How to Set Your Freelance Rate

A freelance rate is not a salary divided by 2,080 hours. You pay your own expenses and taxes, take unpaid time off and spend part of every week on work nobody pays for. Build the rate from those facts and you get a floor you can defend; then the market tells you how far above it you can go.

Five steps

1. Set the income you want to keep

   The amount after tax and expenses that you want for the year. Example: $72,000.

2. Gross it up for tax

   Divide by (1 − your tax rate). With a 20% rate you entered: $72,000 ÷ 0.8 = $90,000 of profit before tax.

3. Add business expenses

   Software, equipment, insurance, a workspace, professional fees: $12,000 a year. Revenue needed: $102,000.

4. Count billable hours honestly

   Weeks you work times hours you can bill each week: 50 weeks × 30 hours = 1,500 hours.

5. Divide

   $102,000 ÷ 1,500 = $68 an hour — $544 for an 8-hour day, $2,720 for a 40-hour project.

Billable hours are the lever

The same goal at 25 billable hours a week over 48 weeks — 1,200 hours — needs $85 an hour. At 35 hours over 50 weeks it needs about $59. Track for a few weeks how much of your time is really billable before you trust any number; admin, sales and learning do not disappear.

Check against the market

Your calculated rate is the minimum that meets your goal. Compare it with what clients in your field pay for similar work. If the market pays less, the options are more billable hours, lower expenses, a different client segment or pricing by project and value instead of time.