Effective Hourly Rate
What you actually earn — not what you charge. Profit divided by honest hours: the number most owners avoid.
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What is your effective hourly rate?
Your effective hourly rate is the number most business owners avoid: your real profit divided by the hours you actually work — not the rate you quote clients. A founder billing $250/hour who works 60 hours a week to clear $90,000 a year is really earning closer to $30/hour once honest hours are counted. The quoted rate is a price; the effective hourly rate is the truth.
Healthy benchmarks
For a B2B service business doing $300K+ in revenue, an owner's effective hourly rate should comfortably clear what you'd pay a senior employee to do your highest-value work — typically $150–$300+/hour. If yours is below $100/hour, you are subsidising the business with your own time. Below $50/hour and you'd earn more as an employee elsewhere.
How to improve it
Three levers move the number: raise prices (most owners are underpriced), cut or delegate low-value hours (admin, delivery a junior could do), and stop doing unpaid work that doesn't convert. The effective hourly rate is a Foundation-layer metric in the Business Evolution Framework — fix it before you scale, because scaling a low effective rate just multiplies the problem.
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