How to use this calculator
- Set the annual income the business should support.
- Add yearly operating overhead.
- Choose a profit reserve and collection-loss allowance.
- Enter realistic annual billable hours and calculate.
#2629 · Salary & HR Tool
Fractional Executive Required Rate Calculator
Estimate the minimum average rate a fractional executive needs to invoice to support an annual income goal, business overhead, a profit reserve, and possible unpaid invoices. The calculator converts those needs into annual and monthly revenue targets and a required rate for each realistic billable hour.
Calculator
Income, costs, and capacityFormula
Required collected revenue = (income goal + overhead) ÷ (1 − profit reserve)
Required invoiced revenue = collected revenue ÷ (1 − unpaid allowance)
Required hourly rate = invoiced revenue ÷ billable hours
Required invoiced revenue = collected revenue ÷ (1 − unpaid allowance)
Required hourly rate = invoiced revenue ÷ billable hours
What the result means
The hourly result is a business floor based on your assumptions, not a market quote. Package or retainer prices can be converted back to an effective hourly rate for comparison.
Personal income tax is not modeled separately. Treat the income goal as the pre-personal-tax amount you want the business to support.
Example calculation
A $70,000 income goal plus $12,000 overhead, with a 10% profit reserve and 3% unpaid allowance across 1,000 billable hours, requires about $93.93 per hour and $93,929 in annual invoiced revenue.
Tips for better results
- Include preparation, executive follow-up, and cross-client context switching when estimating usable capacity.
- Use billable capacity, not total hours worked.
- Review overhead at least quarterly.
- Check package pricing against the effective hourly rate.
Frequently asked questions
Why does the required rate use billable hours instead of total work hours?
Only billable hours directly carry revenue, so non-billable work must be recovered through the rate charged for sold time.
Is the profit reserve the same as personal income?
No. Personal income is the compensation goal; the profit reserve is revenue retained after supporting that goal and overhead.
How should retainers be compared with the hourly result?
Divide the retainer price by the realistic hours required, then compare that effective rate with the calculator result.
What does the unpaid allowance cover?
It allows for the portion of invoices you expect not to collect because of write-offs, disputes, or payment loss.
Does this required rate include personal income tax?
Not separately. Enter an owner-income target that reflects the pre-tax compensation your business needs to support.
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Rate-building components
| Component | Role in rate |
|---|---|
| Income goal | Owner compensation target |
| Overhead | Operating costs recovered through pricing |
| Profit reserve | Share retained beyond income and overhead |
| Billable hours | Revenue-producing time denominator |