How to Calculate Blended Rate for Consulting

A blended consulting rate is the average hourly rate charged for a consulting engagement when multiple consultants, each with potentially different hourly rates, contribute to the same project.

Calculate it using a weighted average:

\[ \boxed{\text{Blended Rate} = \frac{\text{Total Consulting Fees}}{\text{Total Billable Hours}}} \]

When every consultant has a different hourly rate:

BlendedRate=(R1H1)+(R2H2)++(RnHn)H1+H2++Hn

The key is to weight each consultant’s rate by the number of hours they contribute. Simply averaging their hourly rates can produce an incorrect result.

1. Blended Consulting Rate Formula

The formula is:

BR=i=1n(RiHi)i=1nHi

Where:

Variable	Meaning
BR	Blended consulting rate
Ri	Hourly billing rate of consultant
Hi	Billable hours contributed by consultant
n	Total number of consultants or billing categories

The calculation uses the agreed hourly rate and the corresponding billable hours for each consultant.

2. Information You Need Before Calculating

Collect these details for everyone working on the consulting engagement:

Individual consultant hourly rates.
Estimated or actual billable hours for each consultant.
Applicable client discounts, if calculating the actual billing rate.
Total project hours.

Use the same project scope and reporting period for all consultants.

3. How to Calculate Blended Rate Step by Step

Step 1: List each consultant’s hourly rate.

For example, a consulting team has three members:

Consultant	Hourly rate
Senior consultant	$250
Consultant	$175
Junior consultant	$100

Step 2: Identify the hours contributed by each consultant.

Assume the following estimated project allocation:

Consultant	Hourly rate	Billable hours
Senior consultant	$250	20
Consultant	$175	40
Junior consultant	$100	40
Total		100

Step 3: Calculate each consultant’s total fees.

Multiply the hourly rate by the number of billable hours.

Consultant	Calculation	Total fees
Senior consultant	$250 × 20	$5,000
Consultant	$175 × 40	$7,000
Junior consultant	$100 × 40	$4,000
Total		$16,000

Step 4: Divide total consulting fees by total billable hours.

BR=16,000100

\[ \boxed{BR = \$160/\text{hour}} \]

Calculated result

The blended consulting rate is $160 per hour.

This means the consulting team can present one hourly billing rate of $160 for the engagement instead of separately charging the client $250, $175, and $100 for different team members, assuming the client and consulting firm agree to that pricing arrangement.

4. Why You Should Use a Weighted Average Instead of a Simple Average

A common mistake is adding all consultant rates and dividing by the number of consultants.

Using the example above:

\[ \frac{250+175+100}{3}=\$175 \]

This gives $175 per hour, but it is not the correct blended rate for this project.

The reason is that consultants contribute different amounts of time.

The senior consultant works 20 hours, whereas the junior consultant works 40 hours. Therefore, their hourly rates should not have equal influence on the final result.

Calculation method	Result
Simple average	$175/hour
Weighted blended rate	$160/hour

The weighted average reflects the actual distribution of project hours.

5. How to Calculate Blended Consulting Rate in Excel or Google Sheets

You can calculate the blended consulting rate automatically using the SUMPRODUCT formula.

Set up your spreadsheet like this:

A	B	C
Consultant	Hourly Rate	Billable Hours
Senior consultant	250	20
Consultant	175	40
Junior consultant	100	40

Enter this formula in another cell:

=SUMPRODUCT(B2:B4,C2:C4)/SUM(C2:C4)

The result will be:

$160 per hour

SUMPRODUCT multiplies each consultant’s hourly rate by their billable hours and adds the results. Dividing by total hours produces the weighted blended rate.

Calculating it from total fees and hours

When you already know the total consulting fees and total billable hours, you can use:

=16000/100

Or, if the total fees are in D5 and hours are in C5:

=D5/C5

6. What If You Want to Calculate Your Consulting Firm’s Own Blended Rate?

There is another important distinction.

A consulting firm may want to calculate a blended rate that covers its operating costs and generates a target profit margin, rather than simply averaging its consultants’ existing client billing rates.

This is a cost-based pricing calculation.

First, calculate the fully loaded cost per billable hour:

CostRate=TotalDeliveryCostsTotalBillableHours

Delivery costs may include:

Consultant salaries and bonuses.
Employer payroll taxes.
Employee benefits.
Relevant delivery overhead.
Other applicable employment costs.

Then calculate the required selling rate:

SellingRate=CostRate1-TargetGrossMargin

For example, if the fully loaded delivery cost is $80 per billable hour and the target gross margin is 40%:

SellingRate=801-0.40

\[ =\frac{80}{0.60}=\$133.33 \]

The firm would need to charge approximately $133.33 per hour to achieve the assumed 40% gross margin.

This is different from calculating the weighted average of existing consultant billing rates. Do not confuse a cost-based pricing rate with the client-facing blended rate.

7. Common Mistakes When Calculating Blended Consulting Rates

1. Using a simple average: Different consultants contribute different hours, so their rates need to be weighted.

2. Ignoring actual billable hours: Use the hours associated with the rates being calculated, not the entire team’s paid working hours.

3. Using standard rates instead of discounted rates: For an actual realized billing rate, use the rates or fees actually agreed upon and billed.

4. Mixing different project periods: Do not combine one consultant’s annual hours with another consultant’s monthly hours without aligning the reporting period.

5. Including unrelated expenses: Travel reimbursements, software purchases, and other pass-through expenses should generally be excluded when calculating an hourly consulting labor rate.

6. Confusing markup with gross margin: A 40% markup on cost does not produce a 40% gross margin.

8. Frequently Asked Questions

Is blended consulting rate the same as average hourly rate?

Not necessarily. A blended consulting rate is usually a weighted average that accounts for each consultant’s billable hours. A simple average gives every consultant equal weight regardless of their contribution.

Can a consulting firm use one blended rate for all employees?

Yes. A consulting firm can offer one rate covering different experience levels and roles. This simplifies client billing, although the firm must ensure that its team composition and delivery costs support that rate.

Should non-billable hours be included?

For a client-facing blended billing rate, generally no. Use the hours that correspond to the consulting fees being billed. However, when measuring the effective hourly revenue earned from actual delivery work, unbilled delivery hours may also need to be included.

How do you calculate the actual blended hourly rate after project completion?

Divide the total professional-service fees billed for the project by the total billable hours recorded for that same project.

ActualBlendedRate=ActualFeesBilledActualBillableHours

For a collected-rate calculation, replace fees billed with the revenue collected and attribute both amounts to the same work.

Is a lower blended consulting rate always better?

No. A lower rate can make a proposal more competitive, but profitability also depends on team costs, the number of hours required, project scope, and the level of expertise needed.