How this calculator works
A consultant can only charge for days actually worked for clients. Start with the weekdays in the year, then subtract holidays and vacation, sick days and the marketing, admin and unbillable days every practice needs. Multiply the remaining days by working hours to get billable hours. The revenue you must earn is your operating costs plus the income you want before tax. Dividing that revenue by billable days gives the day rate; dividing by billable hours gives the hourly rate. The result is a break-even floor, not a ceiling: it does not cover profit for reinvestment or gaps between contracts.
Formula
Billable days = weekdays - holidays and vacation - sick days - non-billable days. Billable hours = billable days × hours per day. Revenue needed = annual operating costs + target income. Daily rate = revenue needed / billable days. Hourly rate = revenue needed / billable hours.
Worked example
With 260 weekdays, 15 holidays and vacation days, 5 sick days and 24 non-billable days, 216 days are billable. At eight hours a day that is 1,728 billable hours. Costs of $25,000 plus a $90,000 income target require $115,000, giving a day rate of $532.41 and an hourly rate of $66.55.
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Frequently asked questions
Should the target income be before or after tax?
Enter the pre-tax income you want to take out, because the rate must generate that amount before personal tax. Include contributions you make as an owner, such as pension savings, in the target if they are not in operating costs.
Why is the hourly rate not the day rate divided by eight?
It is, when you work the same eight hours every billable day. If you enter a different working day, the two rates stay consistent with the hours you actually plan to bill.
Is this the rate I should quote?
Use it as the floor. Market rates, the value you deliver and the risk in each engagement should push the quote above break-even. Discounting below this rate means your costs and income target are not covered.