A fixed fee must preserve the same revenue model
Start with the hourly quote floor from RateFloor. That rate already funds your annual tax and overhead set-asides. A project fee must preserve the labor remainder after those allowances, pay any additional direct purchases, and fund its own defined risk reserve.
This tool applies the combined revenue set-aside to the entire client invoice, including money collected for direct purchases. It does not assume that reimbursed costs are exempt. Enter the same combined tax and variable overhead percentage used to establish your hourly floor.
Fee builder
Find the project minimum
Use your internal floor, not a salary-derived hourly rate.
Worked example: a 68-hour engagement
A project needs 60 delivery hours plus eight client-specific operating hours not already funded through the annual utilization allowance. At a $100 quote floor, the labor quote is $6,800. With 40% combined revenue set-asides, its protected remainder is $4,080. Add $500 of new direct purchases.
The project also reserves 10% of the total fee for defined scope uncertainty. Only 50% of the invoice remains after the 40% operating set-asides and 10% risk reserve. The minimum is ($4,080 + $500) / 0.50 = $9,160.
- Protect the labor remainder
68 x $100 x (1 - 0.40) = $4,080Do not charge the annual tax and overhead allowance twice on labor.
- Fund purchases and risk
($4,080 + $500) / (1 - 0.40 - 0.10) = $9,160Direct purchases and risk are additional to the protected labor remainder.
- Check the closure
$9,160 - $3,664 - $916 - $500 = $4,080After all three deductions, the original labor remainder is still protected.
The protected equivalent labor rate translates the remaining labor funds back to the original hourly-quote basis: $4,080 / 60% / 68 = $100/hr. It is not take-home pay per hour, and the risk reserve is not guaranteed profit.
Counterexample: adding a purchase at face value
For ten hours at a $100 floor, a $1,000 purchase, 40% revenue set-asides, and no risk reserve, a $2,000 invoice leaves only $200 after set-asides and the purchase. The labor alone should have retained $600. The consistent minimum is ($600 + $1,000) / 60% = $2,666.67, rounded up to $2,667.
Do not enter a purchase here if it is already in annual fixed costs or the variable-overhead budget. If a client pays a supplier directly, exclude that supplier invoice from both your collected revenue and this cost input. Other reimbursement arrangements require an explicitly different planning model; this tool does not determine their tax treatment.
Client operations are real project hours
Discovery, project setup, meetings, feedback review, file preparation, vendor coordination, and final administration consume the same finite year as production. Hiding them inside delivery hours makes later estimates harder to improve. Estimate them separately, then compare estimated and recorded time after completion.
Direct costs should be tied to this engagement: licensed assets, a specialist subcontractor, travel, printing, or a dedicated service. General software and equipment already funded through the annual floor should not be added again. The classification matters more than the label.
A risk reserve needs a boundary
Use a reserve for uncertainty that remains after reasonable discovery, such as a new integration, incomplete source material, or several named stakeholders. It should not absorb new deliverables, extra revision rounds, changed deadlines, or delayed approvals. Those events need change control.
What this fee does not claim
The result is an internal sustainability boundary, not a market valuation, legal clause, or promise that a buyer will accept the price. Value-based pricing may support a higher fee. A client may also require a lower scope, a different schedule, or another provider.
Estimate quality still controls the result. Record actual delivery and operating time, direct costs, changes, and write-offs. Use that evidence to improve the next project instead of treating the reserve as guaranteed profit.