Your quoted rate is what you charge for an hour. Your effective hourly rate is what you actually earned for each hour you worked. The second is the one that pays the rent, and it is almost always lower.
How to work it out
Divide what you billed in a period by the hours you worked in it, billable or not. If you billed $5,400 in a month and worked 120 hours, your effective rate is $45 an hour, whatever your quoted rate says.
Where the gap comes from
Fixed-price work that ran over. A $2,000 project quoted at 32 hours pays $62.50 an hour. If it took 50 hours, it paid $40.
Hours you worked and did not bill. Unbilled revisions, calls you did not record, and admin all count as worked hours with nothing billed against them.
Discounts and write-offs. Every hour you take off an invoice lowers the rate for the rest.
Why it is worth knowing
Comparing the effective rate of each client and each kind of project shows which work pays and which only looks as if it does. A client at $70 an hour who generates hours of unpaid back-and-forth can pay less than one at $55 who does not.
How to raise it
- Quote fixed prices from your tracked history, not from memory.
- Bill the hours you work, including the short ones. A timer catches them.
- Put revision rounds and extras in the agreement, and charge for the ones beyond it.
- Raise your quoted rate when your effective rate says you are below the figure you need. The hourly rate calculator gives you that figure.
How Involets does it
Involets’ Reports show what you billed, what is unbilled and the hours you tracked over the range you pick, and the effective rate: billed income for each tracked hour. Every project shows what is billed, unbilled and, for fixed-price work, what is left. See Reports and Reports, explained.