Trade office
Hourly charge-out rates: why billable capacity changes the calculation
An employee’s hourly wage is not automatically the price of an hour sold to a customer. A business carries other costs and cannot bill every available hour. A meaningful calculation therefore needs costs and billable capacity to cover the same period.
Choose the denominator deliberately
Start with a realistic estimate of hours you can actually sell. Leave, internal administration and other non-billable work affect capacity. Agree with your business adviser which costs belong in the calculation and how activities are allocated. The linked Dortmund Chamber of Crafts guide explains background principles. Another company’s market price does not replace examining your own situation.
An example, not a pricing recommendation
Suppose a simplified cost block of €60,000 is to be covered by 1,200 billable hours. That gives €50 per hour for that cost block. If only 1,000 hours are realistic, the figure becomes €60. This example is not a complete business plan or a recommendation for your selling price. It simply shows how an optimistic assumption changes the result.
Update assumptions using real records
Regularly compare assumed capacity with recorded and allocated hours. If material trips or rework grow, the wage assumption may not be the problem; the workflow may need attention. Update the plan with a reason and identify the period considered. A quote also needs its particular risks, scope and your pricing decision. Keep internal cost and offered price visibly separate.
Your business checklist
- Use the same period for costs and capacity.
- Estimate billable hours realistically rather than optimistically.
- Review assumptions with your business adviser.
- Do not confuse internal cost with selling price.