Effective Hourly Rate
It is what you actually earn per hour after counting sales calls, admin, and scope creep — not just your posted billable rate.
Formal definition
Effective hourly rate equals total revenue divided by total hours worked, including non-billable time.
Why it matters
Agencies often quote
Where you see it
- Freelancer rate calculators
- Agency profitability reviews
- Consulting partnership meetings
- Side-hustle finance blogs
- MBA small-business cases
Worked example
- Annual revenue:
- Total hours worked: 1,200.
- Effective rate =
- Interpretation: Every hour averages
How Business metrics calculates it
Revenue ÷ Total hours worked.
Where people fool themselves
Effective rate on billable hours only is a quote card. Effective rate on all hours is whether the business works. You need both; we compute the all-hours version when you enter hours worked.
Run it on your own numbers: the Freelance & Agency calculator.