A new homeowner calls and asks, “What do you charge per hour?” You say a number off the top of your head. Then you drive home and wonder if that number even covers the truck.
This post gives you a way to build an hourly rate from your own costs. I do not know your city or your crew, so I will not give you a market price. I will show you the steps, and one example you can swap your numbers into. For tax or payroll questions, ask your accountant.
Why one number from the internet fails
Another company’s hourly rate was built on their costs. Their truck may be paid off. Their crew may be two people, not four. Their insurance may be cheaper because their record is different.
If you copy their number, you copy their margins, not yours. The safer path is to build your own rate from your own books, then check it against what the market will accept.
The five cost buckets
Add up what it costs to run the crew for a full year. Keep each bucket separate so you can see where the money goes.
- Labor. Wages for every person on the crew, plus payroll costs such as employer taxes and workers’ comp. Do not forget your own pay if you work on the crew.
- Equipment. Truck payments or replacement savings, chipper, saws, rigging, repairs and maintenance.
- Fuel and travel. Diesel, gas, and the wear from driving to every site.
- Insurance and licenses. General liability, vehicle, workers’ comp (if not counted above), permits and any certifications.
- Overhead. Phone, software, marketing, office help, accounting and anything else that keeps the business open.
If you have not tracked these before, pull twelve months of bank and card statements. It takes an evening and it is worth it.
Count billable hours, not paid hours
This is where most owners go wrong. A crew might be paid for forty hours a week. But not all forty hours can go on an invoice.
Think about the time you cannot bill:
- Driving to and from jobs
- Loading and unloading the truck
- Fueling up and fixing gear
- Rain days and slow weeks
- Estimates and paperwork
An owner who says “we work 2,000 hours a year” may only bill a smaller part of that. A common mistake is dividing costs by paid hours. That makes the rate too low.
A simple way to start: track one month. Write down the hours you charged to customers and the hours the crew was on the clock. Divide billable by paid. That is your own ratio. Use it, not a guess.
The formula in plain words
Here is the math, step by step:
- Add up all yearly costs from the five buckets.
- Estimate your yearly billable crew-hours.
- Divide costs by billable hours. That is your break-even hourly rate.
- Add your profit target on top.
Profit is not a bonus. It pays for the next truck, a slow winter and your own risk. Choose a profit target you can defend, and check it with your accountant.
A worked example (an example only)
Here is a made-up example for Oak & Pine Tree Service, a small company. These numbers are examples, not market prices. Replace each one with yours.
| Cost bucket | Example yearly cost |
|---|---|
| Labor (3-person crew, with payroll costs) | $180,000 |
| Equipment (truck, chipper, saws, repairs) | $45,000 |
| Fuel and travel | $18,000 |
| Insurance and licenses | $20,000 |
| Overhead (phone, marketing, office) | $22,000 |
| Total yearly cost | $285,000 |
Now billable hours. Say the crew works 2,000 paid hours each year. After drive time, setup, rain days and slow weeks, Oak & Pine finds that only 1,200 of those hours get billed.
- Break-even rate: $285,000 divided by 1,200 hours is $237.50 per crew-hour.
- Add a profit target. If the owner wants a cushion on top of that, the final rate goes up from $237.50.
Notice that $237.50 is for the whole crew and truck together, not per person. That is why one “per hour” number is hard to compare with anyone else’s.
Per person, per crew or per job
Customers hear “hourly” and think of one worker. But your rate is really a crew rate. There are three ways to present it:
| Method | Good for | Watch out for |
|---|---|---|
| Per crew-hour | Small jobs, trimming, cleanup | Customers who ask “how many people?” |
| Per day | Larger jobs with a clear scope | A job that drags past the day |
| Flat price per job | Most removals | You must estimate time well |
Many tree companies quote a flat price for the job. The hourly rate is behind the scenes. It is how you check that the flat price is fair to you. If your estimate says six crew-hours, multiply by your rate and compare to what you were going to quote.
For more on estimating time, see how to price tree work estimates faster and the method in how to price tree removal jobs.
Do not forget the extras
Some jobs need more than the base rate covers. Add a separate line when you need to:
- A crane, rented lift or specialty gear
- Disposal or dump fees
- A long drive out of your normal area
- A rush or after-hours call
A rented crane is not part of your hourly rate. It is a pass-through cost. The crane job cost calculator can help you plan that. For distance, use the travel cost calculator.
Checklist: build your hourly rate this week
- Pull twelve months of statements and sort costs into five buckets
- Track billable and paid hours for four weeks
- Work out your break-even crew-hour rate
- Choose a profit target and add it
- Compare the rate to your last ten flat-price jobs
- Write down the rate and the date, then review it every quarter
Check yourself every quarter
Costs move. Fuel goes up. Insurance renews higher. A new hire changes the labor bucket. Put a reminder on your calendar to re-run the numbers each quarter.
Also look at the jobs you lost. If you lose many on price alone, do not drop your rate right away. First check whether the quote was explained well. A calm, clear explanation can help more than a lower number. The estimate win rate calculator can show you whether price or follow-up is the problem.
Try it: use our free crew day rate calculator. It shows the formula in plain words and nothing leaves your device. Then run the result through the profit margin calculator to see what a job leaves in your pocket.
A good rate only helps if the phone gets answered
You can build the perfect rate and still lose money if calls go to voicemail. According to Invoca, about 27% of calls to home-service businesses go unanswered, and under 3% of those callers leave a voicemail. A rate you never get to quote earns nothing.
If you want to see how many calls you miss, get a free audit of your missed calls at /free-audit. For how we help, read about our services and our pricing. This is not tax or legal advice. Talk to your accountant about payroll and your insurer about coverage.
