How to Price Freelance Work (Without Undercharging)

Work backwards from the income you want, add tax and costs, and divide by realistic billable hours to find your rate.

Most new freelancers charge what an employee earns per hour. That leaves them short.

Work backwards

Suppose you want $60,000 of take-home pay, expect $10,000 of business costs and set aside 25% for tax. You need about $80,000 before tax plus $10,000 of costs, so $90,000 of revenue.

Use billable hours, not working hours

You cannot bill every hour. After admin, selling, holidays and sick days, 1,300 billable hours a year is realistic. $90,000 / 1,300 is about $69 an hour.

Check margins and break-even

For product or service pricing, know your margin and how much you must sell to cover fixed costs.

Calculators

Use the freelance hourly rate calculator, the break-even calculator and the profit margin calculator. For taxes, see self-employed taxes made simple.

This article is general education, not financial advice.