Billable Rate & Utilization Calculator

How the billable rate & utilization calculator works

Annual revenue requirement = owner compensation + other business overhead + additional profit allowance. Available hours = working weeks × hours per week. Expected billable hours = available hours × billable utilization ÷ 100.

Required hourly rate = annual revenue requirement ÷ expected billable hours, rounded upward to a whole cent. The ceiling avoids a displayed rate that would underfund the entered target. Billable utilization must be greater than zero; nonbillable hours are the remaining available hours.

The scenario table holds your annual revenue requirement and available hours fixed while changing utilization. Lower utilization requires a higher rate to support the same revenue target. The fixed profit allowance here differs from setting profit as a percentage of revenue.

Include leave in working weeks and administration, selling and other nonbillable work in utilization without deducting the same hours twice. This is a capacity and pricing model, not a wage, tax or market-rate recommendation. It assumes every billable hour is invoiced and collected at the entered rate. Discounts, payment fees, bad debts, overtime and variable delivery costs must be allowed for in your own inputs or a separate job quote.

Worked example

A $75,000 compensation target, $20,000 of other overhead and $10,000 profit allowance require $105,000 annual revenue. At 46 working weeks and 40 hours per week, 1,840 hours are available. At 65% utilization, 1,196 hours are billable. Dividing $105,000 by 1,196 and rounding upward gives $87.80 per billable hour. This is an illustrative rate from entered targets, not evidence of what customers will pay.

Sources and assumptions

The source material explains the underlying calculation or pricing structure. Entered prices, costs, schedules and scenario choices are your assumptions; this tool does not obtain supplier quotes or predict actual results.

• AccountingTools: time and materials pricing