Before you can calculate how much it costs you to perform one hour of
service, you must first calculate your total annual billable hours. In other words, you want to account for the number of service hours that were directly
billed to your clients to generate revenue. Don’t forget to account for any employee’s paid time off (sick days, holidays, vacations). These hours should not be included in your total because
while the employee got paid, the time was not billed to your clients. You’ll also want to include billable hours worked by employees who perform both billable and non-billable work (like the business owner), as well as short-term or contract employees who do not work a full yearly schedule. Once you’ve determined the total number of hours billed to your clients, you’re ready for the final step.
