The mistake: pricing off your old wage
When you were a W-2 employee making, say, $40/hour, that number felt like your worth. So new owners quote $55–$60/hour, feel like they got a raise, and slowly go broke. Here's why: as the owner, your hourly rate has to carry the entire business, not just your paycheck.
Build your rate from the floor up
Start by figuring out your break-even cost per billable hour:
- Add up annual overhead — truck payment and fuel, insurance, tools, software, phone, your tax-savings target, and the salary you actually want to pay yourself.
- Divide by billable hours, not total hours. A full-time year is ~2,080 hours, but you can't bill all of them. Drive time, quoting, invoicing, and slow weeks are unpaid. Most solo operators realistically bill 1,200–1,400 hours a year. Use that smaller number.
- The result is your break-even hourly rate — the floor below which every job loses money.
- Add profit on top. Break-even keeps the lights on; it's not success. Add a margin so the business earns more than it costs to run.
That math almost always produces a number higher than new owners expect — and that's the point. Quoting below it doesn't win work, it funds your customers' projects out of your pocket.
Mark up materials
Charge for materials at a 15–35% markup over your cost. This isn't gouging — it covers the time you spend sourcing and picking up, the cost of warrantying parts, and the capital you front before the customer pays. Passing materials through at cost is leaving guaranteed margin on the table.
T&M vs flat rate
- Time & materials (T&M): you bill your hourly rate plus marked-up materials. Simple, transparent, low risk on unpredictable jobs. The downside: you're capped at your hours, and customers feel every minute.
- Flat rate: you quote one price for the whole job. Customers love the certainty, and you get rewarded for being efficient — finish faster and your effective rate climbs. The risk is underestimating; you eat the overage.
Both models work. The non-negotiable is the same either way: know your break-even floor, so a flat-rate quote is never accidentally below cost.
Don't compete on price
There's always someone cheaper, and "cheapest" is a race to insolvency. Compete on showing up on time, clean work, clear communication, and standing behind it. Customers pay a premium for reliability — and reliability is exactly what a tradesperson going independent already knows how to deliver.