Convert working capacity into realistic billable time
A billable hours calculation estimates the client time available after holidays, leave, administration, sales, meetings, training, and other nonbillable work. It supports revenue planning for freelancers, agencies, and professional-service teams.
Formula
Worked example
A consultant with 1,600 available annual hours and a 65% target utilization has 1,040 planned billable hours. Dividing the annual revenue target by those billable hours gives a more realistic rate than dividing by every working hour.
Start with capacity the person can actually use
Subtract vacation, holidays, sick time, training, and known internal commitments before applying utilization. This avoids setting a revenue target against hours that were never available.
Use different assumptions for delivery staff, managers, owners, and new hires. Their sales, supervision, and onboarding responsibilities may create very different billable capacity.
Track realization as well as utilization
High recorded billable hours do not guarantee strong revenue if time is discounted, written off, or included outside scope. Realization compares recorded value with the amount actually billed or collected.
Review utilization, realization, effective hourly rate, and collection together. This helps distinguish a capacity problem from a pricing or collection problem.
Billable-capacity planning checklist
- Subtract realistic leave and internal time.
- Use role-specific utilization assumptions.
- Separate recorded, invoiced, and collected hours or value.
- Compare forecasts with recent time records each month.
Last reviewed September 8, 2026. This calculator provides an estimate for planning and education. Verify current rates, rules, and account-specific terms with the relevant official source.