How to Set Your Shop Rate as a Solo Fabricator (The Real Math)

Every solo fabricator, machinist, and welder hits the same wall inside the first year: what do I charge per hour? Pick a number too low and you work 60-hour weeks subsidizing your customers. Pick too high without a reason and every quote comes back with a blank stare. This guide walks through the exact math that gives you a defensible shop rate — the kind you can show a skeptical buyer without flinching.

The one-line formula

Shop rate equals annual costs plus target income, divided by billable hours. That is it. The hard part is being honest about each input.

1. Add up your real annual overhead

Overhead is every dollar your shop spends before you bill a single job. For a solo operation, that usually includes:

• Shop rent or mortgage portion (if you own the building)
• Utilities — power, heat, internet, water, compressed air
• Insurance — general liability, property, equipment floater
• Tooling and consumables — inserts, wheels, gas, filler rod
• Software and subscriptions — CAD, CAM, accounting, quoting
• Vehicle and fuel (if you run a service truck)
• Accounting, legal, licensing fees
• Machine payments and a realistic maintenance reserve (5–10% of machine value per year)

Most solo fabricators land somewhere between $30,000 and $80,000 per year in overhead before they pay themselves anything. Pull last year's bank statements and add it up. No estimating.

2. Decide what you actually need to earn

This is the step most shops skip. If you want $90,000 take-home, you need to gross closer to $120,000 once you account for self-employment tax, health insurance, and retirement. Be specific:

• Take-home you want in your pocket
• Self-employment tax buffer (roughly 15% on top)
• Federal and state income tax (varies — 15–25% is common)
• Health insurance premiums (if not covered elsewhere)
• Retirement contributions

Stack those together and you get your target income. If you cannot make the math work at the end of this post, the answer is usually that your target income is unrealistic for the hours you are willing to work.

3. Be brutally honest about billable hours

A full-time year has 2,080 hours. A solo fabricator does not bill 2,080 hours. Not even close.

Subtract holidays (80), vacation and sick time (80–120), administrative and quoting time (200–400), shop maintenance (100), and unbilled rework. The honest number for most solo shops is 1,200 to 1,600 billable hours per year. If you use 2,080 in your denominator, you will be chronically underpriced.

4. Work an example

Say you run a small welding and fab shop out of a 2-car garage. Your numbers:

• Annual overhead: $45,000
• Target income (including tax buffer): $110,000
• Billable hours: 1,400

That is your floor. Round up to $115 or $120. Anything below this number means you are paying your customers to use your shop.

5. Different rates for different work

A single blended rate is easy but leaves money on the table. Most shops end up with 2–4 rate cards:

• CNC machining — higher rate (covers machine cost): $95–$150/hr
• Manual welding / fitting — labor-heavy, lower machine cost: $85–$125/hr
• Design and engineering time — billed separately at a higher rate: $125–$175/hr
• Rush / after-hours — 1.25–1.5× standard rate

6. Common mistakes that sink solo shops

• Using 2,080 hours as the denominator — you will be 30% underpriced before you quote a single job.
• Forgetting self-employment tax — a $75/hr rate with no tax buffer becomes $55/hr take-home equivalent.
• Pricing against the “guy down the road” instead of your real costs. His overhead is not your overhead.
• Never raising the rate. Tooling, insurance, and materials drift up every year. Your rate should too.

7. Once you have the rate, build quotes on it

A shop rate is only useful if every quote actually uses it. Spreadsheets drift, gut-feel discounts creep in, and before long you are back to making numbers up on the drive home.

That is the problem PriceFab solves. RateBuilder stores the rate once, and QuoteBuilder turns any job description into a line-item quote that uses it — so every estimate is built on the same math you worked out above.