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Hourly rate for services and projects

Find out what to charge per hour to pay your business costs, your own pay and the taxes and fees, and still make a profit, counting the hours you cannot bill. For agencies, consultants, studios, developers and freelancers, with a project quote.

Educational simulation. Not investment advice. Results are estimates based on the data you enter and do not replace advice from a qualified professional.

Reviewed on Oct 31, 2026

Example values for a small agency with 2 professionals.

Monthly costs and pay
Hours

Internal meetings, sales, admin, travel and idle time between clients are not billed. In services, 60% to 75% billable hours is already a good result.

Charged on the price
Project quote

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—Hourly rate
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What each billed hour pays for

The share of the hourly rate that pays for each item.

Tap the chart to see the values.

Required rate by billable hours

The fewer hours the team can bill, the more each hour has to cost. The dashed line is the market rate.

Tap the chart to see the values.

Monthly profit charging the market rate

Monthly result if you charge the market rate, by billable hours.

Tap the chart to see the values.

Hourly rate and quote

The summary lists your inputs, results, formulas, assumptions and sources. The full report also includes the charts and interpretations, in color. In the print dialog, choose Save as PDF.

Method, assumptions and sources

Formulas

Billable hours = professionals × working hours × % billed
Cost per billable hour = (fixed costs + pay) ÷ billable hours
Hourly rate = (cost per billable hour + variable cost per hour) ÷ (1 − taxes − fees − target profit); the minimum rate uses zero profit
Project quote = estimated hours × (1 + contingency) × hourly rate

Assumptions and limits

  • Paid time off and holidays must be included in the pay entered; the rate does not vary by type of service or seniority.
  • Taxes and fees are entered as a percentage of the price; income tax on profit is not included.
  • The calculated rate is a cost-based reference; client perception and competition also set the price.

Official sources and references

  • U.S. Small Business Administration, business planning guides.
  • Horngren, Datar & Rajan. Cost Accounting: A Managerial Emphasis (cost-based pricing). Pearson.

Frequently asked questions

How do I calculate my hourly rate?

Add fixed costs and the pay you need per month, divide by the hours you can actually bill, add the variable cost per hour, and divide the result by 1 minus taxes, fees and target profit (as % of the price). The calculator does this and shows the minimum rate with no profit.

What are billable hours?

The hours you can charge to clients. Sales, admin, internal meetings, travel and training do not count. In services, billing 60% to 75% of working hours is already good, so a 160-hour month usually means 95 to 120 billable hours per person.

How do I read the default example?

With $20,000 a month of fixed costs and pay, 2 professionals and 65% billable hours, there are 208 billable hours a month. Paying for everything plus 8% in taxes and fees, $5 of variable cost and 15% profit requires $131.37 an hour; the no-profit minimum is $109.95. The market pays $150, so there is room of about 14%.

What goes into “taxes on revenue”?

Only taxes charged as a percentage of what you bill, such as gross receipts taxes, or VAT/GST when it is included in your price. Income tax on profit is not a percentage of revenue and is not entered here. Check the rate for your location with an accountant.

How much contingency should I add to a project?

Usually 15% to 30% of the estimated hours, depending on complexity, how clear the scope is and your history of rework. Change requests outside the agreed scope should be quoted separately.

What if my calculated rate is above the market?

Work on the levers before cutting the price: bill more of your hours, reduce fixed costs, specialize so clients pay for the expertise, or sell packages and retainers. Charging below the minimum rate means every hour you sell increases the loss.

Is this rate final?

It is a cost-based reference. What clients perceive, competition and your positioning also set the price. Review the rate at least once a year or whenever costs, team size or utilization change.

Related calculators

See all in Taxes & owner pay ›

How to set your hourly rate for services

An hourly rate that only copies a salary divided by 160 hours almost always loses money. Each billed hour has to pay for the hours you cannot bill, the business overheads, the taxes and fees charged on what you invoice, and still leave a profit.

The formula

Rate = (fixed costs + pay) ÷ billable hours + variable cost per hour, all divided by (1 − taxes − fees − target profit)

Billable hours are working hours × the share you can actually charge. Sales calls, internal meetings, admin, training and gaps between projects are real work, but nobody pays for them directly.

Example

ItemValue
Fixed costs + pay per month$10,000
Working hours160
Billable share62.5% (100 hours)
Cost per billable hour$100
Taxes, fees and profit25% of the price
Hourly rate$100 ÷ 0.75 = $133.33

Dividing $10,000 by all 160 hours would suggest $62.50, less than half of what is needed.

Quoting projects

Estimate the hours task by task and add a contingency margin, usually 15% to 30%, for rework and change requests. Then multiply by the hourly rate. If the client asks for a lower price, reduce scope rather than the rate.

Compare with the market

If your calculated rate is above what the market pays, the levers are more billable hours (retainers, less rework, fewer proposals that do not close), lower fixed costs or a more specialized service that justifies a higher price.