Here is an illustrative walk-down:<\/p>\n
- \n
- Work year: 2,080 hours<\/li>\n
- Less 10 holidays: 80 hours<\/li>\n
- Less 15 PTO days: 120 hours<\/li>\n
- Available working time: 1,880 hours<\/strong><\/li>\n
- At 70% utilization: 1,316 billable hours<\/strong><\/li>\n<\/ul>\n
The 70% utilization assumption accounts for time spent on work that keeps delivery functioning but is not billed to a client: administration, training, internal coordination, sales support, and similar tasks. Use your own records and policies to set the assumptions.<\/p>\n
![\"Illustrative](\"https:\/\/cdn.marblism.com\/dauC9Xnl-QF.webp\")
<\/p>\nA simple billable hours calculator is:<\/p>\n
Available delivery hours \u00d7 utilization rate = expected billable hours<\/strong><\/p>\n
For example: 1,880 \u00d7 70% = 1,316 hours<\/strong>. If the team regularly bills less than it works, compare your actual available hours and time records with this estimate. The related bench-time utilization and payroll cost guide<\/a> looks at the cost of unassigned capacity; this article focuses on the amount of delivery time you can realistically sell.<\/p>\n
What is a billable hour worth in a service business?<\/h2>\n
Start with the revenue your delivery capacity needs to produce. In this illustrative company calculation, an annual revenue target of $2 million is supported by eight delivery staff, each with 1,316 billable hours:<\/p>\n
8 \u00d7 1,316 = 10,528 billable hours<\/strong><\/p>\n
Then divide the revenue target by those hours:<\/p>\n
$2,000,000 \u00f7 10,528 = about $190 per billable hour<\/strong><\/p>\n
![\"Illustrative](\"https:\/\/cdn.marblism.com\/BGa063e-hIK.webp\")
<\/p>\nThat is a revenue-planning figure, not automatically the hourly rate on your price list, an employee\u2019s labor cost, or your profit per hour. It assumes the target revenue is earned through those hours and all planned hours are realized as revenue. Write-offs, discounts, unbilled scope, and collections can reduce what you actually capture.<\/p>\n
Use it as a diagnostic: does your current service mix and effective rate support the revenue target with the capacity you have?<\/p>\n
For another view of whether your pricing reflects client outcomes rather than time alone, see value-based pricing for a service business<\/a>.<\/p>\n
Want a quick first look at where cash may be slipping away? The Profit Leak Snapshot<\/a> takes about 3 minutes<\/strong> to assess your business.<\/p>\n
Why do hours worked and hours billed differ?<\/h2>\n
Because \u201cworking\u201d and \u201cbillable\u201d are different categories. A team member may work on internal planning, training, quality checks, sales support, or improving a process without creating an invoiceable hour that day. Some of that time is necessary investment, not waste.<\/p>\n
The U.S. Bureau of Labor Statistics\u2019 2025 American Time Use Survey<\/a> reports time spent working across full-time workers. It does not define billable capacity for service firms. Your own time records must show which hours were available, client-related, invoiced, and written off.<\/p>\n
Make the distinctions visible:<\/p>\n
- \n
- Hours worked:<\/strong> all recorded work time.<\/li>\n
- Billable hours logged:<\/strong> client work recorded under your billing rules.<\/li>\n
- Hours billed:<\/strong> time included on an invoice.<\/li>\n
- Realization:<\/strong> billed hours compared with logged billable hours.<\/li>\n<\/ul>\n
A gap between logged and billed time can point to missed time entry, scope creep, write-offs, or billing rules that need attention. For process consistency, review your standard operating procedures for a service business<\/a>.<\/p>\n
How do you calculate utilization without chasing it blindly?<\/h2>\n
Utilization rate is commonly calculated as:<\/p>\n
Client hours \u00f7 available hours \u00d7 100<\/strong><\/p>\n
Define the denominator first. Using 1,880 available hours produces a different rate from dividing by the original 2,080 paid hours. Neither denominator is automatically right for every business; consistency and clear definitions matter.<\/p>\n
Treat utilization as a diagnostic, not a universal target. A lower rate may reflect a temporary demand gap, but it may also reflect planned training, quality work, or time spent supporting future sales. A higher rate can look efficient while leaving no room for those activities, or for the unexpected work that protects delivery quality.<\/p>\n
The goal is not to maximize a single percentage. It is to understand where capacity goes and whether your mix of client work and non-billable investment supports your business plan.<\/p>\n
What should you measure monthly for billable capacity?<\/h2>\n
Review a small set of measures each month, by person and by service:<\/p>\n
- Billable hours logged:<\/strong> client work recorded under your billing rules.<\/li>\n
- At 70% utilization: 1,316 billable hours<\/strong><\/li>\n<\/ul>\n
![\"Monthly](\"https:\/\/cdn.marblism.com\/a26Hp3JrCUt.webp\")
<\/p>\n