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Calculating Your Hourly Billing Rate as a Consultant

There are a few factors to consider when calculating your hourly billing rate as a consultant:

  • Your desired income. How much do you want to make each year? This will be your starting point for calculating your hourly rate.

  • Your expenses. What are your business expenses, such as office space, marketing, and insurance? You'll need to factor these costs into your hourly rate to ensure you're making a profit.

  • Your experience and expertise. More experienced and specialized consultants can charge more per hour.

  • The market rate. What are other consultants in your field charging? You'll want to set your rate competitively so you can attract clients.

Once you've considered all of these factors, you can start to calculate your hourly rate. Here's a simple formula:

(desired annual income / (number of billable hours per year * 1.25)) = hourly billing rate

For example, let's say you want to make $100,000 per year and you expect to work 2,000 billable hours. You'll also want to add a 25% buffer to your rate to account for unexpected expenses. Your hourly billing rate would be:

100,000 / (2,000 * 1.25)) = $40/hour

Of course, this is just a starting point. You may need to adjust your rate up or down based on the factors mentioned above.

Here are a few additional tips for calculating your hourly billing rate:

  • Be realistic. Don't set your rate too high, or you'll scare away potential clients.

  • Be flexible. You may need to adjust your rate depending on the project or client.

  • Be competitive. Do some research to see what other consultants in your field are charging.

  • Be confident. Your rate should reflect your value and expertise.

Net Billable hours

Net billable hours are the number of hours that a company or individual can bill to clients after subtracting non-billable hours, such as vacation, sick leave, and training. Net billable hours are an important metric for businesses that track their profitability, as they can help to identify areas where efficiency can be improved.

To calculate net billable hours, you will need to know the following:

  • The total number of hours worked in a given period of time

  • The number of non-billable hours

Once you have this information, you can calculate net billable hours by subtracting the non-billable hours from the total number of hours worked. For example, if you worked 40 hours in a week and took 8 hours of vacation, your net billable hours would be 32.

Net billable hours can be used to track a company's or individual's productivity and profitability. If you are seeing a decline in net billable hours, it may be a sign that you need to make some changes to your business practices. For example, you may need to hire more staff, invest in new technology, or renegotiate your contracts with clients.

Tracking net billable hours can also help you to identify areas where you can improve your efficiency. For example, if you are spending a lot of time on non-billable tasks, such as administrative work, you may be able to find ways to automate or outsource these tasks. By improving your efficiency, you can free up more time to focus on billable work, which can lead to increased profitability.

Overall, net billable hours are an important metric for businesses that track their profitability. By tracking net billable hours, you can identify areas where you can improve your productivity and efficiency, which can lead to increased profitability.

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