What the calculator does, and why it starts from cost
Most new consultancies set their first day rate by looking sideways: what a competitor publishes, what a recruiter quotes, what the founder was paid as a contractor. That number has no reason behind it, so it cannot be defended when a buyer pushes, and it cannot be raised when the business grows. The alternative is to build the rate from the inside out.
Start with what a billable person costs the business for a year, fully loaded: salary, employer costs, equipment, training. Add the overhead that person has to carry, which is the cost of everyone and everything that does not bill, divided across the people who do. Then be honest about how many days that person will actually invoice. Nobody bills 220 days; holidays, illness, sales support, internal work and the gaps between engagements take a share, and that share is utilisation. The cost per billable day is the loaded cost divided by the billable days. The day rate at the middle grade is that cost divided by one minus the margin the business needs to fund growth, absorb bad months and pay its founders something. Everything else on the card is a multiple of that number.
The borrowed ladder
When we published our first rate card we had two people and no billing history. What we did have was a published skills ladder from a large supplier, with clear grade definitions. We borrowed the shape: five grades, each defined by what the person could be trusted to do alone, with the middle grade as the anchor and the others set as multiples. A card with five grades and two people looks presumptuous until you understand what it does. It tells the buyer who will do the work, it gives the founders a rung to sell into rather than a single number to defend, and it means the day a third person joins, their rate already exists.
The multipliers here are defaults, not recommendations. A firm selling deep specialists may run a flatter ladder; a firm selling a mixed team a steeper one. The test is whether a buyer, reading the grade definitions, would agree that the difference in price matches the difference in what they get.
The blended rate is the one you will actually earn
A rate card is a menu; the blended rate is the bill. If forty per cent of the days you sell are at the middle grade and only five per cent at the top, the top rate barely moves what the business earns. The calculator weights each grade by the share of days you expect to sell at it, which is the number to compare with your cost per billable day. If the blended rate sits too close to that cost, the card is not the problem; the mix is.
A worked example, invented
The defaults on this page are an invented firm, not a real one: a loaded cost of £85,000 per billable person, £25,000 of overhead each, 220 available days, 70 per cent utilisation and a 35 per cent margin. That gives 154 billable days, a cost per billable day of about £714, and a middle-grade day rate of about £1,099. Change the utilisation to 60 per cent and watch the rate rise; that is the cost of the bench, made visible.
What this does not do
It does not tell you what the market will pay. That comes from selling. It does not handle fixed-price work, retainers or managed services, which price on different bases (the comparison of fixed price and time and materials and the managed services pricing guide cover those). And it does not know your grades: the labels and definitions are yours to write. The rate card playbook, in development, goes through the eight steps in full, and the rate card builder that ships with it models the card against your own ledger. Nothing is for sale yet; joining the list gets you told when they are.