estimate. In reality, however, with all of the quoting, following up, driving time, etc. it is probably more realistic that you will bill somewhere in between 25 and 35 hours per week.
Sure, you might work 40 hours per week, but you won’t be paid for every minute of that. You’re only paid for when you’re actually working for a customer.
The goal here isn’t to see how many hours a week you can work, but how many hours it is reasonable to work without totally consuming your life. After all, you’ve started this business to have some freedom right? Enjoy that freedom and set a limit on your billable hours.
For my handyman business, I’ve decided that 25 hours/week is a good amount of work. This allows me time to improve my business, have a personal life, and run this blog. I’ve based my work load on my own personal lifestyle design. I recommend you do the same.
#5 Do the Math
Now that you have an understanding of your costs and how much you think is a reasonable time to work, you can do some quick calculations to see how much you need to charge to live the lifestyle you have designed for yourself.
It goes like this:
Total Monthly Living Expenses = L
Total Monthly Business Expenses = B
Total Billable Hours/Month = H
Total Taxes (%) = T
Your Minimum Hourly Rate = L/[H * (1 – T)] + B/H
Example: So let’s say you need to make $3,000/month to live, expected your business expenses to be about $1,200/month, estimate your taxes at about 30%, and plan to work about 32 billable hours per week.
L = Monthly living expenses = $3,000
B = Business Expenses = $1,200
H= Monthly Billable Hours = 128
T = Total Tax Rate = 30% = 0.30
Minimum Hourly Rate = $3,000/[128 *(1-.3)] + $1,200/128 = $42.86/hour
So, now you know how much you need to charge in order to live the now defined lifestyle that you have laid out in terms of expenses. The next step is to evaluate this hourly rate and determine
if how you can provide that much value in one hour.
Is the number you came up with reasonable? Based on your experience, qualifications, etc, can you comfortably look a customer in the eye and say “I charge X amount?” If you can, awesome. You’re all set.
If you don’t feel comfortable charging that amount, why not? What’s holding you back? I’ve found that most handymen tend to undervalue their services and leave a lot of money on the table.
Don’t do that.
I made that mistake and it cost me tens of thousands in my first year as a handyman. Instead, learn the business skills you need so you can gain the confidence to charge what you should. It’s likely higher than you think.
Be sure to download the “Handyman Hourly Rate Calculator” by clicking the link below.
Handyman Hourly Rate Calculator