Getting paid what you're worth is the whole reason you're in business, right? So why does figuring out an hourly rate feel more complicated than getting an HDMI matrix to work properly on a Friday at 4:30?

The truth is, your entire business hinges on this decision. Charge too little, and you’re heading toward financial trouble. Charge too much, and you might scare off potential customers.

Many integrators either pull an hourly rate out of thin air or base it on what the competition is charging. But what if your competitors are just as clueless and are winging it themselves?

Let’s break down the key factors every custom integrator should consider before setting your prices to ensure profitability.

First, figure out how much you want to earn each year. If you have an idea of what other integrators are making for similar work, use that as a reference. However, don't rely solely on that.

Whatever salary you decide on, make sure it's realistic and aligns with your skills and experience.

Next, you need to figure out how much it costs to run your business. Start by listing all your expenses and calculating their total on an annual basis.

This should include:

• Accounting and bank fees
• Office expenses (postage, phone, internet, office equipment)
• Vehicle costs (insurance, fuel, servicing)
• Work attire (shirts, jackets, boots, safety gear, etc.)
• Tools and equipment
• Software, services, and subscriptions
• Website maintenance
• Marketing and advertising
• Stationery (pens, paper, stamps, business cards)
• Business insurance
• Mobile devices
• Utilities

...and anything else that drains your wallet each month!

If you're just starting out, you may need to estimate some of these costs or ask other integrators what they spend. But be cautious—charging the same hourly rate as others just because it "sounds right" can lead to trouble. Only you can accurately calculate your monthly expenses.

And remember: many of the day-to-day costs of running your business are tax-deductible. Keep detailed records throughout the year so you can deduct them when tax season rolls around.

In America, you're absolutely entitled to earn a profit on top of your salary and overhead expenses.

Risk vs. Reward: Your salary covers the cost of running your business, but profit is your reward for taking the risks that come with being your own boss. Profit also gives you the financial flexibility to expand if you choose to.

Profit is typically calculated as a percentage of the total costs for each job. While there isn’t a set standard, aiming for a profit margin of 10% to 20% is pretty common.

PRO TIP: Some integrators mistakenly think that making a profit is akin to "ripping someone off." That’s just not true. Earning a profit is essential to running a successful business. As a business owner, you should charge what your services are worth and deliver outstanding service. That’s the winning formula.

With 52 weeks in a year, it’s important to remember that, unless you’re a workaholic, you’ll need some time off! And not all of your breaks will be planned. Business naturally has its ups and downs—installations might wrap up unexpectedly, or there could be slow periods where finding new work is challenging. It’s easy to say you’ll bill for 40 hours a week, but hitting that target consistently is a different story.

You should plan for at least 20 days off each year. You might not take all of this time in the early years of your business, but it’s wise to build in some buffer and not underestimate the impact of downtime on your daily or hourly rate.

So, if you take 20 days off, that leaves you with 48 working weeks in the year, which equals 240 working days or 1,920 billable hours per financial year.

Now let’s figure out how much you should charge per day and per hour. Follow these steps to determine your rates:

1. Add your chosen salary and overhead costs together.
   For example: $70,000 (salary) + $20,000 (overhead expenses) = $90,000.

2. Multiply this total by your desired profit margin.
   For instance, if you’re aiming for a 10% profit margin: 10% of $90,000 = $9,000.
   Add that to your total: $90,000 + $9,000 = $99,000.

3. Divide the total by your annual billable hours to get your hourly rate.
   Using our earlier example of 1,920 billable hours: $99,000 ÷ 1,920 = $51.56.
   You might want to round this off to the nearest whole number, so in this case, it would be $52.

4. Multiply your hourly rate by 8 to calculate your day rate.
   For example: 52 x 8 = $416.

And there you have it—your daily and hourly rates! Great job!

But wait – it doesn’t end there…

As you compare yourself to others in the industry, be sure to take into account factors like experience and the quality of service you provide. You might find that your rates are higher than some of your competitors, but if you deliver more value to your clients, that’s perfectly fine. Many clients are willing to pay a premium for quality, so don’t hesitate to charge more if you believe your work is superior.