Billable Hours Formula

 

About: The Billable Hours Formula

Job Monsta wants to introduce to The 'Billable Hours Formula' for Small Business and Income Tax purposes if your such an entity.

The gist of this particular formula is that it can work for your person without any employees other then yourself. so take a look at this formula below:

Desired annual salary

+ Annual fixed costs (or overhead)

+ Desired annual profit

 Divided By Annual billable hours

= Hourly rate

This formula helps bring together all of the hours and money your would like to bring in each year with the hours you plan to work. The end result is an hourly rate to be exact. The formula could also be adjusted based on the type of business that you run.

Here's the simple concepts behind this type of formula:

• Desired Salary: Just how much Revenue aka Money aka Income do you want to earn annually? Just put that salary here; your desired profit then comes later.

For example:

You want to make a $400 a year salary.

• Fixed Costs: What do you spend each year on rent, utilities, office equipment, PCs, etc...
• Desired Profit: A typical real profit goal here is or could even be at least 20% above salary or even below if your looking to make lesser then 20% and overhead fixed costs if you should have any.
• Billable Hours: The fewer Billable Hours  the lower ones hourly rate. Simply calculate the number of potential Billable Hours in a year for this part. There's 52 weeks in a year and also a 40-hr work week, thus there's 2080 Potential Billable Hours. Most of the Billable Hours would be 50%-80%. They say that below this would not be very profitable but that would depend on ones own situation and how many clients one just may have. But use this percentage or below this to help determine how many billable hours you should have each year to be exact we @ Job Monsta would say.

For example: Should 70% of ones time be Billable, you'll have at least 1,456 billable hours (20280 hours x 70%).

Then just add together the:

1. Desired Salary
2. Fixed Costs if none put 0 zero and finally
3. Desired Profit

Next divide this total by your billable hours and the end result is the hourly rate you can charge to cover fixed costs if you should have any and bring in both the desired salary and profit one is after.

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