Start with the full annual cost of operating
Include owner and employee pay, rent or home-shop allocation, insurance, software, utilities, maintenance, consumables, taxes, and an appropriate profit buffer.
Use realistic billable hours
Not every hour is billable. Setup, cleaning, quoting, purchasing, communication, maintenance, and slow periods all reduce the time available to recover operating costs.
Review it as the shop changes
A new machine, higher material handling costs, or more efficient workflow can change the rate. Revisit the inputs on a schedule rather than carrying an old rate indefinitely.
Shop 101
Turn this guide into a tested shop decision.
You leave with one documented input, one controlled result, and one clearer next action.
- Name the material, dimension, or cost input that affects the decision.
- Use the guide and calculator to make the assumption visible.
- Test or compare the result before committing final material, time, or client scope.
Related tools & lessons
Common questions
Is shop rate the same as my hourly wage?
No. A shop rate needs to recover the cost of operating the business as well as labor and planned profit.
How many hours should I count as billable?
Use a conservative number after deducting the real time spent quoting, managing, maintaining tools, buying materials, and running the business.
Should installation use the same shop rate?
It may need a different rate when travel, site conditions, insurance, helpers, or specialized equipment make the work cost more than normal bench work.