01 / FREE AGENCY TOOL
Classify costs without counting them twice
Fixed costs exist across the period even if billable volume changes: a baseline payroll, rent and recurring overhead may belong here. Variable costs increase with each hour or unit of work, such as an hourly contractor used only when work is sold. The correct classification depends on your operating model. If a salaried person is already included in fixed payroll, do not also allocate the same salary as a variable hourly cost in this model.
02 / FREE AGENCY TOOL
Use the realized rate rather than the rate card
Realized rate is the revenue actually attributable to delivery divided by the hours required to produce it. Discounts, fixed-fee overruns and write-offs can make it lower than the quoted rate. A break-even plan built on an aspirational selling price may look achievable while the actual portfolio falls short. Calculate the recent realized rate consistently, then model a planned improvement separately so the assumption remains visible.
03 / FREE AGENCY TOOL
Work through a concrete example
The prefilled example is a planning scenario, not a customer result. Monthly fixed operating costs: $15,000; Average realized billable rate: 150 $/hour; Variable cost per billed hour: 50 $/hour; Monthly available hours: 240 hours. Change these values to match your situation, then calculate again. Save the CSV if you want a record to discuss with a colleague or compare with a later review.
Contribution per billed hour = realized rate − variable hourly cost. Break-even hours = fixed costs ÷ contribution per hour.
| Result | Example output |
|---|---|
| Break-even billable hours | 150 |
| Revenue at break-even | $22,500.00 |
| Required utilization | 62.5% |
| Contribution per hour | $100.00 |
04 / FREE AGENCY TOOL
Understand contribution per hour
Each billed hour contributes the difference between realized rate and variable cost toward fixed costs. If that difference is zero or negative, selling more hours cannot cover a positive fixed-cost base. The tool rejects that case rather than presenting a misleading finite target. When contribution is positive, dividing fixed costs by contribution per hour gives the required billable volume. This is an operating model, not a cash-flow forecast.
05 / FREE AGENCY TOOL
Compare the requirement with real capacity
The required utilization figure compares break-even hours with the available hours entered. A result above 100% means the proposed month cannot break even within that capacity under the stated assumptions. Review pricing, delivery cost, fixed costs or the service mix. Adding capacity is not automatically the answer because it may also add fixed costs. Recalculate the entire scenario after a staffing change rather than increasing the hour denominator alone.
06 / FREE AGENCY TOOL
Model a resilient plan beyond the exact threshold
Breaking even leaves no cushion for surprises or investment. Use the result as a minimum operating checkpoint, then model a revenue or contribution target that supports your intended reserve. Consider the timing of invoices and collections separately: a profitable month can still create a cash shortfall if customers pay late. For retainers and fixed-fee work, translate the portfolio into a consistent realized-rate equivalent and review whether the simplification remains useful.
THE PRACTICAL DETAILS
Questions, answered.
Does break-even mean cash-positive?
No. Invoice timing, collections, upfront purchases and financing affect cash separately from this contribution model.
Why does the calculator reject my rates?
The billable rate must exceed the variable cost per hour. Otherwise additional hours do not contribute toward fixed costs.
Where should salaries go?
Use a classification that matches your model. Fixed payroll can sit in fixed costs, while truly variable contractor time can sit in hourly cost. Do not duplicate either.
Can I model fixed-fee projects?
Yes, using a realistic realized hourly equivalent across the portfolio. Revisit the rate when project estimates or service mix change.
What does more than 100% required utilization mean?
The stated capacity is insufficient at the current rates and costs. The warning points to an operating-plan problem, not a rounding error.