What the retainer profitability calculator measures
The calculator compares a monthly retainer fee and included or planned capacity with actual delivered hours, approved overage, loaded labor cost, and retainer-specific non-labor cost. It keeps usage, revenue and delivery economics separate.
Not every retainer is an hour bank. If the client pays for access, response time, continuity or an outcome, treat included hours as an internal capacity assumption and interpret unused capacity in the context of the service promise.
How the retainer results are calculated
Usage equals delivered hours divided by included or planned hours. Over-service is delivered hours above included capacity. Revenue equals the monthly fee plus only the overage hours the firm expects to invoice at the entered overage rate.
Delivery cost applies loaded labor cost to all delivered hours and adds direct non-labor cost. Effective rate divides revenue by delivered hours, while delivery margin divides profit by revenue.
- Usage = delivered hours ÷ included capacity × 100
- Over-service hours = maximum of delivered hours − included hours and zero
- Revenue = monthly fee + approved overage hours × overage rate
- Delivery cost = delivered hours × loaded labor cost + non-labor cost
- Delivery margin = (revenue − delivery cost) ÷ revenue × 100
- Effective hourly rate = revenue ÷ delivered hours
Worked retainer example
Assume a $24,000 monthly fee includes or plans for 120 hours. The team delivers 138 hours, 10 of the 18 over-service hours are approved for billing at $190, loaded labor cost is $68 per hour and direct non-labor cost is $1,200.
Usage is 115 percent, revenue is $25,900, delivery cost is $10,584 and estimated delivery profit is $15,316. Margin is approximately 59.1 percent and effective revenue per delivered hour is about $187.70. Eight hours remain unbilled over-service and should be classified as deliberate goodwill, pending approval, or a scope issue.
Interpret unused and over-service capacity correctly
Unused included capacity can be healthy when the fee reserves availability the firm could not sell elsewhere. It can also create renewal risk when the client does not perceive value. Persistent over-service may show strong demand, weak boundaries, an outdated fee, or an inefficient delivery model.
Review a rolling period instead of treating one month as the complete relationship. Keep included work, approved overage, unbilled goodwill and out-of-scope requests visible.
Use the calculator in a renewal process
Show fee, reserved and delivered capacity, usage range, overage, service performance, effective rate, cost, margin, and recurring request patterns. Decide whether to change scope, service tier, response promise, role mix, overage mechanism or fee.
Timecard Lab can retain project and retainer hours from approved time so the account review uses actual service effort rather than a reconstructed month-end estimate.
Frequently asked questions
Should unused retainer hours be treated as pure profit?
Not automatically. The firm may be reserving capacity or providing availability, continuity and service levels even when delivered hours are low. Review the commercial promise, reserved capacity and renewal risk.
Should every hour above the included amount be billed?
Only when the agreement and approval process allow it. Keep total over-service separate from approved billable overage so the calculation does not assume revenue the firm cannot collect.
What if the retainer has no included hours?
Use an internal planned-capacity value for the usage view, label it clearly, and interpret it as a staffing assumption rather than a contractual entitlement.
Should shared on-call time be allocated to one client?
Record client-specific work directly. Allocate genuinely shared cost only under a documented method, and do not count the same hour as delivered separately to several clients.