Calculate your break-even point and profitable hourly labor rate.
Rent, utilities, insurance, software, admin salaries, etc.
Include wages, taxes, benefits, and insurance for all techs.
Total hours sold to customers per month.
Target profit percentage after all expenses.
Total Monthly Expenses:–
Cost Per Billable Hour:–
Break-Even Labor Rate:–
Recommended Labor Rate:–
Projected Monthly Net Profit:–
Understanding Your Shop's Labor Rate
Setting the correct labor rate is the most critical financial decision for an automotive repair shop or service center. A common mistake is simply copying the rates of competitors down the street. However, if your overhead costs or technician efficiencies differ, matching a competitor's price could lead to operating at a loss.
Key Variables in the Calculation
This calculator uses a "Cost-Plus" pricing model to ensure every hour sold contributes to both covering your expenses and generating a net profit.
Total Monthly Overhead: These are your fixed expenses that exist regardless of how many cars you fix. This includes rent or mortgage, utilities, shop software subscriptions, insurance, marketing, and the salaries of non-billable staff (service advisors, managers).
Total Monthly Tech Payroll: This is the "Loaded Cost" of your technicians. It should include their gross wages, employer payroll taxes, health insurance, paid time off, and uniforms.
Billable Hours: This is the crucial divisor. It represents the actual number of "flat rate" or booked hours sold to customers. Note that this is often different from the hours technicians are physically present (clock hours).
Profit Margin: This is the percentage of the labor rate that is pure profit. A healthy shop typically aims for a net profit margin on labor between 20% and 30%.
How It Works
The logic follows a three-step process:
Calculate Total Costs: Add your Overhead and Tech Payroll to find the Total Monthly Expenses.
Determine Break-Even: Divide the Total Expenses by the Total Billable Hours. This figure is the absolute minimum you must charge just to keep the lights on and pay everyone (making $0 profit).
Apply Margin: To achieve your desired profit margin, the formula divides the Break-Even amount by (1 - Margin Percentage). This mathematical approach ensures that after costs are subtracted from revenue, the remaining amount equals your target percentage.
Why "Efficiency" Matters
If you cannot raise your labor rate due to market constraints, your only lever is efficiency. By increasing the number of billable hours (without increasing payroll or overhead), you lower your cost per hour, effectively widening your profit margin without charging the customer more.
function calculateLaborRate() {
// 1. Get input values using var
var overheadInput = document.getElementById('monthlyOverhead');
var payrollInput = document.getElementById('techPayroll');
var hoursInput = document.getElementById('billableHours');
var marginInput = document.getElementById('profit_margin'); // Attempting to get by non-existent ID first to demonstrate strict checking or just use correct ID below
// Correct IDs based on HTML above
var overhead = parseFloat(document.getElementById('monthlyOverhead').value);
var payroll = parseFloat(document.getElementById('techPayroll').value);
var hours = parseFloat(document.getElementById('billableHours').value);
var margin = parseFloat(document.getElementById('profitMargin').value);
var errorDiv = document.getElementById('errorDisplay');
var resultsDiv = document.getElementById('resultsArea');
// 2. Validation
if (isNaN(overhead) || isNaN(payroll) || isNaN(hours) || isNaN(margin)) {
errorDiv.style.display = 'block';
errorDiv.innerHTML = "Please enter valid numbers in all fields.";
resultsDiv.style.display = 'none';
return;
}
if (hours = 100 || margin 80 / (1 – 0.20) = 80 / 0.8 = $100
var decimalMargin = margin / 100;
var recommendedRate = costPerHour / (1 – decimalMargin);
// Projected Monthly Revenue and Profit
var projectedRevenue = recommendedRate * hours;
var projectedProfit = projectedRevenue – totalExpenses;
// 4. Output Display
document.getElementById('displayTotalExpenses').innerHTML = "$" + totalExpenses.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('displayCostPerHour').innerHTML = "$" + costPerHour.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('displayBreakEven').innerHTML = "$" + breakEvenRate.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('displayRecommendedRate').innerHTML = "$" + recommendedRate.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}) + " /hr";
document.getElementById('displayMonthlyProfit').innerHTML = "$" + projectedProfit.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
// Show results
resultsDiv.style.display = 'block';
}