Cost Calculator AI
Business & StartupCODB Pricing

Cost of Doing Business Calculator

Determine your hourly Cost of Doing Business (CODB), breakeven billing rate, and target fee structure based on owner salary, operating overhead, and billable capacity.

Annual Costs & Compensation Requirements

Billable Capacity & Profit Buffer

Cost of Doing Business (CODB) Formula

Hourly CODB = Total Annual Cost / Annual Billable Hours; Target Billing Rate = Hourly CODB / (1 - Target Net Margin %)
  • Total Annual Cost: Owner desired salary + employee direct payroll + non-billable operating overhead.
  • Annual Billable Hours: Realistic client-billable capacity (weeks worked per year × billable hours per week, excluding admin time).

Step-by-Step Worked Example

Scenario: A professional consultant needing $96,000 salary, $48,000 overhead/labor, 1,440 billable hours, and a 20% target margin

Calculation Steps:

  1. Total Cost of Doing Business = $96,000 + $48,000 = $144,000 / year
  2. Total Billable Hours = 30 × 48 = 1,440 hours / year
  3. Breakeven Hourly CODB = $144,000 / 1,440 hrs = $100.00 / hour
  4. Target Billing Rate = $100.00 / (1 - 0.20) = $125.00 / hour
  5. Target Day Rate (8 hrs) = $125.00 × 8 = $1,000.00 / day
  6. Target Gross Revenue = $125.00 × 1,440 hrs = $180,000 / year
Result: Your Cost of Doing Business is $100.00/hour just to break even. To earn your 20% profit margin, bill clients at $125.00/hour ($1,000/day).

How to Use This Calculator

  1. 1Enter your desired annual personal take-home compensation.
  2. 2Add all annual company operating expenses (software, insurance, marketing, accounting).
  3. 3Specify realistic billable hours per week (typically 25-32 hrs out of a 40-hr week) and working weeks per year.
  4. 4Set your target net profit margin.

Assumptions & Limitations

  • Non-billable hours (marketing, bookkeeping, invoicing) are accounted for in the capacity calculation.
  • Revenue targets assume 100% collection of invoiced billable hours.

Frequently Asked Questions

Why can't I bill 40 hours per week as an independent consultant?

Administrative overhead, proposals, client communication, continuing education, and accounting occupy 20% to 35% of working hours, leaving 25 to 30 billable client hours per week.

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