If you've moved to fixed fees, congratulations. You've escaped the hamster wheel of hourly billing. But you haven't escaped the need to know what your time is actually worth.
The hidden denominator
Effective hourly rate (EHR) takes your total collected revenue and divides it by the total hours your team spent delivering that work. Not billable hours. Total hours — including the research, the internal meetings, the emails, the revisions.
A fixed fee of $15,000 for a project that takes 40 hours gives you an EHR of $375. The same fee for a project that balloons to 120 hours? $125.
Why every flat-fee practice needs this
Fixed fees without EHR tracking is flying blind. You feel good about the fee at signing, but you have no feedback loop telling you whether the work was profitable.
- Track total hours per matter — not for billing, but for learning
- Compare EHR across practice areas, client types, and team members
- Use it to set future fixed fees based on actual cost, not guesswork
Benchmarks
For most professional advisory firms:
- Below $150/hr EHR: you're subsidizing your clients
- $200–$350/hr: healthy range for mid-market firms
- $400+/hr: either you're very good or very efficient (ideally both)
The number every flat-fee practice secretly needs to know isn't what you charge. It's what you earn per hour of actual effort.
Getting started
You don't need time-tracking software. A simple spreadsheet per engagement with total hours logged weekly will give you the data. The discipline isn't in the tool — it's in the honesty of recording time even when no one's watching.