A client rate is not an employee wage
The value of an hour for an independent worker is revenue required per paid hour, not an employee wage converted to an hour. Administration, sales calls, revision, training, and gaps between assignments consume capacity even when they cannot be invoiced. The utilization field makes that lost capacity explicit.
Turning available time into billable capacity
Paid hours per week equal productive hours × utilization ÷ 100. Paid hours per year equal that figure × working weeks. Required hourly revenue = (income target + overhead) ÷ paid hours per year. This treats the income target as money available after overhead but before personal tax; add a tax reserve to the target if needed.
The revenue floor for 1,035 paid hours
Thirty productive hours at 75% utilization yield 22.5 paid hours each week. Across 46 weeks that is 1,035 paid hours. Income of $80,000 plus $12,000 overhead needs $92,000 of revenue. $92,000 ÷ 1,035 equals $88.89. Charging $75 instead would collect $77,625 if every planned paid hour sold.
Pricing work when utilization changes
Use it to set a minimum hourly rate, price a fixed project by expected hours, or decide whether a retainer covers its meetings and administration. Test lower utilization before accepting a rate based on an unusually busy month.
Business costs outside the rate model
Taxes, health insurance, pension deposits, unpaid invoices, discounts, VAT or sales tax, credit-card fees, and profit after tax are not calculated unless included in the target or overhead. The result is a capacity model, not a market-rate survey.
Hours and percentages that create false confidence
Do not use forty total work hours as forty paid hours. Do not treat a 75% utilization rate as 0.75 in the field. If an expense is reimbursed separately, excluding it from overhead may be appropriate; if it comes from your invoice, include it once.
Why this is not a salary conversion
This page sets a required client-hour revenue floor. A salary-to-hourly converter divides an existing employee salary by paid employment hours and does not account for unsold time or business overhead.
Quote from capacity, then audit capacity
The default inputs create 1,035 billable hours: 30 productive hours times 75% utilization times 46 weeks. Dividing $92,000 of income target and overhead by that capacity produces $88.89 per paid hour. A six-hour fixed-price assignment therefore needs $533.34 before scope risk, payment fees, tax, or unpaid kickoff time; two unbilled delivery hours mean the job consumes eight working hours. Utilization is not a productivity score. Prospecting, proposals, administration, training, support, and gaps between contracts can lower it. At 60% utilization the same annual requirement needs $111.11 per billable hour. Keep revenue, personal tax, sales tax, and reimbursed expenses on their proper sides of the model, and compare quarterly collections, paid hours, non-billable hours, and overhead with the assumption. If only 900 hours sell, $92,000 requires $102.22 per paid hour. Retainers, commissions, and value-priced work need additional measures; this is a self-employed capacity test, not an employee wage conversion.
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