Enter the amounts for each of the main fields then click calculate for the result.
Revenue – Enter the combined revenues (ex.tax) of the business.
Costs – Enter the amount combined for cost of goods sold + expenses (ex. tax). It is important that you also exclude the Business Owner salaries and other benefits to calculate EBOC correctly.
Hours – Enter the total of all hours worked by the Business Owners including both ‘on’ and ‘in’ the business hours. Most Owners usually underestimate the true number initially.
* This free tool is for information & education use only, we always recommend speaking with a professional before making important business decisions.

EHR (Effective Hourly Rate) is a Business Owner productivity/efficiency metric. In essence EHR is a ratio of how much profit a business makes versus the hours the business owner works. It is a good indicator for how leveraged the Business Owner is being with their people and systems, or conversely how reliant the business is on the owner to make sales and get the work done. It indicates whether the business is being run like a ‘business’ or a ‘job’ and that effects the business value and what someone is prepared to pay for it.

Calculating EHR: (Combined Revenues – Combined Expenses)/Owner Hours = Effective Hourly Rate

Most Business Owners look to build a “commercial, profitable enterprise that works mostly without them” use EHR as a productivity ‘tracking’ score for how they are doing. The Revenue gives us the ‘scale’ of the business enterprise. The profit (EBOC) gives us the ‘reward’ or Return on Investment as a shareholder/owner of our time, energy and money. Finally, the EHR gives us a metric of how much time investment to give us that return and a good indicator if it is a business built on systems, and people, or if the enteprise is being run like a ‘job’ with the business adding little value itself.
As Business Coaches we use EHR-Effective Hourly Rate across more than 70 different industries to give the Business Coaches and Coaching Clients a quick consistent measure for how productive they are at building a more valuable business through their time, people and systems.

EBOC (Earnings Before Owners Compensation) normalises Owner compensation and perks to eliminate anything above and beyond a reasonable management replacement salary. When valuing a business the EBOC/Revenue ratio metric is typically the greatest indicator of a businesses profitability – because in most cases businesses are valued primarily on free cash flow. In accounting speak this is also known as Sellers Discretionary Earnings (SDE)

Calculating EBOC: Combined Revenues – Combined Expenses = Earnings Before Owners Compensation
Calculating NOI: EBOC – Owners Compensation = Net Operating Income(NOI)

Martial Arts is about the journey of mastery over self; in much the same way as a Business owners mastery of all that goes into making a successful business. At BGL we do it as a fun reminder there is always another level to mastery and to acknowledge the progress of our clients.
In our experience as Business Coaches far too many people tout Revenues as a vanity metic for business success yet it alone doesn’t reveal if the business is actually profitable, or if the Owner is working themselves into an early grave working lots of hours and trying to do everyhting themselves. Using EHR as a success metric takes into all 3 high level indicators of what a business is.
Our definition at BGL: A business is a commercial, profitable enterprise that works mostly without you. You can think of commercial as their is revenue, profitable as their is a good EBOC, and works mostly without you as EHR. For most clients we work with Black Belt (above $1000) you are in reality moving from Business Owner to Investor where you ‘get to’ work in your business rather than ‘have to’.
Our Belt levels are:
Black – Over $1000/hr EHR
Brown – Upto $1000/hr EHR
Red – Upto $700/hr EHR
Blue – Upto $500/hr EHR
Green – Upto $300/hr EHR
Yellow – Upto $200/hr EHR
White – Upto $100/hr EHR

To increase your EHR you need to lift your EBOC or reduce the Owners hours. Often the answer to which one should work on first will be different depending on if you are talking with an accountant or a business coach 🙂
An accountant will start by looking at the revenues coming in to see if improvements can be made. Next, take a hard look at your expenses. It’s easy to fall into the pattern of paying a bill year after year without questioning it. Chances are you can trim expenses somewhere. But keep it realistic; cutting necessary and reasonable isn’t going to positively affect your true bottom line.
If Revenue/EBOC are ok a business coach will usually start with dropping the owners ‘in the business’ hours. We use a framework for this LEAD (Leverage, Elimination, Automate, Delegate) with a few other tools to enable this. It is no coincidence that the most successful owners focus ‘on the business’ and usually work less hours and make more profits. But initially we reinvest that time to further improve the efficiency of the people & systems using our 4 meeting framework of Daily Huddles, Weekly Leadership, Monthly Mentoring, and Quarterly Planning which can all be executed in less than a few hours per day. While we are setting these up the coach is usually ticking of the Sales & Cost improvements mentioned earlier.
*BTW If you are serious about improving your EHR and building your business into a “Commercial, profitable enterprise that works mostly without you” take a look at our Free 30-Day Pilot Program where we work with you personally to get you from Chaos to Control reducing your in the business hours by 20-50%.