What the Heck Is Efficiency Rate (And Why It Matters for Your Hourly Rate)

Introduction:

Let’s be real. Most electricians out there are working hard, but still not making the money they should. And the craziest part? It’s not even because their pricing is too low (even though it probably is). It’s because they’re not calculating their hourly rate the right way.

One of the biggest things people mess up — or totally skip over — is their efficiency rate. So let’s break it down.

First, What Is Efficiency Rate?

Efficiency rate is just a fancy way of saying “how much of your time is actually billable?” As in: what percentage of your day, week, or year are you actually doing electrical work that a customer is paying you for?

Spoiler alert: it’s WAY less than you think.

Most guys think they’re working 8 hours a day, 5 days a week, so they charge based on 40 billable hours per week. But that’s a fantasy. Here’s reality:

• You’ve got drive time.

• You’ve got quote time.

• You’ve got picking-up-materials time.

• You’ve got standing-around-waiting-for-the-customer-to-move-their-cat time.

• And maybe you even do meetings or paperwork or jobs that take longer than they should.

All of that is time you're not getting paid for. And guess what? It eats into your efficiency.

How Do You Figure Out Your Efficiency Rate?

Simple. Imagine your week out in the field. Now make up a list of all the things you do that are not electrical work. Here's my own list:

• Pulling and submitting permits

• Doing quotes

• Following up on quotes

• Scheduling jobs

• Going to the suppliers

• Organizing the van

• Taking out trash

• Setting up job sites

• Cleaning up job sites

• Spending time talking with the customer and building rapport

• Moving customers junk that's in the way

• Walking back and forth to the van for tools and supplies

• Taking days off

• Taking sick days

• Lunch breaks

Adding time to non-billable tasks

Now put your list in a spreadsheet or even on paper and start adding time and frequency to each non billable task in your list.

Pro tip: Don't just think about the task itself, remember that we need to drive to and from the task, so add that to the time.

Here’s an example:

Now just work through your list and calculate the total amount of time that you spend doing non billable tasks for your electrical business.

Our total calculated efficiency rate

Now you have a total amount of time that unbillable lets convert it to a percentage, that makes it easy for us to add to our hourly rate.

(total billable billable hours / total working hours) = Efficiency Rate

Here’s an example:

Let’s say in a week, you’re out in the field for 40 hours, but only 13 of those hours are actual paid billable work.

(13 billable hours / 40 hour work week) = 32.5% Efficiency

So your efficiency rate is 32.5%. And honestly? That’s pretty normal for a one-man service company. Don’t lie to yourself here — if you’re just starting out or still doing everything yourself, 25-35% is typical.

Why Efficiency Rate Matters (Like, A LOT)

Let’s say you’re paying a journeyman $42/hour. After labor burdens (benefits, insurance, holidays, yada yada), you’re at $59.64/hour in real cost.

If you charge customers $60/hour thinking you’re breaking even — you’re actually bleeding money. Because your tech is NOT billing 8 hours a day.

So we adjust that rate by dividing by your efficiency rate.

(burdened labor rate / efficiency rate) = Total billable hourly rate

ie.

($59.64/hr / 0.325) = $186.37/hr

So if your techs are only billable 32% of the time, you need to be charging at least $186/hour just to break even.

That’s before profit. That’s before marketing. That’s before van payments or paying yourself a dime. Wild, right?

Now you see why charging $125/hour or $140/hour because “that’s what the other guys do” is a fast track to being broke and burnt out.

Don't Be That Guy

The guy who charges low, hopes for volume, and runs himself into the ground? He’s not building a business — he’s building a prison.

When you understand your efficiency rate, you stop guessing and start leading. You charge based on reality, not vibes. And you finally give yourself a chance to:

• Hire great people

• Pay yourself properly

• Grow the business

• And get your nights and weekends back

Bottom Line

Efficiency rate is the missing link in your pricing. If you’re not factoring it in, your numbers are broken.

Take the time to figure it out — even just roughly. Track your week. Do the math. And build your flat-rate pricing around what it actually costs you to deliver the job, not just what feels fair.

Trust me: once you see the truth behind the numbers, you’ll never go back.