Glossary / Effective Hourly Rate
Effective Hourly Rate
Your effective hourly rate is what an hour of your own time is actually worth to the business. Divide monthly revenue by the hours you personally work in that month.
Work out yours
Effective hourly rate = monthly revenue ÷ (hours per week × 4.33)
$46/hr
Any task you can hand off for less than $46 an hour is worth handing off.
Why it matters
This number tells you which work belongs in your hands and which does not. Owners consistently guess it low by about half, then spend Saturdays doing twenty dollar an hour work while the hundred dollar an hour work waits until Monday.
Where people get it wrong
It is not a salary and it is not what you take home. It is a decision tool. Use it to price your own time against the cost of delegating, nothing else.
If this number is not where you want it
Once you know what an hour is worth, the next question is which hours to stop spending. That is an operating problem, not a marketing one.
Owner Operating System, $250 one time
See what it would take, free →About Owner Operating SystemRelated terms
- Gross MarginGross margin is the share of revenue left after the direct cost of delivering the work.
- Break-Even PointYour break-even point is how much you must sell to cover all your costs.
- Repeat RateRepeat rate is the share of your customers in a period who had bought from you before.
- Average TicketAverage ticket is what a typical customer or job brings in before costs.
Common questions
+ Why is my effective hourly rate lower than what I charge?
Because you are not billing every hour you work. Quoting, chasing invoices, and admin are all unbilled, which is exactly why the honest number is usually a shock.
Part of the small business glossary. All six free calculators are here.