Accountants Profit Target (Hourly) Calculator
Estimate the hourly billing rate and annual revenue needed for an accounting practice to cover costs, pay the owner and achieve a profit target.
Overview
This Accountants Profit Target (Hourly) Calculator estimates the average hourly billing rate your practice needs to achieve a chosen annual profit. It combines your overheads, owner pay, available working time, expected billable utilization and fee collection rate to produce a revenue and charge-out target.
How it works
The calculator first estimates your annual working hours from weekly hours and working weeks. It then reduces those hours by your billable utilization and collection rate to estimate effective collected billable hours. Your required revenue equals annual overheads plus owner salary or drawings plus the desired profit. Dividing that revenue target by effective collected billable hours gives the average hourly billing rate required.
How to use this calculator
- 1Enter the annual profit you want the practice to retain.
- 2Add your annual owner salary or drawings and all practice overheads.
- 3Set your normal weekly hours and the number of weeks you expect to work.
- 4Estimate the percentage of time that will be billable to clients.
- 5Enter the percentage of invoiced fees you expect to collect.
- 6Review the required hourly rate and compare it with your current pricing.
Example Calculation
Annual profit target
$100,000
Annual owner salary or drawings
$80,000
Annual practice overheads
$120,000
Working hours per week
40
Working weeks per year
46
Billable utilization
65%
Fee collection rate
98%
Required hourly billing rate
$255.96
With a £100,000 profit target, £80,000 owner pay and £120,000 overheads, the practice needs £300,000 of annual revenue. At 65% billable utilization and 98% collection, this requires an average hourly rate of about £256.04.
Frequently asked questions
What is a profit target for an accounting practice?
A profit target is the amount the practice aims to retain after paying operating costs and any owner salary or drawings included in the calculation.
How is the required hourly billing rate calculated?
The calculator divides required annual revenue by expected collected billable hours. Required revenue includes overheads, owner pay and the selected profit target.
What billable utilization should an accountant use?
Use the portion of total working time realistically spent on client work that can be invoiced. Administration, business development, management and training usually reduce this percentage.
Why does the collection rate affect my hourly target?
If some invoiced fees are discounted, written off or not collected, each productive hour must generate more billed revenue to meet the same target.
Should owner salary be included in overheads?
Include it once only. This calculator shows owner salary or drawings separately so you can distinguish personal pay from the additional profit target.
Can I use this calculator for fixed-fee services?
Yes. The hourly result can be used as a benchmark when pricing fixed-fee work. Estimate the hours needed for a service and compare its fee with the target hourly rate.
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Assumptions and warnings
Assumptions
- The calculation treats owner salary or drawings as a cost that is separate from the profit target.
- Billable utilization represents all non-billable administration, marketing, management and training time.
- The collection rate accounts for expected write-offs, discounts and unpaid invoices.
- The required hourly rate is an average; individual services and client rates may vary.
- Results are planning estimates and do not include taxes, financing costs or one-off capital expenditure unless included in overheads.
Warnings
- This calculator provides a business planning estimate only and is not financial or accounting advice.
- Review your assumptions regularly, especially billable capacity, collections and overhead costs, before setting prices.