01 / FREE AGENCY TOOL
Decide what the annual income target represents
The target is an amount the business must generate for the person or team being modeled. It is not automatically personal take-home pay. If employer contributions, benefits, reserves or owner compensation must be funded, include them consistently in either the income target or overhead. Avoid entering the same salary twice. For a small team, aggregate the costs and available hours for the same group; do not divide company-wide requirements by only one person’s capacity.
02 / FREE AGENCY TOOL
Make working weeks believable
A calendar has 52 weeks, but holidays, leave, illness and training reduce the weeks available for work. Then separate available working hours from billable hours. Sales conversations, operations, administration and internal development all use real time without necessarily producing a client invoice. A model based on 100% billable availability will understate the required rate whenever those activities exist. Use a conservative baseline and test a second case with lower utilization.
03 / FREE AGENCY TOOL
Work through a concrete example
The prefilled example is a planning scenario, not a customer result. Annual income target: $80,000; Annual business overhead: $20,000; Working weeks per year: 48 weeks; Available hours per week: 40 hours; Billable share of available time: 65 %. 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.
Required annual revenue = income target + overhead. Billable hours = weeks × weekly hours × billable share. Hourly floor = required revenue ÷ billable hours.
| Result | Example output |
|---|---|
| Required hourly floor | $80.13 |
| Annual billable hours | 1,248 |
| Required annual revenue | $100,000.00 |
| Monthly revenue equivalent | $8,333.33 |
04 / FREE AGENCY TOOL
Distinguish a floor from a selling price
The result is a rate that supports the requirements entered into this model. It does not measure market demand, the value of an outcome, your differentiation or the risk of a fixed-price engagement. You can quote above the floor, use minimum project fees or sell retainers with explicit boundaries. If the market will not support the floor, investigate the service design and cost structure rather than assuming that more unpaid work will solve the gap.
05 / FREE AGENCY TOOL
Test the assumptions that move the answer
Change one input at a time and save the results. Reducing billable share often has a larger effect than adding a few working hours, because it changes the denominator for the entire year. Increasing annual overhead also raises the floor even if the delivery team works the same schedule. Use these comparisons when deciding whether to hire operational support, simplify internal processes or adjust pricing for the next renewal.
06 / FREE AGENCY TOOL
Use realized rates in the review
The quoted hourly rate and the realized rate are not always the same. Discounts, write-offs and unbilled overages reduce the revenue actually earned per delivery hour. After a month or a project, divide attributable revenue by the hours required to deliver it and compare that result with this floor. A profitable-looking rate card can still conceal weak economics if estimates regularly miss or the contract allows unlimited revisions.
THE PRACTICAL DETAILS
Questions, answered.
Does this calculate my personal tax?
No. It models revenue requirements and capacity. Add an appropriate cost allowance to your inputs if needed; it does not calculate tax liability.
What billable percentage should I use?
Use your own consistent historical data and test a conservative alternative. There is no universal target that fits every role or agency model.
Should I use 52 working weeks?
Only if all 52 weeks are genuinely available. Deduct leave and closures from weeks, or reflect them consistently elsewhere without double counting.
Can I use this for an agency team?
Yes, if both the financial requirements and the hours cover the same team. Sum weekly available hours across the relevant people.
Why is my required rate higher than expected?
Non-billable time reduces the hours available to fund income and overhead. Review those assumptions before lowering the rate.