Why use this calculator
Setting the right freelance rate is critical to building a sustainable business. Many freelancers undercharge by failing to account for taxes, business expenses, and the need for a profit margin. This calculator ensures you price your services to meet your financial goals while covering all costs.
How to use it
Enter your desired take-home income, the number of hours you can realistically bill each week, your working weeks per year (accounting for vacation and sick days), your tax rate, annual business expenses, and a profit margin to build a financial cushion.
The formula
Rate = (Target Income / (1 - Tax Rate / 100) + Expenses) x (1 + Profit Margin / 100) / (Billable Hours x Weeks per Year)
Worked examples
A designer wanting $80,000 take-home with 30 billable hours/week, 48 weeks/year, 30% taxes, $10,000 expenses, and 15% margin
Recommended rate of approximately $98.21/hour with a daily rate of $785.71
A consultant targeting $120,000 with 25 billable hours/week, 46 weeks/year, 35% taxes, $15,000 expenses, and 20% margin
Recommended rate of approximately $212.17/hour with monthly revenue target of $21,639
When people use it
- New freelancers determining their initial pricing
- Established freelancers reviewing rates annually
- Consultants transitioning from full-time employment
- Agency owners calculating minimum rates for contractors
Tips
- Track your actual billable hours for a few months before estimating - most freelancers overestimate how many hours they can bill
- Include health insurance, retirement contributions, and software subscriptions in your expenses
- Review and adjust your rate at least once per year as your skills and costs change
- Consider offering project-based pricing using your hourly rate as a baseline
Questions people ask
- Why is the recommended rate higher than just dividing my income by hours?
- The calculator accounts for taxes you must pay, business expenses that eat into revenue, and a profit margin to grow your business and handle unexpected costs.
- What is a good profit margin for freelancers?
- Most successful freelancers aim for 10-20% profit margin. This provides a buffer for slow months and funds for business growth.
- How many billable hours should I plan for?
- Most freelancers can only bill 60-70% of their working hours. The rest goes to admin, marketing, and business development. 25-30 billable hours per week is realistic.