Glossary
Hourly rate
Also called: billing rate · bill rate
An hourly rate is the price charged for one billable hour of work. A sustainable rate is derived from the income you need, divided by the billable hours you will realistically sell, with overhead costs, taxes, and unpaid time off added on top.
Last updated October 13, 2026
The bottom-up formula
Start with the take-home income you need for the year. Add business overhead (software, insurance, equipment, accounting) and a reserve for tax. Divide by the billable hours you will actually sell — working weeks minus holidays and sick days, times billable hours per week at a realistic utilization. The result is the minimum rate; market positioning sets how far above it you can go.
Why most first rates are too low
The common mistake is dividing a salary by 2,080 hours, as if every working hour were billable. Nobody bills 40 hours a week for 52 weeks. A more realistic 1,300–1,500 billable hours a year raises the required rate by 40–60% compared with the naive calculation.
Rates per project, not per person
Many professionals keep different rates for different clients or kinds of work: a retainer rate, a rush rate, a reduced non-profit rate. Billing tools handle this by setting the rate on the project, so each time entry is priced at the right rate automatically.
Worked example
Needed income $80,000 + overhead $12,000 + 25% tax reserve ≈ $115,000. Billable hours: 46 weeks × 28 hours = 1,288. Minimum rate ≈ $89/hour.
In Hoursmith
Hourly projects in Hoursmith carry their own rate, so tracked time is priced automatically when it reaches the invoice builder. Fixed-fee and internal projects work alongside hourly ones.