Effective hourly rate

Total fee divided by every hour the job really ate. The number that says whether that flat rate was a win or a trap.

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What it is

Effective hourly rate is the total fee divided by every hour the job actually consumed: the work, the calls, the revisions, the chasing of assets, the invoice you had to send three times. A 6,000 project delivered in 40 hours is 150 an hour. The same project after two surprise rounds and a stakeholder who joined late is 60 hours, and your 150 rate was really 100.

It is the only honest scoreboard for flat-fee and value-priced work, and it is most useful compared across projects rather than read on its own. Track hours per client for a quarter and the pattern shows up fast: which client types, project sizes, and deliverables pay, and which ones you have been subsidising out of goodwill.

Gotcha: most people compute it against billable hours only, which is just restating the rate card back to themselves. Count the unbilled hours or the number lies. Also worth separating: a low EHR from scope creep is a contract problem, a low EHR from slow delivery is a process problem, and the fixes are nothing alike.

Ask AI for it

Build me a single-page effective hourly rate tracker. Columns: client, project, total fee collected, billable hours logged, unbilled hours (calls, admin, revisions, chasing inputs), total hours, effective hourly rate, and variance against my target rate. Add a summary row with the weighted average EHR, and conditional formatting that flags any project more than 20 percent below target in red. Include three sample rows so I can see the shape.

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utilization rateproject profit marginvalue based pricingscope creepfixed price vs time and materials