Example
40 hours a week, 46 weeks worked, 30% of the time non-billable. 1,288 billable hours a year, so $90,000 of income needs $69.88 an hour, not $43.27.
What it means in practice
Billable hours exclude holiday and sick days, and they exclude everything you do that is real work but not chargeable: quoting jobs you do not win, invoicing, chasing payment, sourcing and collecting materials, traveling between jobs, and your own bookkeeping.
The gap is larger than most people expect. A 40 hour week over 46 working weeks is 1,840 hours, and at a realistic 30% non-billable that leaves about 1,288.
It matters because it is the denominator when you set a rate. Divide the income you need by 2,080 and you will finish the year short having worked exactly as hard as you planned.
The mistake to avoid
Counting travel between jobs as billable when you do not actually charge for it. If nobody pays for it, it is not billable, whatever it feels like.
Work it out
Utilization, and what it is really measuring
Utilization is billable hours as a share of hours available. Agencies quote seventy-five percent for staff who neither sell nor invoice. A business owner doing their own quoting, chasing and bookkeeping will rarely clear sixty-five, and a figure above that usually means something is not being counted rather than that the week went well.
A second example
A part-time bookkeeper works 24 hours a week, 44 weeks a year, and loses 20% to admin and client onboarding. That is 845 billable hours. To take home $40,000 the rate has to be $47.34, not the $31.85 that a 1,256-hour year would suggest.
Related terms
- Business daysWorking days, Monday to Friday, used in contracts and terms where weekends do not count.
- GSTGoods and services tax: a tax charged at each stage of supply, with businesses reclaiming what they paid, so it lands on the final buyer.