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How to work out your agency's hourly rate

The Sumhour team · 9 November 2026

Other agencies’ rates show what clients will pay. Whether that rate keeps your own agency running is a separate sum, and you can do it with four numbers from your books and your calendar. The agency hourly rate calculator runs the same sums if you’d rather type than read.

A year of costs

Add up what the agency pays in a year: salaries and freelancers, employer costs, rent, software, insurance, the accountant. Use next year’s figures, including the hire you’ve already agreed to.

Our example is an eight-person studio that spends 480,000 a year on its team and 96,000 on everything else, so 576,000 in total.

The hours you’ll actually bill

Eight people on 40-hour weeks, working 46 weeks once holidays and sick days are out, have 14,720 hours between them. Meetings, proposals, admin, hiring and learning come out of those same hours, so only part of them reach an invoice.

That part is your billable utilization. At 70%, the studio has 10,304 billable hours a year, and those hours have to pay the whole 576,000.

If you’ve never measured your share, track a month of time and divide each person’s billable hours by their available hours. Whoever also runs the business often comes out lowest.

The break-even rate

Divide the year’s costs by the billable hours:

576,000 ÷ 10,304 = 55.90 an hour.

At 55.90 the studio covers its costs and keeps nothing. Below it, each billed hour loses money, however busy everyone looks.

The rate with a margin

For a margin, divide the break-even rate by one minus the margin. At 20%:

55.90 ÷ (1 − 0.20) = 69.88 an hour.

At 69.88, 10,304 hours bring in 720,000. Take away 576,000 of costs and 144,000 is left, which is 20% of what clients paid.

Adding 20% to the break-even rate instead gives 67.08 and a margin of about 16.7%, because margin is measured against the price and a markup against the cost.

Why the billable share moves the result most

Keep the rate at 69.88 and let billed time slip by one point, from 70% to 69%. Revenue falls to about 709,700, costs stay at 576,000, and the margin drops from 20% to about 18.8%. One point of a 40-hour week is 24 minutes per person, a few unplanned internal calls.

So it’s worth tracking time on fixed fees and retainers too. Your rate assumes a billable share, and if you only check it at year end, the margin it was meant to protect is already gone.

One rate is an average

A senior designer and a junior developer cost you different amounts per hour. Bill both at 125.00 and they earn different margins, and a single agency rate hides which projects are carried by whom. Once you know each person’s cost per hour, you can see each client’s margin from the hours logged on it, and price the next proposal from that.

Traps to avoid

• Pricing from available hours instead of billable hours, which makes the rate look affordable and the year come up short.
• Leaving out the owner’s pay because they “take what’s left”.
• Adding a markup when you meant a margin.
• Setting the rate once and never checking the billable share again.

In Sumhour

Sumhour tracks time against projects, keeps a cost rate for each person and shows each client’s and project’s margin from the hours logged. The utilization report shows each person’s billable hours against their capacity for any period you choose. The calculator is free and needs no account.

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