A rate card is the itemised (itemized, in the US spelling) price list of a services business. In a consultancy, agency or managed service provider (MSP) it sets out what a day, or an hour, of each grade of person costs to buy, and the terms on which that price holds. It is not a quote, which applies the card to a piece of work, and it is not the rate any one client actually pays, which is the billing rate. It is the published starting point every negotiation refers back to and, as I learned twice, the document that decides what the company can sell for years afterwards.
The five things a services rate card carries
A card that only lists prices is half a card. The ones that survive a procurement team carry five things.
- The grades. A ladder of seniority levels, each with a sentence on what that grade can be trusted to do alone.
- The unit, defined. How many hours a day holds, on site or remote, what happens to travel time, and what out-of-hours work costs.
- The price per grade per unit. One number for each rung, in one currency, with the tax position stated.
- The terms that travel with the price. Payment terms, minimum booking, notice, expenses, and whether the rate is held for an engagement or reviewed annually.
- The version. A date, a validity period and how volume or term discounts apply, so nobody argues later over which card a deal was struck on.
Rate card vs billing rate vs billable rate vs blended rate
| Term | What it means | Where you see it |
|---|---|---|
| Rate card | The published list price per grade per unit | Proposals, frameworks, the website |
| Billing rate | The rate actually invoiced for a named person on a named engagement, after any negotiated discount | The statement of work and the invoice |
| Billable rate | Usually a synonym for billing rate; in resourcing it is the rate a person can be charged out at, as distinct from what they cost | Resourcing plans and utilisation reports |
| Blended rate | One rate for a mixed team, the weighted average of the billing rates of the grades on the job | Fixed-team retainers and managed services |
The gap between the card and the billing rate is your discount, and it should be visible, not buried in a second, lower card. The gap between the billing rate and what you recover per hour after write-offs and overruns is your realised rate, and that decides margin. A card can look healthy while realised rates quietly fall; utilisation will not tell you, and revenue per billable person will.
Why a two-person firm publishes five grades
When Steve and I started what became DevOpsGroup, a services company helping other businesses build and run software, in 2013 there were two of us, and our first rate card was borrowed. Another supplier had published theirs on the government’s G-Cloud buying framework, and I copied the structure because it would make getting onto the framework easier. Its levels came from SFIA, the Skills Framework for the Information Age, which describes seven levels of professional responsibility rather than job titles. For private buyers we ran a plainer five-grade house card, practitioner to principal, mapped onto the same levels so that no buyer could compare the two and find a cheaper way in. Publishing five grades from a company of two felt presumptuous. It turned out to be the most useful thing the card did. Five grades described the company we intended to become rather than the one we were. They gave a buyer a place to put us, because large organisations already buy consultancy through a ladder like it. They let us sell a senior day at a senior price, and when we hired the first junior engineer there was already a rung, and a price, waiting. The card was also a promise about who would do the work, and we had to keep it.
The other lesson came slower. Having copied the framework’s structure to get onto it, we lived inside that structure for years. A price is a strategy, and the card written in year one decides more than the founder writing it realises.
How the prices on a rate card are set
The number on each rung comes from a method, in four steps. Start with the cost base: what the business must earn in a year to pay its people, its overhead and the profit it needs. Divide that by the days you will actually bill, far fewer than the working days in a year once selling, leave, training and bench time are taken out; that is the floor. Then look at what the market’s existing ladders charge for the grade you are selling, because the buyer already has that ladder in their head, and place yourself on it deliberately. Finally, adjust for risk: a fixed price carries more of it than a day rate and should cost more. A rate both sides would agree to again is the test. The guide Consultant day rate in the UK: how to set one you can defend works through what a fair rate is; consulting fees more generally are set by time, by fixed price for a scope, by retainer for availability, or by value delivered, and a rate card is the foundation of the first three.
Going further
The playbook How to build a consulting rate card with no billing history sets out the borrowed ladder method in full, and the rate card builder models a graded card and its blended rate on your own numbers. Both are in development.