How to Calculate Hourly Break-Even Rate for Plumbing Company

Running a plumbing business isn’t just about fixing leaks—it’s about staying profitable. Many plumbing contractors struggle because they underprice their services or don’t know their true costs. If you’ve ever wondered, “How much do I actually need to charge per hour just to break even?”—you’re not alone. In this guide, we’ll walk you through how to calculate hourly break-even rate for plumbing company, so you can set smart, sustainable prices and stop leaving money on the table.

What Is an Hourly Break-Even Rate?

Your hourly break-even rate is the minimum amount you must charge per billable hour to cover all your business expenses—without making a profit or a loss. It’s the financial “zero point” where revenue equals costs.

For plumbers, this number is critical. According to the U.S. Bureau of Labor Statistics (2025), the median hourly wage for plumbers is $32.40—but that doesn’t include overhead, insurance, tools, or vehicle costs. Without knowing your true break-even rate, you could be working full-time and still losing money.

💡 Key Insight: A 2023 study by the National Association of Home Builders found that 68% of small trade businesses underestimate their overhead by at least 25%. That’s why calculating your break-even rate isn’t optional—it’s essential.

Why Do Plumbers Need to Know Their Break-Even Rate?

Many plumbing companies operate on intuition rather than data. But guessing leads to:

• Undercharging clients while overworking yourself
• Cash flow shortages during slow seasons
• Inability to scale or hire help

Knowing your break-even rate helps you:

• Set competitive yet profitable pricing
• Decide whether to take on low-margin jobs
• Plan for growth with confidence

Think of it as your business’s financial GPS—you won’t get lost if you know your baseline.

Step-by-Step: How to Calculate Hourly Break-Even Rate for Plumbing Company

Follow these five precise steps to determine your true hourly cost. We’ll use a realistic example throughout.

Step 1: Calculate Total Annual Fixed Costs

Fixed costs are expenses you pay regardless of how many jobs you complete. For a plumbing business, these typically include:

• Rent or office space
• Insurance (liability, workers’ comp, vehicle)
• Software subscriptions (scheduling, invoicing)
• Licensing & permits
• Accounting/legal fees
• Vehicle lease or loan payments
• Phone & internet

Example:
John’s Plumbing Co. has the following annual fixed costs:

• Insurance: $6,000
• Truck payment: $9,600
• Software: $1,200
• License & permits: $800
• Phone/internet: $1,800
• Accounting: $2,400
  Total Fixed Costs = $21,800

📌 Tip: Don’t forget hidden costs like continuing education or union dues if applicable.

Step 2: Calculate Total Annual Variable Costs

Variable costs change with each job. These include:

• Fuel & vehicle maintenance
• Materials (if not billed separately)
• Disposal fees
• Subcontractor labor (if used)
• Marketing per job (e.g., paid ads)

Example:
John spends ~$4,200/year on fuel, oil changes, and minor repairs. He also uses $1,500 in consumables (sealants, fittings, etc.).
Total Variable Costs = $5,700

⚠️ Important: If you bill materials directly to clients (common in plumbing), exclude them from this calculation—they’re not your cost.

Step 3: Add Fixed + Variable Costs = Total Annual Expenses

Total Annual Expenses = Fixed Costs + Variable Costs
= $21,800 + $5,700
= $27,500

This is the total amount John must earn just to keep his doors open.

Step 4: Determine Billable Hours Per Year

Not every work hour is billable. Plumbers spend time on:

• Travel between jobs
• Admin work
• Training
• Downtime

Industry benchmarks (from the PHCC Educational Foundation) suggest most solo plumbers average 1,000–1,500 billable hours/year.

Example:
John works 45 weeks/year, 5 days/week, 8 hours/day = 1,800 total hours.
But only 65% are billable due to drive time and paperwork.
Billable Hours = 1,800 × 0.65 = 1,170 hours

🔍 Pro Tip: Track your time for 2 weeks using a free app like Toggl. You’ll likely be surprised how few hours are truly billable.

Step 5: Divide Total Expenses by Billable Hours

Hourly Break-Even Rate = Total Annual Expenses ÷ Billable Hours
= $27,500 ÷ 1,170
= $23.50/hour

So, John must charge at least $23.50 per billable hour just to break even.

But wait—is that enough?

Should You Charge Exactly Your Break-Even Rate?

No. Charging only your break-even rate means zero profit. To build a sustainable business, you must add:

• Profit margin (typically 10–20%)
• Taxes (set aside 25–30% if self-employed)
• Emergency buffer for slow months

Using John’s example:

• Break-even: $23.50
• Add 20% profit: +$4.70 → $28.20
• Add 10% for taxes/buffer: +$2.82 → $31.02/hour

Now he’s in line with industry averages—and actually making money.

📊 Quick Reference Table:

For more on cost structures, see Break-even analysis on Wikipedia.

Common Mistakes Plumbers Make When Calculating Break-Even

Avoid these pitfalls:

1. Ignoring non-billable time – Assuming 2,000+ billable hours/year is unrealistic.
2. Excluding vehicle depreciation – Even if your truck is paid off, it loses value.
3. Forgetting self-employment tax – Sole proprietors owe ~15.3% extra in FICA.
4. Using gross revenue instead of net – Revenue ≠ profit. Always use net expenses.

A real-world case: Mike, a plumber in Ohio, charged $25/hour thinking he was profitable. After tracking costs, he discovered his true break-even was $34/hour. He raised rates gradually—and profits doubled within 6 months.

How to Use Your Break-Even Rate in Pricing Strategy

Now that you know your number, apply it wisely:

• Set minimum service charges (e.g., $95 for first hour, based on $32/hour)
• Bundle services to increase perceived value
• Offer tiered pricing (basic vs. premium service levels)
• Adjust for market demand – charge more in high-cost urban areas

Remember: Clients care about value, not just price. A plumber who explains their transparent pricing often wins trust—and higher margins.

FAQ Section

Q1: What’s the difference between break-even rate and hourly wage?

A: Your hourly wage is what you pay yourself. The break-even rate covers all business costs, including your wage, overhead, insurance, and more. They’re rarely the same.

Q2: Should I include my salary in the break-even calculation?

A: Yes—if you want to pay yourself a living wage, include it in fixed costs. Otherwise, you’re working for free.

Q3: How often should I recalculate my break-even rate?

A: At least once a year, or whenever major costs change (e.g., new truck, hiring staff, insurance hike).

Q4: Can I use this method for flat-rate pricing?

A: Absolutely. Convert your hourly break-even into job-based pricing. Example: A 2-hour job = 2 × $31 = $62 minimum charge.

Q5: What if my break-even rate is higher than competitors?

A: Differentiate through service quality, guarantees, or speed. Or find ways to reduce costs (e.g., fuel-efficient van, group insurance). Never race to the bottom.

Q6: Does this apply to plumbing companies with employees?

A: Yes—but include payroll, benefits, and training in your fixed costs. Employee-heavy businesses often have higher break-even rates.

Conclusion

Knowing how to calculate hourly break-even rate for plumbing company isn’t just accounting—it’s the foundation of a thriving trade business. With this method, you’ll stop guessing, start pricing with confidence, and finally earn what you’re worth.

If this guide helped you, share it with a fellow plumber on Facebook, LinkedIn, or your local trade group. Let’s raise the standard for the entire industry—one profitable business at a time.

💬 Your Turn: What’s your current hourly rate? Did you know your break-even before reading this? Tell us in the comments!