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Hourly Rate Calculator for Small Business Owners

Small business owners often struggle with setting accurate hourly rates that cover expenses and ensure profitability. Harvest offers essential tools for tracking billable and non-billable hours, helping you set the right rate.

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What should you charge per hour?

Most freelancers and consultants dramatically undercharge. This calculator accounts for what most people miss: non-billable time, taxes, and overhead.

$
Accounting for vacation, holidays, sick days
60%
Most freelancers can bill 50-70% of their time. The rest goes to admin, marketing, proposals, and learning.
$
Software, insurance, equipment, accounting, taxes beyond income tax, etc.
Your break-even rate $0
Recommended rate (+20% buffer) $0
Billable hours per week 0h
Equivalent daily rate $0

Start tracking your billable hours

Walk through the entire flow below. Start a timer, check your reports, and create a real invoice — all in three clicks.

Go ahead — start tracking!

One click and you're timing. Try it right here: start a timer, add an entry, edit the details. This is exactly how it feels in Harvest.

  • One-click timer from browser, desktop & mobile
  • Works inside Jira, Asana, Trello, GitHub & 50+ tools
  • Duration or start/end — your call
  • Day, week & calendar views to stay on top of it all
  • Friendly reminders so no hour gets left behind
Acme Corp
Website Redesign
Homepage layout revisions
1:24:09
Content Strategy
Blog calendar planning
1:30:00
SEO Audit
Technical audit report
0:45:00
Brand Guidelines
Color system documentation
2:15:00
Logo Concepts
Initial sketches round 1
1:00:00
Today's total 6:54:09

Understanding the Foundations: Why Your Hourly Rate Matters

Your hourly rate is more than just a number; it's a reflection of your business’s sustainability and your expertise. Setting the right hourly rate ensures that you cover costs, value your skills, and achieve business growth. The difference between a "salary equivalent" and a small business hourly rate lies in incorporating all business expenses, taxes, and desired profit margins. For instance, small businesses often aim for a profit margin of 10-20% to maintain stability. Additionally, understanding the average hourly earnings can guide your pricing; for example, in August 2022, small business earnings averaged $30.71 per hour.

The Step-by-Step Guide to Calculating Your Profitable Hourly Rate

Calculating your hourly rate involves several critical steps to ensure profitability. Step 1: Define your desired annual income, considering personal financial needs. Step 2: Itemize business expenses, including rent, utilities, and insurance. Step 3: Account for taxes, such as self-employment taxes at 15.3%. Step 4: Determine your realistic billable hours by subtracting non-billable time from total working hours. A typical freelancer bills 60-70% of their work hours. Step 5: Incorporate a profit margin of 10-20%. By following these steps, you ensure your hourly rate covers all costs and contributes to business growth.

Factors Influencing Your Hourly Rate: Beyond the Numbers

While numbers play a significant role, other factors can influence your hourly rate. Market research is crucial to benchmark against industry averages and competitor rates. For instance, project managers average $28 per hour, while dentists can earn up to $74 per hour. Your experience and expertise, such as certifications and a strong portfolio, also justify higher rates. Additionally, geographic location affects rates due to varying living costs; for example, California has a higher minimum wage than the federal rate. Finally, client type and project complexity can necessitate rate adjustments to reflect the value delivered.

Legal and Practical Considerations for Hourly Billing

Small business owners must navigate legal and practical aspects when setting hourly rates. Federal and state labor laws, like the $7.25 federal minimum wage and overtime pay regulations, are fundamental. Transparent communication about rates, scope, and additional charges, such as travel and revisions, is vital. Accurate time tracking is crucial for billing; tools like Harvest offer one-click timers and manual entry for precise tracking. Regularly reviewing and adjusting your rates is essential to keep pace with inflation and business growth, ensuring your business remains competitive and profitable.

Calculate Hourly Rates with Harvest

Visualize how Harvest helps small business owners calculate and adjust their hourly rates based on expenses and desired salary.

Harvest hourly rate calculator interface for small business owners

Hourly Rate Calculator for Small Business Owners FAQs

  • Freelancers can track billable hours using tools like Harvest, which offers one-click timers and manual time entry for precise tracking. This ensures that all billable work is accurately recorded, helping freelancers maintain profitability and organize billing efficiently.

  • To input business expenses into an hourly rate calculator, list all costs associated with running your business, such as rent, utilities, software, and equipment. These expenses should be summed to determine your total annual business expenses, which you can then divide by your billable hours to calculate the hourly rate.

  • When calculating your hourly rate, consider your desired annual income, business expenses, self-employment taxes (15.3%), and profit margin (10-20%). Additionally, account for billable hours and adjust for non-billable activities like administrative tasks and holidays to ensure a competitive and profitable rate.

  • Non-billable hours, such as administrative tasks and internal meetings, reduce the total number of hours you can bill clients. This means your hourly rate must be higher to compensate for these unbillable hours. Tools like Harvest help track these hours accurately, ensuring your rate reflects your actual working time.

  • Yes, you can adjust your hourly rate calculator to account for seasonal business fluctuations by estimating changes in billable hours and adjusting your rate accordingly. This ensures your pricing remains competitive and aligns with your financial goals throughout the year.

  • A reasonable hourly rate varies by industry. For example, project managers average $28 per hour, while pharmacists earn around $57.50 per hour. Researching industry averages and considering your experience and location can help determine a competitive rate.

  • Harvest assists small businesses with accurate time tracking through features like one-click timers and manual entry. This ensures precise billing for both billable and non-billable hours, helping businesses maintain profitability and streamline project management.