Effective hourly rate
What is Effective hourly rate?
Total revenue from a project divided by the total hours actually spent on it.
For fixed-fee work, the effective hourly rate reveals true profitability. A project can win the pitch on price and still lose money once the hours are counted.
Related terms
- Gross margin (agency)Revenue minus the direct cost of delivery (mostly people's time), shown as a percentage of revenue.
- Net marginWhat's left of revenue after all costs (delivery and overhead) are subtracted.
- Productized serviceA service packaged with a fixed scope, price and turnaround, sold like a product.
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