How to Quickly Calculate Your Minimum Freelancer Rate

. 2 min read

Now that you know more about your business expenses and time allocation, you can use a simple formula to figure out the minimum amount you should charge. The key here is to consider the difference between revenue and profit. What you charge is revenue; profit is what you can take home after spending time and money making your business sustainable.

Let's begin with what we already know.

  1. You're only going to take home about half of what you bring in (about 55%)
  2. You're only going to work on projects that pay the bills for about half of your available time (about 60%)

That means, in order to make $20/hour and cover your business expenses, you'll need to charge $40/hour.

And then, in order to actually make $20/hour during the time you've allotted to working on your business (including the stuff you don't get paid for), you need to double your rate again, to $80/hour.

In order to bring in $20/hour in profit from your business, your business needs to charge clients $80/hour. Gives you a different perspective on your 'overpriced' peers, doesn't it?

A Real-World Example

These blocks represent two workweeks (10 days):

(Let's pretend, as a freelancer, that you won't be working on weekends—ha!)

If you were working full-time for an employer—and you make $20/hour—you'd take home roughly $110 per day (after taxes).

= $1,100 every 2 weeks

Now, as a freelancer, you don't spend all your time working on projects you get paid for. The following blocks show (with a green highlight) how much time per week you'll actually spend making money:

That means, in order to make an average of $110/day, you need to charge twice that.

= $110/day on average

However, you still need to cover your business expenses! Every day, your expenses take up roughly 50% of your revenue. That means, you'll only be taking home about half of what you make.

So, again, you need to double how much you're charging, just in order to bring home the same amount you'd be making working full time for an employer full-time:

= $1,100 every two weeks, after expenses.

Start off with an idea of how much you need to take home every day—to pay rent and live comfortably—then quadruple that number. That's the number you need to charge clients for one full day of work.