Most freelance rates start as a guess: what a friend charges, what you earned in your last job divided by forty hours, or a number that felt brave on the day. A guess can work for a while. But if it's below the rate your business needs to survive, every new client makes things slightly worse.
Your rate floor is the lowest hourly rate at which your business pays you what you need. It isn't your price. It's the line you should never quote below.
The four numbers you need
- What you want to take home in a year. The money that ends up in your personal account, the way a salary would.
- Tax. As a freelancer, nobody takes tax out for you. Set aside a share of what you earn. Your accountant can tell you the right figure for where you live.
- Business costs. Software, equipment, insurance, your accountant, training, a co-working desk. Add up a year's worth.
- Billable hours. Hours a client actually pays for, across a year, after holidays and quiet weeks.
Billable hours are fewer than you think
This is where most rates go wrong. You might work forty hours a week, but a good part of that is unpaid: email, quotes, invoicing, finding the next client, admin, learning. For most freelancers, the hours a client pays for are well below the hours they work. Then take off holidays, sick days and the gaps between projects.
If you're not sure, track a normal week honestly. The answer is usually humbling, and it's the most important number in this guide.
Run your numbers
The calculator adds your tax on top of the take-home you want, adds your costs, and divides by your billable hours. If you put in what you charge now, it shows how far you are from your floor and what the gap costs you over a year.
(income + tax + costs) ÷ billable hours
The floor is not your price
Once you know your floor, you know what you can't go below. What you actually charge should depend on other things too:
- What the work is worth to the client. A landing page that brings in leads is worth more than its hours.
- The market for your kind of work. Look at what people with similar experience charge.
- How much risk you're taking. Fixed-price projects carry the risk of overrunning. Price that in.
For a more detailed answer, with day rates and project prices, the free rate calculator below does the full version and saves your figures.
Raising your rate with existing clients
If you're under your floor, the fix is to raise your rate, and the safest way is with notice. New clients get the new rate straight away. Existing clients get a date:
From 1 March, my rate goes up to $95 an hour. Anything we agree before then stays at the current rate. Thanks for working with me; I'm looking forward to the next project.
No apology and no long explanation. Clients are used to prices going up. The ones who leave over a fair rate are rarely the ones keeping your business healthy.
Charging enough per hour is half the battle. The other half is getting paid for every hour you work: see what unbilled small requests cost you in a year.