Effective hourly rate on fixed fee projects
A fixed fee stays fixed while the effort can grow. Reviewing the fee against all delivery hours shows what changed without pretending that an hourly equivalent is project profit.
Product capabilities reviewed against the ABH truth sheet on 14 October 2026. Any arithmetic examples are fictional, in USD and exclude taxes. Operational guidance only.
Short answer
Effective hourly rate is the service fee divided by all hours needed to deliver it. Include revisions, coordination and agency corrections. Compare the result with your internal target, then use the evidence to scope the next engagement.
Use ABH for the work and invoice record. Receive client payments through your own external arrangement and record them manually.
The formula
Divide the service fee by actual delivery hours for the engagement. Choose whether the fee means contracted, invoiced or collected value and label that choice. For a delivery review, an invoiced service fee gives a different result from cash received so far. Keep tax and separately reimbursed purchases outside the service fee when comparing delivery effort.
The calculation converts a fixed amount into an hourly equivalent; it does not change the contract into hourly billing. It also does not deduct salaries or overhead. The pricing model comparison explains when a fixed fee makes sense. This review asks how the completed work performed against the assumptions you used when agreeing that fee.
Worked example with scope creep
Illustrative fictional example, USD, excluding taxes: a $6,000 design engagement was estimated at 60 hours. That implies $100 per hour before costs. The completed work takes 80 hours after extra revisions, reducing the effective hourly rate to $6,000 / 80 = $75. The $25 difference per hour reflects changed effort, not a new amount owed by the client.
If an additional deliverable is separately approved for $1,000 and takes 10 hours, review it as an identifiable change before combining totals. The combined service fee is $7,000 across 90 hours, about $77.78 per hour. The change request guide helps distinguish accepted extras from revisions the agency must absorb under the original scope.
Include non-billable and revision time
Count briefing, preparation, meetings, delivery, quality checks and revisions that the engagement required. Excluding agency corrections makes the engagement look more efficient than it was. Excluding coordination hides a recurring cost of delivery. Separate phases in the record so you can see where effort grew, while keeping the full denominator for the overall rate.
A contributor may record work that is not separately chargeable but is still necessary to fulfill the fixed fee. Use the billable and non-billable distinction to avoid confusing an invoice decision with a delivery-effort calculation. If records are incomplete, mark the result provisional and ask for corrections rather than substituting the estimate as if it were actual time.
Compare against your target rate
Compare the effective rate with the reference you used in the proposal. A gap does not automatically mean the fee was wrong: an unusually difficult handoff, a missed dependency or an avoidable rework cycle may be responsible. Write the cause next to the calculation. Comparing unlike engagements without that context can encourage a price increase where a workflow fix is needed.
Use your break-even hourly rate as a separate cost-based reference. A rate above break-even still needs room for uncertainty and any intended margin. A rate below your target can be an intentional commercial choice, but the person making that choice should see the delivery assumptions. Do not present either target as an industry benchmark.
Feed the result back into scoping
Review effort by phase before the next quote. If content preparation repeatedly exceeds the allowance, require complete inputs before scheduling design or explicitly include that work in the scope. If revisions cluster around an unclear approval point, define the decision and revision allowance more clearly. Price the work you intend to deliver rather than assuming the last overrun will disappear.
Preserve the completed engagement's original estimate, actual hours and reason for differences. An improved estimate is more useful than rewriting the old one. The client onboarding billing checklist helps capture dependencies early. Share operational lessons with delivery while keeping fees and financial analysis with the people authorized to make those decisions.
Tracking hours against a project budget in ABH Pro
ABH records time against clients, projects and tasks. Pro adds the project budget bar, which is advisory: it does not stop time tracking or impose a hard spending cap. Use it as a prompt to review progress and agreed scope. The budget explanation describes that boundary before you rely on it during delivery.
ABH does not compute project profit, margin or cost-per-hour roll-ups today. Its existing analytics panel is a realization view, with advanced analytics on Pro. For the effective hourly rate described here, assemble the service fee and complete hours and calculate the ratio separately. The time and invoice workflow supports the underlying record without promising a profitability dashboard.
Frequently asked questions
Should fixed fee work still have time records?
Yes, if you want to compare the fee with actual effort and improve future estimates.
Can I invoice an overrun automatically?
No. Extra charges need the agreed commercial basis and any required client acceptance.
Does the ABH project budget stop work?
No. The Pro budget bar is advisory and does not impose a hard cap.
Review the workflow before you choose.
Use ABH for the work and invoice record. Receive client payments through your own external arrangement and record them manually.