Reference
What the numbers actually mean, how to calculate them, and where most people get them wrong.
If you sell people's time and expertise, you're running on a few dozen numbers whether you look at them or not. Most owners look at a few, calculate them differently every quarter, and compare them to a benchmark they found on the internet somewhere. Then they wonder why the business feels fine and the bank account doesn't.
Every term below has four parts: the formula, what it actually tells you, the way people get it wrong, and a range. The ranges are from agencies and consultancies I've run or worked inside. They're a starting point. A law firm and a design studio should not have the same billability target, and if someone tells you otherwise they're selling software.
Some businesses swap the words utilization and billability, or call realization something else. Fine. Argue about the formula and the denominator, not the label.
Read this first
Most metrics on this page are only as honest as the inputs behind them. Most service businesses don't have those inputs, which is why their metrics are vibes with decimals. You need four things. The first two are non-negotiable.
Not just the billers, and not just billable time. All of it, logged the day it happens, against a project or an internal code. It's the numerator of half this page and the denominator of the other half. Time logged on Friday for the whole week from memory is fiction. Senior people are pretty bad at time tracking. The owner also usually thinks they don't have to do it at all. Why keep timesheets?
What an hour of each person actually costs: salary, taxes, and benefits divided by their available hours. Leave overhead out; the multiplier covers it. Nobody wants to build this spreadsheet because it means looking at everyone's pay side by side. Build it anyway. Without it, “profitable project” is a feeling.
Every invoice tied to the project it paid for, so hours and dollars meet in the same row. If the books say “Client X, $18,000” and time tracking says “Client X website, 140 hours” and nobody can confirm those are the same thing, you can't calculate realization, and that's the one that explains where the money went.
Every project priced with hours by role behind the number, kept, and compared to actuals when it's over. A fee with no hours behind it can't be measured against anything.
Have all four? Every formula below works. Have two? You can do the top half. Have none? Start with time tracking on Monday and come back in a quarter. Why keep timesheets? This page will still be here. None of this needs a particular tool. A spreadsheet with discipline beats software without it.
Or have me set it up →Seven core metrics are marked. If you track nothing else, track those.
These are operating definitions, not accounting standards. Your books may recognize revenue differently. Use these to run the business and the books to file the taxes, and reconcile before you compare them.
Do You Even Have Time
The hours a person can actually work.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
You pay a full-timer for about . You get about 1,800, because they have the nerve to take the vacation you gave them and to get sick in February like everyone else. That 13 percent gap is the most common reason two businesses report different numbers for identical work.
Range1,750 to 1,850 per full-time person, depending on how generous your time-off policy is and how honest your sick-day reporting is.
Where the inputs come fromPaid hours from payroll. Time off from wherever leave is actually recorded, not from the policy document.
Capacity is the ceiling.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Recalculate monthly, not once in January.
Add up everyone's available hours and that's the most work the business can do this month, before anyone gets sick, quits, or spends a week on a pitch. Ten people at 1,800 hours a year is 18,000 hours, about 1,500 a month. Multiply that by your effective rate and you have this year's revenue at this year's habits. Multiply it by your standard rate and your target billability instead and you have the ceiling. Everything past that second number is wishing.
RangeNot a benchmark. But most businesses overstate it by 10 to 20 percent because they count the open role they haven't filled and forget the Tuesday everyone spent in the all-hands.
Are People Working, and Does It Count
Everyone's in.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
The project manager, the account lead, the owner who spent Tuesday in a client's discovery workshop and Wednesday explaining Tuesday to the team. It's an organizational health number: is this business built to deliver work, or is it built to have meetings about delivering work. A twelve-person shop where nine deliver, two manage, and one sells tops out around 75 percent if the managers and the seller never touch a client project, and that's before anyone takes a vacation. The billable-only version of this number is billability, next.
Range80 percent is where I set the bar. Under 80 for a quarter, the business is spending too much of itself on itself. Well over 100, people are logging more hours than they have, which is either a burnout problem or a spreadsheet problem, and both are bad, and only one is fixable with a formula.
Where the inputs come fromTime tracking, with every person logging and every entry coded client or internal. If the owner and the account lead don't log, the number is wrong before you start.
Of the people you sell, how much of their time got sold.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Only the billers are in the denominator. This is delivery efficiency, and it's the number your project managers already feel in their stomachs on Friday. The worked example, because I will keep saying this until it sticks: someone bills 1,500 hours in a year. Against , that's 72 percent. Against 1,800 available hours, it's 83 percent. Same person. Same work. Eleven points. Neither is wrong. Reporting one without saying which one is how you end up arguing with a benchmark.
Range80 percent for delivery roles. Under 80 for a quarter is a staffing or pipeline problem. Sustained over 90 means somebody isn't logging their sick days, nobody's training, and one of your good people is updating their résumé right now.
Where the inputs come fromTime tracking filtered to the people whose job is to bill. Decide who's on that list and write it down; the number moves every time the list does.
The number of billable hours you expect from each person in a year.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Set per role. Roughly 80–85% for junior and mid-level delivery, 65–75% for seniors, 30–50% for managers and sellers, near zero for the owner past about 15 people.
A senior on 1,800 available hours with a 70 percent target owes the business about 1,260 billable hours a year, which is 105 a month. Write that number down in January and by April you'll know whether the year is on track. It's the planning step almost everyone skips, which is how a business gets to October and discovers, with genuine surprise, that the year is not going to add up.
RangeRole-based. If you own a 25-person shop and you're 70 percent billable, that's not a badge. That's a shop with no one running it.
How much of the project is coordination instead of production.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Estimate it as a line, not a leftover: a share of total project hours, computed at estimate time, sitting right there in the spreadsheet where the client can see it. On a 400-hour project that's 40 to 80 hours of someone keeping it on the rails. It's the line that gets deleted to make the number work, and then the project runs over by exactly that amount, and everyone is astonished.
Range10 to 20 percent of total project hours. Higher with lots of stakeholders or a client who needs a lot of hand-holding. Under 10 percent, check whose evenings it's coming out of.
Where the inputs come fromA project-management line in every estimate, and a project-management time code so it lands there when logged.
What You Charge vs. What You Get
Everything that isn't delivering client work, as a percentage of the labor that is.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Rent, software, admin, sales, management, the owner's non-billable time, the office plant service you forgot you were paying for. $900,000 of everything else is an overhead rate of 100 percent. It's most of what the multiplier between cost rate and standard rate has to cover, and it grows every year nobody looks at it, like a hedge.
Range80 to 120 percent of direct labor for agencies and consultancies. Over 150 percent, you've built a business that's mostly running itself, with a small delivery team attached to pay for it.
Where the inputs come fromThe profit-and-loss statement. Everything that isn't delivery labor or a direct project expense is overhead, including the owner's non-billable time.
What an hour of someone costs you, and what you charge for it.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Measured as Standard rate ÷ Cost rate
Cost rate is what an hour of someone costs you: salary, taxes, and benefits, divided by the hours they're available. Not their share of the rent. That's what the multiplier is for. Standard rate is what you charge for that hour. A designer who costs $60 an hour, at a multiplier of three, is a $180 line on the rate card. The multiplier between the two numbers is the entire business model.
Range2.5 to 3.5 times cost rate for agencies and consultancies. Under 2.5 and there's no room for overhead and the billability you're not going to hit. Over 3.5 is either a premium you've earned or a rate card that lives in a drawer.
Where the inputs come fromPayroll for pay and employer taxes, and the benefits bill. Leave overhead out; it shows up in the multiplier, not the cost rate.
The one rate a project effectively charged once you mash senior and junior time together.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Never quote a blend without knowing the mix behind it.
Handy for estimating and for comparing projects. Dangerous for pricing, because it hides which people are subsidizing which. Forty hours of a $250 strategist and 160 hours of a $120 coordinator blend to $146 an hour. Quote $146, then staff it the other way around, and the project earns $146 an hour for time that was worth $198.
RangeNot a benchmark. Know yours per service line, and know which projects drift above it, because those are the ones where your best people are being sold at a discount.
What you actually made per hour, after every discount, giveback, overrun, and "let's just include that."
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Measured as Effective rate ÷ Standard rate
Calculate it per project, per client, and for the whole business. Some shops divide by billable hours only. Either works; say which one you did. $18,000 invoiced on a project that took 140 hours is $129 an hour, and no rate card gets a vote. It's the most honest number on this page, because it doesn't care what you meant to charge. It's also the other three rate cards in one line: effective rate is standard rate times billability times realization, as long as all three are run on the same people for the same period. If the number's low, one of those three is why, and the card for each will tell you which.
RangeAt least 75 to 80 percent of standard rate. If the card says $150 and you're clearing $95, you're not a $150 shop. You're a $95 shop with a nice card. Fix the estimating or fix the card. Just stop telling yourself the first number.
How much of your billable work became invoices.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
You logged 100 billable hours at $150 and invoiced $12,000. Realization is 80 percent. The other $3,000 got given back, discounted, or swallowed by a fixed fee that turned out to be a fixed wish. This is the number that explains the busy team that loses money. Billability says people worked. Realization says whether it counted. The gap is usually givebacks.
Range85 to 95 percent. Under 85 means estimates, scope discipline, or rate discipline has a problem, and it is nearly always estimates. The fix for that one is Project Definition Before Discovery.
A retainer that bills by the hour up to a limit and then stops.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Every capped retainer needs a written answer to "what happens when the cap is hit in week two."
The work does not stop. Only the billing stops. This is how agencies manufacture givebacks at scale, and it's popular in support and maintenance work because it feels fair to everyone right up until month three, when you hit the cap on the ninth. If your retainer doesn't say what happens next, You Should Be Intentionally Vague in Your Contracts is about writing the sentence that does.
Time you logged, could have charged for, and didn't.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
The project ran over. The client pushed back. The retainer hit its cap. Someone felt guilty. Some businesses call these write-downs or write-offs. Giveback is the better word because it's the true one: you gave the client hours. On purpose. It was nice of you.
Two things turn givebacks from a wound into information. Value them at standard rate, not cost, because at cost they look half as bad as they are and you'll under-react. And put a name on every one. A giveback with an approver is a decision. A giveback without one is a leak, and leaks don't show up on the profit-and-loss statement, they show up in the effective rate, eight months later, as a mystery. Every giveback is a point off realization.
RangeUnder 10 percent of billable hours. Over 15 percent, the estimates are wrong, the scope isn't managed, or someone is giving away work to avoid a conversation they'd rather have at any other time than now.
Where the inputs come fromYour time-tracking tool's write-off or non-billable adjustment report, if it has one. If it doesn't, compare billable hours logged per project against hours on the invoice. The difference is the giveback.
Where the Money Actually Goes
Money that walks through your business without stopping to add margin.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Strip it out before you calculate anything per person or per hour.
The subcontractor you bill at cost plus 10 percent. The software license you resell. The media spend. Bill $400,000 of media at cost plus 5 percent and you've added $400,000 of revenue and $20,000 of margin. It's real revenue, and it's fake productivity, and it looks great on a slide right up until someone asks about margin. For every margin and rate on this page, strip it from both sides: it's not in revenue and it's not in direct project cost. The markup, if there is one, is revenue.
RangeTrack it separately and report the headline numbers with and without it. If pass-through is over 25 percent of revenue, you're partly a reseller, and there's nothing wrong with that as long as you know it.
The margin the project would earn if everything went to plan.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
It's designed into the estimate before anyone signs, by pricing up from cost rate instead of down from the client's budget. A $60,000 fee against 400 hours at an average $70 cost rate is $28,000 of cost and a 53 percent margin at estimate. When the project's over, project margin tells you whether that number was a plan or a guess.
Range50 percent or better at estimate for agencies and consultancies, because overhead is going to take 20 to 30 points, and reality is going to take a few more, and reality doesn't ask first. Building this number in before the proposal goes out is most of what Project Definition & Scoping is.
Where the inputs come fromThe estimate itself. Hours by role times each role's cost rate is the estimated cost. If the estimate has no hours in it, there is no margin at estimate.
What the project actually earned after direct labor at cost, subcontractors, and expenses you mark up.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Set it next to margin at estimate and you know instantly whether the estimate lied or the delivery did. The $60,000 project that was estimated at 53 percent came in at 520 hours instead of 400. That's $36,400 of cost and a 39 percent margin. The estimate was off by 120 hours, and now you know exactly which 120. For why those hours matter, read the case for keeping timesheets.
Range50 to 60 percent. Under 50, it was underpriced, underestimated, or overstaffed. Under 30, you would have made more money staying home.
Where the inputs come fromRevenue by project from the books, hours by project from time tracking at each person's cost rate, plus subcontractor invoices coded to the project. Pass-through billed at cost stays out.
Project margin for the whole business.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Cost of delivery is direct labor and direct expenses. Not rent. Not the salesperson. Not the four hours the owner spent on the proposal. $2 million in revenue against $900,000 of delivery cost is a 55 percent gross margin, and that 55 has to pay for all of overhead before any of it becomes profit.
Range50 to 60 percent. If gross margin is fine and net margin isn't, stop looking at the delivery team. The problem is overhead.
What's left after everything.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
It's the number the owner cares about and the least useful one for figuring out what to fix, because by the time it's wrong, the numbers above it on this page have been wrong for months and nobody was looking. $2 million in revenue, $900,000 of delivery cost, $900,000 of overhead: $200,000 is left, which is 10 percent. Healthy, barely, and every one of those three numbers had a say in it.
Range10 to 20 percent is a healthy, sustainable service business. Over 20 is excellent, and usually means a specialty you can charge for or operations tighter than most. Under 10, you've bought yourself a job, and it's not a great one.
Operating profit with the financing and accounting noise stripped out, so a business with a loan and old equipment can be compared to one without.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Measured as a share of revenue
It's what buyers, lenders, and boards look at, which is why owners end up reporting it whether or not it helps them run anything. Take the $200,000 of net profit from the net margin example, add back $15,000 of loan interest, $60,000 of taxes, and $25,000 of depreciation on the equipment, and EBITDA is $300,000, or 15 percent. Same business, better-looking number, and both are true.
RangeRoughly the same as net margin for a small service business with no debt and no equipment to speak of. Carry a loan or a studio full of gear and the two numbers drift apart, and buyers will ask about the gap. 10 to 20 percent of revenue.
Revenue divided by people. The bluntest number on the page, and useful for that reason.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Hard to game, easy to compare, and it moves when something real happens. The $2 million business with twelve people is at $167,000 a head. The same $2 million with nine people is $222,000, and that's a very different shop, even though the revenue line looks identical.
Range$150,000 to $250,000 per person for agencies and consultancies in the United States, in my experience. Under $150,000, you're underpriced or overstaffed. Over $250,000, you're either senior-heavy or somebody left the media spend in.
Getting Paid Is Also a Skill
How and when you send invoices. It's the difference between cash that arrives steadily as the work gets done and feast-or-famine, where you're flush in March and sweating payroll in May.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Level monthly on anything over three months. Milestone billing only when the client insists, and then with a deposit that covers the gap.
Milestone billing invoices when phases finish. Monthly billing invoices for the month's work. Level billing takes a fixed fee, cuts it into equal slices, and sends one on the first of every month regardless of what got done. A $120,000 project billed half at kickoff and half at launch puts $60,000 in one quarter and $60,000 in another, with nothing in between. The same project on level monthly billing over six months is $20,000 a month, every month. On a fixed-fee job over a few months, a reservation payment up front and equal invoices after smooths your cash and is easier on the client's accounts payable. I've never once had a client push back on it. Their bookkeeper usually sends a thank-you.
Hours you've spent that haven't become an invoice.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Measured in billing cycles
On a monthly cycle some is normal. A nine-person delivery team at 120 billable hours a month and $150 an hour produces about $160,000 of work in progress every month, and on the first of the next month that should be on invoices, not in a queue. When it grows month over month, something is wrong: a client is disputing, a project manager isn't closing out milestones, or the work is over scope and nobody wants to be the one to bill it.
RangeNo more than one billing cycle's worth. If you bill monthly and work in progress is bigger than a month of delivery, someone is sitting on something.
Where the inputs come fromHours logged to billable work that aren't on an invoice yet, times standard rate. Most time-tracking tools have an "unbilled" view; if yours doesn't, it's billable hours logged minus hours invoiced, by project.
Roughly how long invoices sit before they're paid.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Measured in days
You don't need the accountants' term. You need the number, and you need it to go down. A $2 million business bills about $5,500 a day, so every day you shave off this number is $5,500 you stop floating for the client. Send the invoice the day the milestone closes, not at month end. Follow up on day 31, not day 61. Take a deposit. The follow-up workflow that makes those three things happen without you remembering is Payment Processing.
Range30 to 45 days for agencies. Over 45, you're financing the client's cash flow. Over 90, you're a bank, and a bad one, because you're not charging interest.
Where the inputs come fromThe receivables aging report in your accounting system, and revenue for the same period.
How much of the first phase is paid before anyone starts.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
A deposit is cash flow, it's a commitment signal, and it's leverage if the relationship goes sideways in week two, which happens more than anyone admits. On a $60,000 project with a $20,000 first phase, a $10,000 reservation payment is 50 percent coverage. If the client goes quiet in week three, you've been paid for most of what you did.
Range25 to 50 percent of the first phase, or of the whole thing for small engagements. A non-refundable reservation payment before kickoff is in every agreement I write, and I don't apologize for it, and nobody's ever asked me to.
Whether each project is earning what you said it would, when you said it would.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Measured per project, monthly and year to date
Monthly, it's the earliest warning you get that a project is slipping or that the forecast was written by an optimist. A project forecast at $20,000 a month that invoices $14,000 in April is 30 percent under. If May's forecast still says $20,000, the forecast is the only one who hasn't heard.
RangeWithin 10 percent of forecast for the month. Beyond that, either the forecast or the project needs a conversation, and it needs it this week, not at the quarterly.
Where the inputs come fromThe project forecast (what each project was expected to invoice, by month) against invoices actually sent. If there is no monthly project forecast, that's the first thing to build.
The Next Six Months
How much potential work is in play relative to what you need to close.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Weight every opportunity by its real probability, which is lower than the salesperson's number and higher than the pessimist's. A quarter that needs $500,000 of new work should have $1 million to $1.5 million of weighted pipeline behind it. Ten $200,000 opportunities at 50 percent is $1 million and a good quarter; the same ten at 20 percent is $400,000 and a problem you'll meet in about six weeks. The honest probability for a stage is your win rate at that stage, not a feeling. Some sales teams run coverage unweighted, which is how a pipeline gets to 4× and the quarter still comes up short. If you compare yours to anyone else's, ask which one they mean.
Range2 to 3 times the target, weighted. Under that, two losses leave a hole. Well over it, someone is weighting with their heart.
Where the inputs come fromThe customer relationship management system, the CRM, with a probability on every open opportunity. No probability, no weighting, no coverage number.
Work you've signed and haven't delivered.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Measured in months of delivery
It's the opposite of pipeline: certain money, uncertain timing. It tells you how many months you could go without selling a thing. The $2 million business delivers about $167,000 a month, so $500,000 of signed, undelivered work is three months of backlog, which is comfortable. $1.2 million is seven months, which is either a hiring plan or a pricing problem.
RangeTwo to four months is comfortable. Over four, either hire or admit you're underpriced, because your clients have already figured out which.
Where the inputs come fromSigned agreements minus the value of work delivered. Invoicing doesn't reduce it; delivery does. It's a list, not a report; keep it current.
How often you close what you pitch.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Calculate it by count and by value
Calculate it by count and by value, because winning eight of ten small ones and losing both big ones is a very different business than the other way around. Eight wins out of ten proposals is 80 percent by count. If the two you lost were worth more than the eight you won, it's under 50 percent by value, and the second number is the one that pays rent.
Range25 to 50 percent by count for competitive proposals. Referral businesses run higher. Above 50, raise your rates and see what happens. Something will. The conversation that gets you a number worth losing on is So What's Your Budget?.
How much of the business runs on contracts that renew versus projects that end.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
More recurring is more predictable, which is why every three-year plan has it growing. The $2 million business with $800,000 in retainers and support is at 40 percent. It's also the revenue most exposed right now, because support and maintenance is exactly the work clients are starting to hand to software instead of people, and most of it sits in capped retainers, where the givebacks live.
Range30 to 50 percent for most agencies and consultancies. Over 50 and you're closer to a managed services business, which is fine, but staff it and price it like one.
Whether the clients you already have spent more or less than they did last year.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Over 100 percent, they grew. Under, they shrank, left, or both. Last year's clients paid you $1.6 million. This year the same clients paid $1.4 million. That's 88 percent, and the $200,000 you sold to new clients this year didn't grow the business, it replaced what walked out. It beats client count as a health number, because a client who stays and spends half as much has not been retained in any way your landlord cares about.
Range90 to 110 percent for agencies. Over 110 is a growing book. Under 90, you're on a treadmill, replacing revenue instead of adding it, and the treadmill is speeding up.
Where the inputs come fromInvoices by client for both years. Start from last year's client list. Add up what they paid last year; add up what the same list paid this year, zeros included. New clients this year stay out of both.
How dependent you are on one relationship.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
It's the number every owner feels in their gut and never writes down, because writing it down makes it real. In the $2 million business, a $600,000 client is 30 percent. Losing them takes the company from healthy to a hiring freeze in one email. The fix isn't firing the client. It's growing the others until that account is a quarter of the book instead of a third.
RangeNo single client over 25 percent. Over 35, you don't have a client. You have a boss who can fire you without a meeting.
Where the inputs come fromInvoices by client for the period, sorted largest first. The number is the top line divided by the total.
The Weekly Look in the Mirror
The weekly instrument panel.
Hours the person is paid for in the period. A full-timer is about 2,080 a year.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
A common U.S. baseline: 40 hours a week multiplied by 52 weeks. If the standard workweek is different, use that schedule instead.
Holidays, vacation, sick days, and any other paid leave actually taken, not the policy allowance.
Paid hours minus time off. Defined fully under Available hours.
The billability percentage you've decided that role should hit. It's a choice, not a measurement; the rule below is a starting point.
Every hour logged to a client project code, billable or not, by anyone in the company.
Hours logged against client work you can charge for, before any write-down. Not the same as hours invoiced.
Hours logged as billable and then not invoiced. Written down before the invoice, discounted off it, absorbed by a retainer cap, or swallowed when a fixed fee came in under the hours.
Hours logged to coordinating a project rather than producing its deliverables.
Every hour logged to the project by anyone, including project management.
Fees invoiced for work, excluding pass-through unless stated.
Dollars on invoices sent for the work, after any discount, whether or not they've been paid yet.
All hours logged to the project or the business, billable and not.
The rate on your rate card for that role.
The ratio of standard rate to cost rate you're aiming for.
Salary plus employer taxes plus benefits, for the period. No overhead in it. The multiplier has to cover that, at the billability you actually hit, not the one you planned.
Every cost that isn't direct labor on client work or a direct project expense.
The pay, at cost, of people delivering client work, for the hours they spend on it.
Direct labor on the project at cost rate, plus subcontractors and expenses you mark up. Pass-through billed at cost is out of both the cost and the revenue.
Direct project cost, summed across every project in the period.
Everything on the profit-and-loss statement.
Revenue minus all costs, before the adjustments listed.
The number in the proposal.
Hours by role in the estimate, times each role's cost rate.
Fees invoiced for that project.
Fees for the year with partner, subcontractor, and third-party costs billed near cost removed.
People, weighted by their fraction of full time. Two half-timers are one.
Billable hours logged and not yet on an invoice, times standard rate.
Invoices sent and not yet paid.
Money in hand before work starts, not money promised.
The estimated cost of the first phase, at cost rate.
Invoices actually sent in the period.
What the project plan said would be invoiced in the period.
Each open opportunity's value times its realistic probability of closing, summed.
The revenue the plan needs in the period.
Signed fees minus the value of the work delivered so far, whether or not it's been invoiced. A deposit doesn't shrink backlog. Finishing the work does.
Revenue for the last twelve months, divided by twelve.
Proposals that turned into a signed agreement.
Every proposal you sent with a price on it, including the ones that went quiet.
Revenue from agreements that renew without a new proposal.
All fees invoiced in the period.
This year's invoices to every client on last year's list. A client who left counts as zero; don't drop them.
Everything last year's clients paid you last year. This is the whole cohort, not just the ones who came back.
This period's invoices to the one client who paid the most.
Paid hours minus time off. Defined fully under Available hours.
Fees invoiced for that project.
Five to fifteen measures. Same formula every week. Label goal and actual.
Businesses that run on a structured operating system usually have one. Businesses that don't should anyway. The framework doesn't matter. What matters is that the same numbers, calculated the same way, get looked at by the same people every week, until looking at them is boring, which is the point. If you're starting from nothing, start with the seven marked Core metric: billability, effective rate, project margin, net margin, days to get paid, pipeline coverage, and client concentration. They're the chain from hours to cash, plus the one risk that can break it. The margin numbers are monthly; the rest you can read every Monday. Add more as you find out which ones your business argues about.
RangeMore than fifteen and nobody reads it. Fewer than five and it's not a scorecard, it's a mood. Everything on this page is a candidate.
The chain
Utilization tells you whether the company is pointed at client work. Billability tells you whether the people you sell are getting sold. Realization tells you whether their hours became invoices, and givebacks tell you where the difference went. Effective rate tells you what the work actually earned. Margin at estimate says what the project was supposed to earn; project margin says what it did. Overhead tells you what it costs to keep the lights on around all of it. Net margin is what's left. Billing cadence decides whether that arrives smoothly or in lumps, and days to get paid decides when.
Most service businesses watch billability because it's easy and net margin because it's the bottom line. The numbers in between are where the money goes. Track them, use the same formula every month, label your denominators, and put the seven marked Core metric on a scorecard that someone actually opens.
If you'd rather have someone else find out where the money's going, that's Metrics & Reporting Review on the services page, and it's most of what the first 30 days of a fractional COO engagement look like.
Left out
Gross profit per person. It's revenue per person with pass-through removed, which is already the formula on card 20.
Cash runway. A startup number. A service business that needs to know how many months of cash it has left has a different problem than metrics.
Lifetime value. A subscription number. Project clients don't have lifetimes; they have projects and, if you're lucky, retainers. If half your revenue is retainers, you can calculate it, and revenue retention above is the version I'd trust first.
Net Promoter Score. It's a survey, not a metric, and every agency that runs one gets a nine from the client who's about to leave.
Valuation multiples. What a buyer pays for the business, not how the business runs. Different page, different audience, mostly different people.
If you think one belongs here, tell me which and why. The address is at the bottom.
Keep this nearby
Download the two-page cheat sheet, pin it where Monday starts, and use the same definitions every week.
Download the cheat sheetReviewed and updated September 27, 2026