Understanding Labor Rates in Product Pricing
Learn how to calculate and apply labor rates so your time is properly covered in every product you sell, whether it’s a one-off custom build or a repeat item.
What the Labor Rate Calculator does
Inside BuildItTV Product Pricing Studio, the Labor Rate Calculator helps you put a real dollar value on your time — not a guess, not “what everyone else charges,” but a rate that fits your actual business.
Your true hourly labor rate
The calculator helps you arrive at a rate that reflects your wage, overhead, taxes, and real-world inefficiencies — so you aren’t quietly losing money every time you turn on the lights in the shop.
Labor cost per task
You can attach labor to the actual work you do: prep, CNC machine time, sanding, hand finishing, assembly, painting or staining, packaging, and even customer communication.
Labor portion of product price
Once you know your labor rate and time, the app turns it into a clear dollar value that becomes one of the pillars of your final product price.
How your labor rate is calculated
A good labor rate is more than “what you’d like to earn.” It also needs to cover overhead, taxes, and the realities of day-to-day shop work.
1. Desired hourly wage
Start with what you want or need to earn per hour as the owner or primary worker. This is your base wage — not yet adjusted for overhead or taxes.
2. Overhead burden
Every hour you work needs to help pay for rent/mortgage, utilities, insurance, equipment, software, marketing, maintenance, and more. The calculator bakes a portion of that overhead into each hour of labor.
3. Taxes & real-world inefficiencies
Finally, you can account for taxes and the messy realities: training time, setup, tool changes, and downtime. That keeps your labor rate grounded in how the shop actually runs — not a perfect, unrealistic scenario.
Why labor rates matter so much
Here’s a simplified example that shows how easy it is to undercharge when you pick a number that “sounds fair.”
Imagine you’ve been charging $25/hour because it seems reasonable.
But when you break it down, your actual needs look more like:
- $22/hr wage
- $11/hr overhead burden
- $4/hr taxes
- $3/hr to cover inefficiencies and downtime
That’s a total of $40/hour.
If you charge $25/hr when your real number is $40/hr, you’re losing $15 for every hour you work. The Product Pricing Studio Labor Rate Calculator helps you uncover that gap so you can fix it before it quietly erodes your profits.
How labor affects your product pricing
Once you’ve set a solid labor rate, it becomes part of the full pricing formula in Product Pricing Studio — alongside materials, machine time, packaging, and platform fees.
1. Labor cost
Labor cost is simply:
Labor time × labor rate = labor cost
Example: at $40/hr, a 30-minute job is:
0.5 × $40 = $20 labor cost.
2. Margin & profit
Labor itself isn’t profit — but you can’t hit your margin targets if labor is undervalued. A correct labor rate helps ensure:
- You’re not working for free
- Your quoted prices cover overhead
- Your profit targets are realistic and repeatable
3. Final selling price
In the app, labor feeds into the overall formula:
Materials + Labor + Machine Time + Packaging + Platform Fees + Profit Target
If labor is too low, the whole price collapses. If it’s accurate, every quote becomes professional, consistent, and profitable.
Why this matters to woodworkers & CNC shops
Most woodworkers and CNC owners don’t struggle with the woodworking part — they struggle with the pricing part. The real issue usually isn’t “I don’t know what to charge,” it’s “I don’t know what my labor is actually worth.”
By using a solid labor rate inside BuildItTV Product Pricing Studio, you get:
- A business-grade hourly rate that reflects reality
- Clear labor cost per product or job
- Final prices that protect your profit instead of eroding it
You stop guessing. You start earning on purpose.
Put your labor rate to work in the app
Once you’ve dialed in your labor rate, plug it into your pricing workflow and use it on every quote, every product, every time.