Small-business owners need billable totals that cover capacity, costs, and client terms. Everhour turns approved work into invoice-ready records.
Track billable vs. non-billable time and see your real utilization rate and revenue potential in seconds.
Working hours in the period
Admin, meetings, internal work
Industry average is 75–80%
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A billable-hours calculation answers the practical question behind a client invoice: how much approved client work should be charged, at which rate, and with which reimbursable expenses. For a small-business owner, the answer is not only an invoice total. It also shows whether client work is covering the owner's available capacity, business overhead, and delivery cost.
The core output is a pre-tax billable amount in U.S. dollars. The United States has no federal VAT/GST or national sales-tax rate for billed professional time, so any tax input must be jurisdiction-specific when the service is taxable. State and local rules determine whether a service is taxed and at what rate.
The standard formula is billable hours × agreed bill rate, plus re-billable expenses when the client contract allows them. If a project uses more than one rate, calculate each rate group separately, then add the subtotals. Keep non-billable admin, sales, rework, and internal management time out of the invoice total unless the client agreement explicitly allows it.
For example, a small service business owner completes 38 approved implementation hours at $95 per hour and 6 advisory hours at $150 per hour. The labor total is $4,510. If the client agreement allows $275 in re-billable software and travel expenses, the pre-tax billable amount is $4,785.
Small-business owners often underprice because they divide annual income goals by total working hours instead of expected billable hours. In professional-services organizations with fewer than 10 employees, SPI reported 1,326 billable hours out of 2,041 total annual hours, about 65.0% utilization. SPI also states that healthier services organizations should try to attain at least 75% billable utilization, equal to 1,500 billable hours annually.
Use expected billable capacity as the denominator for pricing. The break-even hourly floor is variable cost per hour plus fixed costs divided by expected billable hours. SBA guidance also suggests adding about 10% to break-even analysis for miscellaneous expenses that cannot be predicted. SCORE advises small businesses to price from costs, profit, and competition, and warns that discount pricing is hard to sustain.
A one-off calculator is enough when you need a fast invoice check, a quote sanity check, or an implied hourly rate for a fixed-fee project. Fixed pricing works for standardized, clear-scope work, but unknown scope shifts delivery risk to the owner. In those cases, compare the fixed fee against expected billable hours before sending the quote.
A managed workflow becomes necessary when several people log time, tasks have different rates, expenses need approval, or invoice status must stay tied to the project. Everhour Billing & Invoicing converts tracked billable time and expenses into invoices, calculates invoice amounts from rates while excluding non-billable tasks, and exports invoices to QuickBooks Online, Xero, or FreshBooks.
This content is for general information only, may not be fully up to date, and is provided without any warranty or liability.
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Include approved client-facing work that the agreement allows you to charge. Exclude internal admin, sales calls, training, business development, and non-billable project work unless the client contract says those hours are billable. Track those excluded hours separately because they affect utilization and pricing even when they do not appear on the invoice.
Start with variable cost per hour, then add fixed costs divided by expected billable hours. If fixed costs are $45,000 and expected billable capacity is 1,500 hours, fixed overhead adds $30 per billable hour before profit. Add direct delivery cost, a profit margin, and a market check against competitors before finalizing the rate.
No. Owner time includes administration, selling, planning, and non-billable project work. SPI reported 716 annual non-billable hours for professional-services organizations with fewer than 10 employees. Senior consultants with substantial duties beyond billing can have utilization below 25%, so owner capacity should not be modeled like a full-time delivery employee.
Use billable-hour math to test the implied hourly rate. Divide the fixed fee by the expected billable hours, then compare that number with your break-even hourly floor and target margin. Fixed pricing fits standardized work with clear deliverables; avoid it when scope is uncertain because overruns reduce the effective hourly rate.
No. The United States has no federal VAT/GST or national sales-tax rate for billed professional time. Sales tax is state and local, and different services receive different treatment. For example, New Mexico gross receipts tax includes performing services in New Mexico, while Texas taxes only taxable services under its state and local rules.
Everhour Billing & Invoicing converts tracked billable time and expenses into client invoices, calculates invoice amounts from rates while excluding non-billable tasks, and keeps invoice status visible. Invoices can be exported to QuickBooks Online, Xero, or FreshBooks as drafts for accounting follow-through.
Track client work, keep non-billable tasks out of invoice totals, and send approved amounts into accounting. Everhour connects billable time to invoicing without rebuilding timesheets by hand.
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