Set an hourly rate that covers the work around the work.

An $80,000 annual cost base spread over 1,000 billable hours needs $80 per hour to break even. To leave a 20% profit margin on revenue, the rate needs to be $100.

Your billable rate is the price a client pays for an hour of work. It has to support the business during the hours you cannot invoice, too. Use your costs and realistic capacity to find a planning baseline, then assess what clients will pay for the scope, expertise and outcome.

Build the annual cost base once

For a solo business, start with the compensation you want the business to provide before personal tax. Add business overhead such as software, equipment, insurance and accounting, plus any separate business-paid benefits or employer costs that apply. For a team, work per person or across the whole team consistently: do not divide the team's costs by one person's hours.

Harvest's project-pricing guide uses labor and overhead to establish a minimum hourly rate before considering profit and the market. Count each expense once. If a cost is already included in overhead, adding it again as a separate allowance overstates the baseline.

In this illustrative example, owner compensation is $65,000 and other business costs are $15,000: $80,000 in annual costs. These are assumptions, not recommended pay or tax allowances. A desired take-home amount needs separate tax planning before you use it as a business cost.

Use hours you can actually bill

Subtract time off first, then allow for administration, sales and other work you cannot invoice. If you plan to work 46 weeks at 35 hours a week, you have 1,610 available hours. At a planning assumption of 65% billable capacity, that is 1,046.5 billable hours.

That 65% is an example, not an industry target. Compare the assumption with your own time records, including non-billable work and quiet weeks. Avoid subtracting administration twice: either subtract those hours directly or include them in the non-billable share.

For a simpler rate example, suppose you expect to bill 1,000 hours a year. The break-even rate is $80,000 ÷ 1,000 = $80 per hour.

Margin and markup give different prices

Hourly rate = annual costs ÷ annual billable hours ÷ (1 − profit margin)

Enter a 20% margin as 0.20. In the example, $80 ÷ 0.80 = $100 per hour. At 1,000 billed hours, revenue is $100,000 and the $20,000 left above the cost base is 20% of revenue. This planning profit is before any taxes or costs you have not included.

Cost per billable hour

$80

Target margin

20%

Planning rate

$100

Adding 20% to the $80 cost gives $96. That is a 20% markup, but the $16 profit is only 16.67% of the $96 selling price. Use the definition you intend. A zero-hour forecast or a 100% margin cannot produce a meaningful rate with this formula.

Test a quieter year as well: the same $80,000 cost base and 20% margin require $125 per hour if only 800 hours are billed. A higher price alone does not guarantee demand or collection. Revisit the assumptions as your actual work and payments change.

Agree the price, then keep the history

The calculation is a cost-based baseline, not a market valuation. Agree the rate and scope with the client before work starts. A fixed-fee project or retainer needs its own allowance for delivery risk and the work included.

In BillGrid, hourly entries save the applicable rate when the time is logged. Changing a project default later does not rewrite earlier entries. Review saved rates before invoicing, especially after a price change or a time import. See how billable hours and saved rates work in BillGrid.