TL;DR: Your billing rate is not your hourly rate. Your hourly rate is your net profit divided by every hour you actually worked, including admin, sales, and cleanup. If you track it quarterly and plug the leaks, you can often double your real hourly without raising your sticker price.
I used to tell people I charged $250 an hour.
That was true, technically.
Then a consultant I respect asked a better question: what do you actually net per hour of your life?
Not per billable hour.
Per hour you worked.
So I did the math.
I looked at a full year of deposits.
Then I looked at a full year of hours.
The number that came out was not $250. It was closer to $61. (The Ops Wire)
If you do any kind of service business, consulting, agency work, hospitality consulting, coaching, fractional work, whatever, this is one of those uncomfortable truths that will either make you better or make you tired.
Your billing rate is a unit price.
It is the price of the hour you sell.
Your real hourly rate is the price of your year.
It is:
[
\text{Real hourly rate} = \frac{\text{Net profit}}{\text{Total hours worked}}
]
Net profit means what you actually keep after taxes and the cost of running the business.
Total hours worked means all of it:
Most people track the first bullet.
The money gets divided by the first bullet.
Then everyone is confused why the year feels tight.
There is a normal gap between billing rate and real hourly.
Every business has overhead.
That gap is not the problem.
The problem is when the gap is 65 to 75 percent and you pretend it is 25.
The reason it stays hidden is simple.
You do not account for time leaks.
You rationalize them.
None of those hours show up on an invoice.
All of them show up in your calendar and in your nervous system.
Every service business has its own flavor, but the leaks tend to cluster.
If it takes you three hours to write a proposal and you close one out of three, that is nine hours of sales labor for one deal.
You can call it marketing.
It is still labor.
Fix:
If you cannot send a clean proposal in 20 minutes, you do not have a proposal process.
You have a craft ritual.
Every project has boring, messy edges:
If you do not price the edges, the edges eat the middle.
Fix:
You are not being rigid.
You are protecting the thing you actually sell, which is your attention.
If every new client requires you to personally explain the same five things, you are paying an onboarding tax every time.
Fix:
If you do it right, onboarding feels boring.
Boring is good.
This is the silent killer.
You scope the work.
You deliver the work.
Then you keep doing the little follow-up pieces because you cannot stand leaving it unfinished.
Fix:
If you do not charge for continuation, you are donating your calendar.
Once a quarter, do one honest pass.
No vibes.
No stories.
Math.
Look at the deposits that hit your account over the last 90 days.
Do not look at invoices.
Look at cash received.
Subtract everything that left the business account.
Include taxes and contractor payments.
If you pay yourself through payroll, treat your take-home as the output.
The point is: what did the business actually produce for you?
Count every hour you worked.
Client work, admin, sales, cleanup.
If you are not sure, export your calendar and estimate.
The estimate will still be closer to reality than your current story.
Divide net by hours.
Write the number down.
That is your real hourly rate.
It is the only number that matters.
Do not try to fix ten things.
Fix one.
Most of the time, the biggest leak is not pricing.
It is unpriced hours after the price was already set. (The Ops Wire)
Hospitality is a relationship business.
That is the beauty and the trap.
You can always justify the extra hour.
I get it.
I spent ten years behind the bar. I spent another ten building systems, producing events, consulting, and doing the weird mix of work this industry always creates.
Hospitality people default to generosity.
If you do not put guardrails around that generosity, you end up running a charity with a Stripe account.
A good number is the one that matches your life.
If you are netting $75/hour and working 50 hours a week, that is a different year than netting $75/hour and working 30.
Start by measuring.
Then decide what you want the year to pay you.
Sometimes.
But rate increases do not fix time leaks.
If you are leaking 30 percent of your hours, you will leak 30 percent at a higher rate too.
Plug the leaks first.
Then raise rates if the market supports it.
Retainers are fine.
The question is whether you are selling access or selling outcomes.
If the retainer turns into constant triage, you are selling access and your calendar will get chewed up.
Put boundaries around what the retainer includes.
Use your calendar.
Tag your time blocks by:
You do not need perfect tracking.
You need a baseline.
Good.
That discomfort is information.
You can either look away and stay stuck, or you can use it to tighten the machine.
If you want a clean, repeatable way to protect your hours without turning into a robot, build three things:
If you run a bar, restaurant, or hospitality service business and you want help building the machine behind the craft, that is what I do.
Workshop has the free playbooks. If you want hands-on help, book a call through the site.
Jason Littrell spent 10 years working in bars (including Death & Co, and a stint as USBG president in NYC), then another 10 as a consultant, event producer, cocktail consultant, speaker, entrepreneur, and author. He talks like a bartender, thinks like a systems architect, and runs his entire company on AI.
Jason