Non-Billable Time Cost Calculator

Understanding the non-billable time cost calculator — concept and principle

Freelancers, consultants and agencies spend many hours on work no client pays for directly: admin, invoicing, sales calls, proposals, learning and meetings. Those hours still cost you, because you could have billed them. This calculator puts a price on non-billable time and shows how much you would need to add to your hourly rate for billable hours to cover it.

How it is calculated

• Cost of non-billable time = non-billable hours × hourly rate
• Rate uplift = cost of non-billable time ÷ billable hours
• Rate including it = hourly rate + rate uplift

Hours are per month. The hourly rate is your current billing rate, used here as the value of an hour of your time. Any currency works.

The principle

Your income comes only from billable hours, but your working time includes both kinds. If you want every working hour to earn your target rate, the billable hours must carry the cost of the others. Spreading that cost over billable hours gives the uplift. Equivalently, the new rate equals your rate × total hours ÷ billable hours, so it is your rate divided by your utilisation (billable share of time).

Worked example

1. Non-billable hours = 40, hourly rate = $70, billable hours = 100.
2. Cost of non-billable time = 40 × 70 = $2,800.00 per month.
3. Rate uplift = 2,800 ÷ 100 = $28.00 per billable hour.
4. Rate including it = 70 + 28 = $98.00.
5. Check: 98 × 100 = $9,800 = 70 × 140 total hours.

How to read the result

Here only 100 of 140 working hours (about 71%) are billable. The lower that share, the larger the uplift. If you cannot raise your rate by the full amount, the result shows the value of cutting non-billable time instead: automating invoicing or shortening sales cycles frees hours worth $70 each in this example. Treat $98 as the rate that values all your time equally, before business expenses, tax and time off.

Common mistakes

• Underestimating non-billable hours; track them for a few weeks rather than guessing.
• Forgetting holidays, sick days and quiet months, which reduce billable hours further.
• Treating the uplifted rate as profit; overheads and taxes still have to be paid from it.
• Mixing weekly and monthly hours.

Frequently asked questions

What counts as non-billable time?

Any work you cannot charge to a client: admin, bookkeeping, marketing, proposals, unpaid revisions, training and internal meetings.

Should I always raise my rate by the full uplift?

Not necessarily. Market rates and client budgets matter. You can combine a smaller increase with reducing non-billable hours.

What utilisation is typical?

It varies by profession and business model, so track your own share of billable hours and aim to improve it.

Sources: Maister, Managing the Professional Service Firm (Free Press)