The denominator in your rate formula is often more important than a small expense change. Total working time includes selling, planning, administration, learning, and gaps. Billable capacity counts only the time clients can actually be invoiced.
Use a capacity equation you can audit
Start with weekly working hours, subtract full weeks away, then multiply by the share of remaining time you expect to invoice. For example, 40 hours × 47 working weeks × 62% billable time produces about 1,166 billable hours.
- Total capacity: 40 × 47 = 1,880 hours
- Billable capacity: 1,880 × 62% ≈ 1,166 hours
- Non-billable capacity: approximately 714 hours
Count all the work clients do not see
Sales calls, proposals, follow-ups, marketing, bookkeeping, scheduling, training, internal tools, portfolio upkeep, and gaps between projects still require time. Treating them as nonexistent shifts their cost onto the hours that remain billable.
- Track delivery and client communication separately.
- Track sales and proposal time by opportunity.
- Review write-offs and unbilled revisions after each project.
Model three scenarios
Create conservative, expected, and strong-pipeline cases. Your floor should survive the expected case without depending on perfect utilization. The conservative case shows how much cash reserve or price flexibility the business needs during a slower period.
Update the assumption with evidence
Review trailing three-, six-, and twelve-month utilization. A short strong month is not a new annual baseline. Adjust for planned leave, seasonality, large internal projects, and changes in service mix.
Price across the hours you can realistically invoice, not every hour on the calendar.
Educational planning content only. Pricing, taxes, contracts, and client circumstances vary; use professional advice where appropriate.