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How to Figure Your Hourly Shop Rate or Day Rate

How to Figure Your Hourly Shop Rate or Day Rate

How to Figure Your Hourly Shop Rate or Day RateWhether you want to charge a day rate for your labor or an hourly rate, this post is a good exercise to help you figure out what to charge to keep your bills paid, how to set your income goals and grow your maker business.

As makers and artists, our process is not always easily figured by the day or by the hour. We often have downtime waiting for glue and finishes to dry. For example, Many painters will paint the background on one painting and then set it aside to dry. While it is drying, they work on a different painting. As a result, some projects may take 8 hours to create but are created over the course of several days. If this is how you work, it may be better to price a project at an hourly rate over a day rate method. Since this is how I work, for this article, I will be referring most often to figuring an hourly rate. If you want to charge by a day rate, you can easily multiply how many hours you work in a day to get your day rate.

If you are unsure of how many hours it will take you to complete a project, refer to my article about how to figure out and keep track of your time so you can make an educated estimate of how long a project will take.

Billable hours v.s. Non Billable hours

The first step to figuring your shop rate is to separate what hours are billable to the client and what hours are spent on non-billable tasks. Non-billable tasks would include things such as marketing, accounting, and updating your website and social media sites. Basically, any activity you do for your business that one would not normally charge a client for or figure in as part of their bid. Billable hours are the tasks you do directly for your client, such as painting, sanding, assembling, etc.

To figure out how much time you spend on each, you need to pay attention and keep track of what you do day to day. For example, every morning, I spend 2 hours responding to emails, promoting my business on social media, bidding on new work, and doing accounting tasks. The rest of my day I spend in the shop working on client’s jobs.

Let’s say I work a 40-hour week. Therefore, 10 hours a week are spent on non-billable tasks, and 30 hours a week on billable tasks. Assuming we will take two weeks off for vacation, we will end up with a total of 50 weeks we can bill for at 30 hours per week. That gives us a total of 1,500 billable hours (30 billable hrs. X 50 weeks = 1,500 billable hrs.)

Now that we have an estimate of how many hours we are able to bill clients for each year, we need to make a salary goal. How much do we want to make a year? For this example, I am going to use $100,000 a year salary because everybody wants to make a six-figure income. You need to come up with a realistic goal for yourself.

To find our baseline, we need to divide our salary goal by our billable hours, not total hours.  So we divide our goal by our total yearly billable hours. $100,000/1,500 billable hrs. = $66.67 an hr. By only dividing by our billable hours, we account for getting paid for the non-billable hours we work, assuming we work the 40hr week. If we bill for 30 hours a week at $66.67 an hour, we will hit our goal of a $100,000 salary by the end of the year.

Figuring Your Overhead

However, we are not done with $66.67 an hr. This is only our base rate; we have other expenses, such as overhead. For every hour we are working in our shops, we have to pay for the heat and lights being on, and we have to pay rent/mortgage on the shop space. We may have insurance costs and other overhead costs that need to be paid for. To run a successful business, these costs need to be figured in and billed as part of our hourly shop rate.

Below is a chart on how to calculate your overhead.
Since this article is geared towards small makers and artists, I have configured the chart to track overhead as a home-based business. If you are operating your shop in a location outside of your home, you will want to change most of the percentage to 100%
How to calculate overhead for your maker business(Total overhead of $8,132.02 / 1,500 Billable hrs. = $5.42 of overhead an hr. Then add $5.42 to our base hourly rate of $66.67 to get $72.09 an hour to bill to your customers)

The above chart is just an example. You can download a free Excel file complete with all the formulas you need to input your own numbers.

How to come up with the numbers for your chart.

If you are using your garage as your maker space, it would be unrealistic to figure out how much electricity you are using for just your garage versus the rest of the house. To estimate these kinds of costs, we will use the IRS’s formula for home business deductions to estimate the costs that are shared with your home.

In this example, we have a 2000 sq. ft. house. Most house listings do not include the garage square footage in their estimates, so you will need to add the garage square footage to your home’s total square footage. For this example, you have an 800 sq. foot garage, so your total sq. footage is 2800.

Assume you use the entire garage for your maker business. To find the percentage of your home you use for your business, divide your maker space, aka the garage, by the total square footage of your house, 800/2800=0.29, so you use 29% of your home as your business. (this formula is included in the free download)

Below are some examples of overhead expenses you should include.


You may be thinking, even if I didn’t have a business at home, I would still have to pay the same amount of mortgage/rent on my garage. Why would I add it as part of my hourly rate? Why would you not? If you didn’t have your business in that space, you could use it for something else. Parking your car in the driveway, out in the weather, is most certainly adding wear and tear to the paint job. Those freezing cold nights are affecting the battery in a negative way. All that crap you have in your renting storage unit could be stored in the garage. These hidden costs affect you personally and should be accounted for.  Add your yearly mortgage costs to the chart.


Because putting a separate meter on just your garage to track your electricity usage would not be practical, use the same IRS formula to estimate your electricity costs. Add up your yearly electricity bills and them to the chart.

Natural Gas.

There is a good chance you use gas to heat the spaces in your home as well as to heat the hot water that you use to clean up those paintbrushes and other supplies. Include this on your chart.

Trash Service 

Running a home-based business creates more trash than a normal household. I typically add a 42-gallon contractor bag of just sawdust from the dust collector to my weekly trash pickup. Trash needs to be added to your overhead cost.


How are you posting your YouTube videos and promoting your business without the internet? This is also a part of your overhead.

Phone Bill

You have to have the ability to call customers and vendors, and they need to be able to call you. This is overhead.


As your business grows, you are going to want protection in case anything goes wrong. Even if you don’t have insurance yet, it’s a good idea to charge for it as you need it so you can afford it when it comes time. Call an insurance company, tell them what you plan to do for business, and get a quote. This is a direct business expense, not a portion of your household expenses, and should be added to your overhead costs as 100%

Homeowners/ renters insurance

Many homeowners and renters’ insurance policies cover insuring a hobby business’s tools in case of theft and fire. They may also cover the unfortunate event if something in your shop were ever to burn your house down. Figure this as a percentage of your overhead. Depending on how your mortgage payment is structured, this may already be included in your monthly payment.

Important note, while homeowners insurance may cover some hobby-type business, every policy is written differently, so this is something you will want to have a conversation with your insurance agent about.  This is also something you will want to review as your business grows. You may suddenly find that your policy no longer protects your size and type of business.

Ongoing direct business expenses

You need to make enough money to cover all your expenses, so charge for all direct business expenses at 100% in the above chart.
Examples of this include:
Web Hosting/domain registration fees, Bank fees, subscriptions such as Photoshop or Microsoft Office. Whatever else you pay for on an ongoing basis to keep your business going. Excluding materials or items you bill directly to your customer, materials need to be a separate line item when figuring your project costs for customers.

The above are just examples; consider your business needs and add or subtract items on the chart based on your situation.

At the bottom of the chart, I have shown how to convert your overhead into an hourly charge to be added to your hourly rate.

Add Profit

Now that we have identified all the overhead costs and figured them out by the billable hours, we can add it to our base hourly rate, overheard per hour. + base rate = almost their.

Almost their? Yes, there is still more. The biggest mistake most small business owners make is confusing the money they pay themselves as profit. Your salary is a business expense, even if you are a sole proprietor. If you pay yourself a salary and use your salary to pay your living expenses, are you going to have any money left over to reinvest in your business? How are you going to grow your business? What are you going to do if that drill or other power tool breaks and you don’t have any money to buy a new one? How are you going to increase productivity if you don’t have money to upgrade that contractor table saw to a cabinet saw? This is what adding a profit to your products and labor is for; use it to grow your business and save it for a rainy day.

How much profit you can add will be determined by how fast you want to grow your business and what the market can bear. If you crochet doilies to decorate people’s coffee tables, and it takes you a full day to crochet one doily at a day rate of $ 1,000 plus materials. You could be in trouble, and you need to re-think the products you are selling, how you make them, how you market them, and what you are able to charge for a day or hourly rate.

Let’s be honest: unless these doilies are signed by famous people or made of gold thread spun by Rumpelstiltskin, you will not likely be able to sell many at $1,000 plus. This is where a lot of businesses fail. They are not honest with themselves and think they can sell their products and services at a higher rate than the perceived value.

I plan to write a post on perceived value, but let’s finish this post with a few real-world examples.

What’s Your Minimum 

Now that you have your new hourly rate based on your goal of what you want to make as a salary per year, plus your overhead costs and profit. You may think that nobody will pay that high of a rate.  So, let’s look at the other extreme. What is the minimum you need to pay your bills and sustain a reasonably comfortable standard of living?

To figure this out, you need to look at all your expenses. Some really simple household accounting software, such as Quicken, will help you track your expenses so you can see where your money goes. How much goes to food, rent, the electric bill, childcare, etc? Use those numbers to make a household budget for the year. These yearly expenses that keep you alive are your bare minimum salary. Be sure to figure in your income taxes, as the IRS is like the honey badger.

To figure your barebones hourly rate, divide your yearly household expenses by your total billable hours, then add your overhead costs. (this formula is included in the free download) This is your bottom-line hourly rate. You should never take a job that does not at least pay this rate, or you will not make enough money to pay your bills.

Now, Let’s Put it all together.

This is typically how it goes in building custom furniture. A client approaches you and says they want a coffee table built, and they have a $ 1,000 dollar budget. You figure the materials at $300, leaving you $700 for labor and profit. Because you read my last post about keeping track of your time, you know it will take you about 20 hours to build this project. Based on our example, your goal is to make $102.98 an hour.  However, charging that an hour for this job blows the customer’s budget. You know this because $700 divided by 20 hours is $35 an hour.  So now you can tell the customer that you can’t do their job because if you spend 20 hours working for less than $102.98, you won’t reach your goal.

In the real world, it is unlikely that you will have the ideal profit margin on every job. You have to decide what you think is best for your circumstances at the time. I hope this article will help give you the tools needed to make those decisions.

These goals are not set in stone. A business plan is not set in stone.  Simply use them as a guide and change them to set new goals based on the data you gather as you grow your business.

A lot of artists make the mistake of just figuring materials times two or times 3.5 or whatever unscientific method they use. These methods do not take into account any growth for your business, does not take into account the actual hours involved in making a product, or any overhead expenses that need to be paid for. Those methods can bankrupt you and your maker’s business if you are not careful. The method I laid out in this article is the method I use in my business, and as of writing this article, I am 6 years in and have had steady growth in my business.

Whether you’re a hobbyist or want to be a full-time maker, your time has value, and what you make has expenses; be sure to charge accordingly for them.
Download the free chart with the formulas.

There is always more to talk about when it comes to pricing your work.  Below is a podcast I was on talking about this very subject.

I’m the owner of Benham Design Concepts, a mixed media art studio where I design and build custom furniture and other works of art using wood, glass, stone, and various metals.
In this blog, I talk about the art I create, my journey, and the things I learn along the way.

1 comment

  1. So useful!

    Particularly the combination of “what’s your minimum” and the example!


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