What does an hour of your team actually earn?
Your rate card says one number and the year closes on another. This works out the cost of a billable hour once unsold time is counted, what realisation does to the rate you quoted, and the card rate your margin target actually requires.
Your delivery team
Salary plus employer PF, gratuity accrual, insurance, equipment and software. Not just CTC.
Nominal hours less leave, public holidays and training. Around 1,850 for most Indian firms.
Billable hours as a share of paid hours. If nobody tracks it, your honest guess is usually high.
Only the people whose hours are billable.
Your pricing
What the rate card says before any discount.
Invoiced value as a share of billable value at card rate, after discounts, write-offs and free scope.
Sales, admin, finance, office and founder time, as a share of revenue.
What should be left after delivery and overheads.
What an hour really earns
₹873
An effective rate of ₹2,050 against a cost of ₹1,177 per billable hour, so 43% of what you invoice is margin. Your card rate said ₹2,500.
You are about ₹110 an hour short of the rate this target needs. That is usually recoverable without a price rise: realisation is the faster of the two levers, because it means billing work you already do.
- Cost per paid hour
- ₹730
- Billable hours per person, a year
- 1147
- Cost per billable hour
- ₹1,177
- Effective rate after realisation
- ₹2,050
- Card rate this target needs
- ₹2,610
- Team revenue, a year
- ₹2,35,13,500
- Gross margin on delivery
- 42.6%
- Operating margin after overheads
- 17.6%
- Cost of hours you cannot sell
- ₹51,30,000
- Value you never invoice
- ₹51,61,500
One average rate and one average person, which is how a firm should read its own economics before it splits them by role and by client. The bench is inside the utilisation figure rather than shown separately. Nothing you type is sent anywhere or stored.
A rate card is a statement of intent
An agency bills ₹2,500 an hour. The engineer delivering the work costs ₹1,200 an hour fully loaded. On that arithmetic the margin is 52%, and the whole business gets planned around it: how many people to hire, what to spend on sales, what the year should produce.
Then the year closes and the gross margin in the accounts is 31%. Nothing was stolen and nobody was underpaid. The difference is made of hours that were paid for and never billable, hours that were billable and got written off, a change request delivered and never invoiced, and three weeks between projects when two people had nothing to do.
In a product business the cost of delivery is mostly visible on an invoice from someone else. In a services business it is people's time, and time leaks quietly. Two ratios describe almost all of the leak, and most firms have never calculated either.
The two ratios
- Utilisation
- Billable hours as a share of the hours you pay for. It decides how many hours there are to sell at all. Paid time that is not billable is not automatically waste: proposals, recruitment, internal work and training all have to happen. But every hour of it has to be carried by the hours you do sell.
- Realisation
- Invoiced value as a share of what your billable hours were worth at card rate. It decides how much of each sold hour reaches an invoice, after discounts, write-offs, free scope and fixed-price overruns. This is the leak nobody can see, because nothing in any report shows the work you chose not to bill.
They compound. A firm at 62% utilisation and 82% realisation is earning roughly half of what its rate card implies, and neither number on its own looks alarming enough to investigate.
What the calculator shows
- The cost of a paid hour, from fully loaded cost rather than salary.
- The cost of a billable hour, which is the first number that is higher than founders expect.
- Your effective rate: the card rate after realisation has taken its share.
- Margin per billable hour, in rupees and as a percentage of what you invoice.
- Annual revenue, gross margin and operating margin for a team of the size you set.
- The card rate your operating margin target actually requires, run backwards from the target.
- What the hours you cannot sell cost you, and what the value you never invoice comes to, as two separate figures.
Nothing you type is sent anywhere or stored. It runs in your browser and forgets everything when you close the tab.
A worked example
Illustrative figures for a fictional ten-person delivery team. Every number here is invented, and the point is the shape rather than the amounts.
| What you enter | Value | What comes out | Value |
|---|---|---|---|
| Fully loaded cost per person, a year | ₹13,50,000 | Cost per paid hour | ₹730 |
| Paid working hours a year | 1,850 | Billable hours per person | 1,147 |
| Utilisation | 62% | Cost per billable hour | ₹1,177 |
| Card rate per hour | ₹2,500 | Effective rate | ₹2,050 |
| Realisation | 82% | Margin per billable hour | ₹873 |
| People delivering | 10 | Team revenue, a year | ₹2.35 crore |
| Overheads, share of revenue | 25% | Gross margin on delivery | 42.6% |
| Operating margin wanted | 20% | Operating margin actually | 17.6% |
Read the last two rows together. This firm is not in trouble, it is profitable, and it is quietly missing its own target by two and a half points of margin. Nobody in it would describe that as a problem, because nothing visible is going wrong.
The two loss figures are the ones worth sitting with. The hours this team cannot sell cost about ₹51.3 lakh a year, and the value it never invoices comes to about ₹51.6 lakh. Either one is larger than the profit the firm makes.
Where the hours go
Utilisation falls for ordinary reasons, and knowing which ones apply to you decides whether it is worth fixing.
- The bench: people between projects. Some spare capacity is how a firm says yes to good work starting next week, so the question is how much, not whether.
- Proposals and pitching, which is sales cost sitting inside the delivery team.
- Internal projects: the website, the new process, the tool nobody finished.
- Recruitment and interviewing, concentrated in exactly the senior people whose hours are worth most.
- Training and certification, which is an investment rather than a leak, and should be budgeted as one.
- Rework, which is the only item on this list that is pure loss, and the one least often measured.
A firm running at 85% or above usually has a different problem: it has stopped investing in anything, and it will feel that in eighteen months when nobody has been trained and no proposals went out.
Where the value goes
Realisation leaks in five places, in rough order of size in most firms.
- 01Scope delivered free. The change small enough not to argue about, four times a quarter, on every project. Almost always the largest single leak, and the one with no paper trail.
- 02Retainers that grew. The fee was agreed two years ago and the work has expanded every quarter since. Easy to find and uncomfortable to raise.
- 03Fixed-price overruns, where the hours went in and the price did not move.
- 04Write-offs at invoicing, where a project manager quietly drops hours a client might dispute.
- 05Negotiated discounts, which are the most visible and usually the most deliberate, so the least worth worrying about.
Running the arithmetic backwards
Most firms set rates by looking at what competitors charge and what clients have accepted. That is reasonable market information and it answers a different question from the one that matters, which is whether the rate can produce the margin the firm intends.
The calculator runs it the other way. The effective rate has to cover the cost of a billable hour once overheads and the intended margin have each taken their share of revenue. Divide the cost of a billable hour by what is left after both, and you have the effective rate you need. Divide that by realisation and you have the card rate.
The useful part is what it does to arguments about pricing. A rate card defended as competitive can be shown to be short by a specific number of rupees an hour, and the size of the gap decides whether the answer is a price conversation, a realisation fix or a resourcing change.
What to fix, and in what order
- 01Realisation first. Billing work you already deliver is faster, less contentious and entirely within your control. A change request process, however light, is usually most of it.
- 02Then the retainers. Compare delivered hours at card rate against the fee, one client at a time. This is where the largest single gap usually sits, and the review is an afternoon.
- 03Then utilisation, through resourcing rather than pressure. Knowing who is free next week does more than asking anyone to bill more hours, and it does not cost you people.
- 04Then estimation on fixed-price work. Track estimated against actual hours on every project and adjust the contingency until the average project lands where you meant it to.
- 05Then the card rate, on new work first, where there is nothing to renegotiate and no relationship to manage.
- 06Last, the work that consistently loses money. Repricing it, or declining it, frees the people who were absorbed by it.
What this does not do
- It uses one average person and one average rate. Real firms have juniors and principals on very different rates and utilisation, and the averages hide that. Run it once per role before you act on anything.
- It holds the bench inside the utilisation figure rather than showing it separately, so a firm with one person idle all year and one fully booked reads the same as two people at half utilisation.
- It says nothing about which clients or projects are the problem. That needs time tracking against a rate card, project by project.
- It assumes overheads are a constant share of revenue, which is roughly true across a year and wrong in a month.
- It is a model of a steady state. A firm mid-way through a bad quarter should run it on a normal quarter instead.
It is a first pass, which is the right size for a decision about whether this is worth a proper look. For most firms that have never measured either ratio, the first pass is the part that changes behaviour.