An hourly rate can look generous until you compare it with the hours that actually produce invoices. Answering enquiries, keeping records and preparing proposals may all be necessary work, but they do not automatically become billable time. A practical rate baseline therefore needs two separate estimates: the annual amount the business must generate under your model, and the annual hours you can realistically charge to clients. Dividing by every working hour can make a plan look affordable while leaving part of the working year unfunded.
Define the annual requirement first
Start with an annual pay target and the business overhead you expect that work to support. Keep the period consistent: do not add a monthly software bill to an annual insurance amount without converting one of them. Avoid counting the same cost both inside overhead and again as a project expense. The Australian Government's pricing guidance explains that hourly costing needs to account for the costs of operating the business. The Workday Kit model is a deliberately narrower baseline, not a complete personal tax or employment-cost calculation.
In this invented example, annual pay is 48,000 and annual overhead is 12,000 in the same currency. The requirement is therefore 60,000 before additional items you have not entered. Think of that figure as a transparent input rather than a recommended income. If you need to account for pension contributions, tax, financing or a reserve, identify how they belong in your own plan and check the relevant local treatment. The calculator does not infer them from your location.
Use working weeks to represent time away
Choose how many weeks you intend to work, allowing for your actual plans rather than assuming all calendar weeks are productive. Then enter working hours per week. Here, 48 weeks at 35 hours gives 1,680 working hours. That number includes both billable and non-billable work. Be careful not to subtract the same leave twice: once by reducing working weeks, and again by including it in a billable-share estimate that already assumes an entire calendar year.
Next estimate the share of working time that will be billed. At 60%, the example has 1,008 annual billable hours. The planning rate is 60,000 divided by 1,008, approximately 59.52 per billable hour. A choice to use 60 as a convenient project rate is a separate decision. It is not a guarantee that clients will accept it, and it is not an automatic recommendation to round every calculated rate upward. Keep the unrounded result available for checking the calculation.
Change capacity before debating the last decimal
The billable share often matters much more than small rounding differences. With the same 1,680 working hours, a 50% billable share gives 840 chargeable hours and a baseline of about 71.43. At 70%, the denominator becomes 1,176 and the baseline falls to about 51.02. These are alternative scenarios, not evidence that one utilization level is typical. The comparison shows how strongly the proposed plan depends on time that can actually be sold.
Ask what would need to be true for the higher share to happen. You might need fewer proposal rounds, repeat work or less administration, but none of those changes should be assumed without evidence. Conversely, a new service may require time for preparation and customer conversations. Record the reason for your chosen share. The objective is to expose the assumption, not to choose whichever percentage produces a rate that looks easiest to sell.
Compare the model with work records
After a useful observation period, review dated records. Separate client delivery, business development, administration and time away according to a classification you can maintain consistently. The Project timesheet summary can total manual work entries by project and person, but it does not decide whether an entry is contractually billable. Its amount totals multiply entered hours by entered rates; they are not proof of invoicing, collection or permission to charge a client.
If you record both billed and unbilled work, make those distinctions explicit in your own project naming or source records. Avoid treating a selected sample of busy weeks as a forecast for the entire year. Look for gaps between estimates and actual practice: recurring tasks omitted from quotes, uncharged revisions or unused capacity. Any revised billable-share assumption should follow that evidence. The tool will calculate a new baseline, but it cannot explain a business change on its own.
Move from a baseline to a clear engagement
An internal hourly baseline and a customer-facing price answer different questions. You may choose a fixed project price, a day rate or an hourly arrangement. The Australian Government's contractor guidance distinguishes fee structures and the need to document payment details. That material is jurisdiction-specific background; it is not a substitute for checking the agreement governing your own work. A calculated baseline does not create a contract or define what counts as an authorized variation.
Before quoting, specify the deliverables, the included review process and who approves additional work. Use Project quote breakdown to estimate effort for that scope, and record expenses separately from labor where appropriate. Revisit the annual model when your costs or working pattern materially change. The result is most useful as a repeatable planning check: a stated requirement, an honest capacity estimate and a visible gap between the two, rather than an unexplained hourly number copied from someone else's business.