There are many benchmarks that can be helpful for monitoring your creative service firm’s health. But here’s one easy self-diagnostic. It’s called measuring your effective hourly rate. I’ve built a calculator that you can use to do this, but it’s really pretty simple math. You take your target rate which you bill your hours against (not a recommended practice) or that you use when putting together a quote (a much better practice). That’s your target rate, but your effective rate is what you actually earn per hour after taking all other expenses and unbillable time into account.
What Are You Really Earning Per Hour?
If you’re a freelancer, your target rate is probably in the $50-$90 per hour range. If you are a firm with employees, your target rate is probably in the $100-$150 per hour range. But that does not tell you what you are actually earning per hour. The calculator will help you factor in downtime, unbillable administrative time, professional development costs, and so forth.
As a rule of thumb most firms should aim for about 60% overall utilization of their resources. That is, when you add up all the possible hours available for working among all your employees, you should be capturing 60% of those hours on paid work. (Of course some employees will have higher utilization—designers and programmers for example—and some lower—salespeople and managers—but averaged together you should aim for 60% utilization).