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Agency hourly rate calculator

The rate that covers your costs, and the rate that leaves your target margin, from a year of costs and the hours your team really bills. Change any number; the result updates as you type.

people
h
weeks
%
%
Rate for your target margin$69.88per billable hour
Break-even rate
$55.90
Billable hours a year
10,304
Costs a year
$576,000
Revenue at the target rate
$720,000
Profit at the target rate
$144,000

Billing 1 point less of the time drops the margin to about 18.8%.

How the rate is worked out

  1. Billable hours a year = people × hours a week × working weeks × billable share. With the numbers above: 8 × 40 × 46 × 70% = 10,304 hours.
  2. Break-even rate = (team cost + overheads) ÷ billable hours. Here 576,000 ÷ 10,304 = 55.90 an hour. Below this, every hour loses money.
  3. Target rate = break-even rate ÷ (1 − margin). For 20%: 55.90 ÷ 0.8 = 69.88 an hour, so a fifth of each hour’s price is profit.

The billable share moves the rate more than anything else. The note under the result shows what one point less of billed time does to your margin, which is why agencies that track time closely tend to price more confidently.

Use the rate per person, not only per agency

One rate for the whole agency hides who is profitable to staff. A senior designer and a junior developer cost different amounts, so the same 125.00 an hour earns a different margin on each. Sumhour keeps a cost rate for each person and shows the margin of every client and project from the hours actually logged.

Questions

How do I calculate my agency’s hourly rate?

Add up a year of team cost and overheads, then divide by the hours you will actually bill in that year: people × weekly hours × working weeks × the billable share. That is the break-even rate. To make a margin on top, divide the break-even rate by one minus the margin, so a 20% margin means dividing by 0.8.

What billable share should I plan with?

Nobody bills every hour: meetings, sales, admin and learning take time. Plan with the share your team really bills. If you track time, your utilization report shows it; if you do not, start lower than you think and adjust after a month of tracking.

Why divide by one minus the margin instead of adding the margin?

Margin is a share of revenue, not of cost. Adding 20% to cost gives a margin of about 16.7%. Dividing cost by 0.8 gives exactly 20% of what the client pays.

Is anything I type saved or sent?

No. The numbers stay in your browser and are worked out on your device.

See your real billable share and margin, not a guess. Sumhour tracks time, sends invoices and shows each client’s margin from each person’s cost rate. Every plan, 30 days free, no card.

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More free tools: utilization calculator, invoice template. Related: client profitability in Sumhour.