Bingo! Well said. That's why I chose $95 as a base rate. Then $35 for the third, fourth, fifth, etc person on the job. Their experience doesn't matter. $35.00 covers what I need it to in order to "feed" the business since an additional person raises the hourly cost of operation. If I chose $47.50 per man hour, the third, fourth, fifth, man hour would be $47.50, which would make the hourly rate rack up faster and end up over-charging the client. Whereas I make my rate higher since I know I'll be on every job, so it ($60) and the first person ($35) covers the $95 that my business needs fed, including profit. Now that I have my expenses covered, I instead of charging $47.50, I can charge $35 for each additional man hour, $12.50 less, or $100 per guy per day. That $35 covers his wages, tax, benefits, and profit. So say you have a one day job that you and I bid on. Same exact job specs: Duration: 8 hours Number of people required: 4 Using the math other's have mentioned, let's say both of us use $95/hour for two people as our base rate. You bid is at $47.50 per man hour, you get $190 per hour. I bid at my $95 base and $35/man/hour, I get $165 per hour. Your total job for 8 hours will cost $1,520. Mine will cost $1,320. Or $200 less. Now, you may think that I can use that $200 as additional profit. But because of the way everyone's ridiculing me for calculating my expenses, I know my hourly costs down to the penny which allows me to see where I can lower my expenses better, which I've done without ever cutting the quality of service. Because I've done that, I've saved that $200 that you charged the customer by having much lower operating expenses, so I can charge a little less without feeling it. That lets me get more jobs because other companies charge more for the same job with the same quality. Once word got out that my quality was the same or better, referrals happened and I became overbooked, which leads to expansion and all that great stuff. All from not averaging labor rates....and a few other things. There's 1,000 different factors to calculating costs, profits, etc. I use mine, which to me is very simple. To others that don't fully understand how it works, it looks weird, confusing, and wrong. I get that. But what I don't get, and you didn't do it, is set my ways to the frying pan because they don't understand it. It may work for one guy and not the other. In the end, I get more than enough jobs for good money, with low expenses, and without needing to gouge my client's wallets.