How to Calculate Your Freelance Rate
Setting the right freelance rate is one of the most important financial decisions you will make as an independent professional. A rate that is too low leaves money on the table and signals inexperience; a rate that is too high can price you out of opportunities. The goal is to find a number that covers all of your costs, pays you a fair salary, and leaves room for growth.
Begin by identifying your target annual income -- the amount you want to take home after all business expenses are paid. Next, estimate your overhead as a percentage of that income. Overhead includes self-employment taxes, health insurance, retirement savings, software tools, equipment depreciation, and any other recurring business costs. A figure between 20 and 30 percent is typical for most service-based freelancers.
Once you have a total revenue target, divide it by the number of billable hours you expect to work in a year. Remember that not every hour at your desk is billable. Administrative tasks, client acquisition, bookkeeping, and professional development all consume time that you cannot invoice. Most full-time freelancers find that 25 to 30 billable hours per week is realistic.
Finally, consider external factors such as market rates for your skill set, the complexity of the work, and the value you deliver to clients. Your rate should reflect not only your costs but also your experience, the results you produce, and the demand for your services. Revisit your pricing at least once a year to keep pace with inflation and skill growth.