How to establish your Hourly Rate as Professional Contractor

Posted by SAPAC Reporter on

How to establish your Hourly Rate as Professional Contractor

Prepared by : SAPAC Reporter
Article Classification: Information
Image courtesy: SAPAC Professionals and Contractors


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Determining Operating Costs: Formula


Before we dwell into this, it is important to understand that this information does not constitute financial or legal advice. The information portrayed is intended for the different trades to understand their operational value and daily running of their businesses.

Tools that can be utilized for this exercise is a Microsoft Excel spreadsheet. Or the best alternative is to book an appointment with your Chartered Accountant or Book Keeper. Sit down with them and do perform this exercise.

Make time for your business and you will better understand the question of what you are worth. It will portray a unique definition towards yourself and your business operations. And it may assist you to make adjustments where required to maximize your business operational outputs.

The emphasis on this information is not to dissuade you or to over power you with information. However it is to provide you with a guideline of what you can do to understand your value better. Take the time to read and dissect this information. If you finish this article (take your time) there is some tips in the follow lengthy article at the end. For you to consider to implement some factors into your business if you have not done so yet.  

To save this information follow the prompt at the end of the article.

For a more comprehensive understanding and explanation to the acronyms including tips: 



In order to establish your hourly rate, you first need to understand your business financials. To understand your business financials you need to understand a couple of factors.

And to assimilate these factors to understanding, you need to dig to understand where you may be cutting yourself short or where you may be overcharging "possibly".

The main question still remains, have you established concretely, and correctly without thumb sucking your hourly rate, through a dedicated traceable manner to come to a concrete and viable conclusion? That will motivate you! To get on track with expected industry norms? Tough questions, yes we know.

Regardless, with a bit of effort you can establish answers to this conundrum. It is highly advisable that you perform this exercise at least four times a year. Bringing you on par with industry norms. To make you even more successful! 

What are operating Costs?

  • Ongoing expenses for running a business.
  • Include Cost of Goods Sold (COGS) and Selling, General & Administrative (SG&A) expenses.
  • Examples: rent, payroll, materials, marketing, insurance.

Understand COGS and SG&A read the in-depth article PRESS HERE

How to calculate:

  • COGS + Operating Expenses = Total Operating Costs
  • Find information on your income statement.

Types of operating costs:

  • Fixed (remain constant): rent, insurance.
  • Variable (change with production): raw materials, utilities.
  • Semi-variable (blend of both): overtime wages.

Impact on profit:

  • High costs reduce profit.
  • Manage by stabilizing or reducing them while maintaining quality.

What you should do as Contractor:

  • Monitor operating costs regularly.
  • Understand differences between operating costs, startup costs, and non-operational expenses.
  • Analyzing these costs helps improve efficiency and profitability.

Additional notes:

  • This is a general overview. Specific costs vary by industry and business model. For a more comprehensive view point PRESS HERE with tips.
  • Consulting a professional accountant is recommended for in-depth analysis and cost management strategies.

What can I do to save this information?

You may re-share this information or you may make a shortcut to your desktop or mobile phone in the following manner. Seeing that these are continuously updated.

Here's how to add a SAPAC shortcut to an Android phone's home screen:
  1. Open a browser, like Chrome
  2. Go to
  3. Tap the three dots in the upper right corner
  4. Select Add to home screen
  5. Enter the name SAPAC for the shortcut
  6. Tap Add 
The shortcut will appear on the home screen
To create a shortcut from a website in Chrome:
  1. Open Chrome
  2. Go to
  3. Click More in the top right
  4. Select Save and Share
  5. Select Create Shortcut
  6. Enter the name for the shortcut - SAPAC
  7. Check the Open as window box if you want the page to open in a separate window
  8. Click Create 

SAPAC Professionals and Contractors is national in all South African provinces.

Further Reading:

- Google, Trust Matters


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