.agency-hourly-rate-calculator {
font-family: sans-serif;
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max-width: 600px;
margin: 20px auto;
background-color: #f9f9f9;
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.agency-hourly-rate-calculator h2 {
text-align: center;
margin-bottom: 20px;
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.input-group {
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.input-group label {
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font-weight: bold;
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.input-group input[type="number"] {
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.agency-hourly-rate-calculator button {
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border-radius: 5px;
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.agency-hourly-rate-calculator button:hover {
background-color: #0056b3;
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.calculator-result {
margin-top: 20px;
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text-align: center;
font-size: 18px;
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min-height: 50px;
display: flex;
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}
function calculateHourlyRate() {
var annualRevenueTarget = parseFloat(document.getElementById("annualRevenueTarget").value);
var billableHoursPerEmployeePerYear = parseFloat(document.getElementById("billableHoursPerEmployeePerYear").value);
var numberOfEmployees = parseFloat(document.getElementById("numberOfEmployees").value);
var overheadPercentage = parseFloat(document.getElementById("overheadPercentage").value);
var profitMarginPercentage = parseFloat(document.getElementById("profitMarginPercentage").value);
var resultElement = document.getElementById("result");
resultElement.innerHTML = ""; // Clear previous results
if (isNaN(annualRevenueTarget) || isNaN(billableHoursPerEmployeePerYear) || isNaN(numberOfEmployees) || isNaN(overheadPercentage) || isNaN(profitMarginPercentage)) {
resultElement.innerHTML = "Please enter valid numbers for all fields.";
return;
}
if (annualRevenueTarget <= 0 || billableHoursPerEmployeePerYear <= 0 || numberOfEmployees <= 0 || overheadPercentage < 0 || profitMarginPercentage < 0) {
resultElement.innerHTML = "Please enter positive values for revenue, billable hours, and employees. Overhead and profit margin can be 0 or greater.";
return;
}
// Calculate total billable hours
var totalBillableHours = billableHoursPerEmployeePerYear * numberOfEmployees;
if (totalBillableHours === 0) {
resultElement.innerHTML = "Total billable hours cannot be zero. Please check employee count and billable hours per employee.";
return;
}
// Calculate overhead costs
var overheadCosts = annualRevenueTarget * (overheadPercentage / 100);
// Calculate total required revenue (including overhead and profit)
var profitAmount = annualRevenueTarget * (profitMarginPercentage / 100);
var totalRequiredRevenue = annualRevenueTarget + overheadCosts + profitAmount;
// Calculate the required hourly rate
var hourlyRate = totalRequiredRevenue / totalBillableHours;
resultElement.innerHTML = "Your estimated hourly rate should be:
Understanding Your Agency's Hourly Rate
Determining the right hourly rate for your agency is crucial for profitability and sustainable growth. It's not just about covering your basic costs; it's about ensuring you can reinvest in your business, compensate your team fairly, and achieve your financial goals.
Key Factors to Consider:
- Annual Revenue Target: This is the total amount of revenue you aim to generate within a year. It should be based on your business objectives and market potential.
- Billable Hours Per Employee Per Year: Not every hour an employee works is billable to a client. This metric accounts for administrative tasks, meetings, training, and other non-billable activities. A common range is 1200-1600 hours per year, depending on the industry and agency structure.
- Number of Employees: This directly impacts your total billable capacity and your overall cost structure.
- Annual Overhead Costs: These are the indirect costs of running your agency, such as rent, utilities, software subscriptions, marketing, insurance, and non-billable salaries. This calculator expresses overhead as a percentage of your revenue target for simplicity.
- Desired Profit Margin: Profit is essential for reinvestment, emergency funds, and rewarding stakeholders. A healthy profit margin ensures your agency is not just surviving but thriving.
How the Calculator Works:
This calculator helps you reverse-engineer your required hourly rate. It first calculates your total operational costs, including overhead, and then adds your desired profit. This total figure is then divided by the total billable hours your agency can provide in a year. The formula is:
Required Hourly Rate = (Annual Revenue Target + Overhead Costs + Desired Profit) / Total Billable Hours Per Year
Where:
- Overhead Costs = Annual Revenue Target * (Overhead Percentage / 100)
- Desired Profit = Annual Revenue Target * (Profit Margin Percentage / 100)
- Total Billable Hours Per Year = Billable Hours Per Employee Per Year * Number of Employees
Example Scenario:
Let's say your agency has the following:
- Annual Revenue Target: $500,000
- Billable Hours Per Employee Per Year: 1,200
- Number of Employees: 5
- Annual Overhead Costs: 30% of Revenue Target (which is $150,000)
- Desired Profit Margin: 20% of Revenue Target (which is $100,000)
In this case:
- Total Billable Hours = 1200 hours/employee * 5 employees = 6,000 hours
- Total Required Revenue = $500,000 (Target) + $150,000 (Overhead) + $100,000 (Profit) = $750,000
- Required Hourly Rate = $750,000 / 6,000 hours = $125.00 per hour
Using this calculator with these inputs would yield an estimated hourly rate of $125.00.
By accurately calculating your hourly rate, you can confidently price your services, manage your resources effectively, and ensure the long-term success of your agency.