How to Calculate Your Freelance Hourly Rate (Without Underpricing Yourself)

Most freelancers set their rate by glancing at what other people charge, doubling their old salary’s hourly equivalent, or simply guessing. Then they wonder why, despite being “busy”, the bank balance never grows the way it should.

The problem is that an hourly rate isn’t a market price you copy. It’s a number that has to cover your income goal, your business costs, the weeks you don’t work, and all the hours you spend working on the business instead of for clients. Here’s how to calculate it properly.

Step 1: Decide what you actually want to earn

Start with your target annual take-home income, the money you want left over for yourself after business expenses. Be honest and include what you’d want in a good year, not the bare minimum to survive. If you’d be happy on $60,000 net, that’s your starting number.

Step 2: Add your business expenses

Everything you spend to run the business has to be earned back through your rate: software subscriptions, hardware, insurance, accounting, coworking, your phone and internet share, professional development. Add it all up for the year. For many solo freelancers this lands somewhere between $5,000 and $15,000.

Your required annual revenue is now income goal + expenses.

Step 3: Count your real billable hours

This is where most people go wrong. There are 52 weeks in a year, but you will not bill 52 × 40 = 2,080 hours. You need to subtract:

• Weeks off. Holidays, sick days, slow periods. Even 5–6 weeks is realistic.
• Non-billable time. Admin, invoicing, marketing, sales calls, proposals, learning. For most freelancers, only 50–70% of working hours are actually billable.

So if you work 40 hours a week, 46 weeks a year, at a 60% billable ratio, your real billable hours are: 40 × 46 × 0.60 ≈ 1,104 hours, barely half the naive 2,080.

Step 4: Do the division

Your minimum hourly rate is simply:

required annual revenue ÷ real billable hours

Using the numbers above ($60,000 income + $10,000 expenses = $70,000, divided by 1,104 billable hours), your minimum rate is about $63/hour. Notice how far that is from “I’ll charge $40 because that feels reasonable.”

Step 5: Add a profit and buffer margin

The number from Step 4 is your break-even rate, not your target. Add 15–25% on top for profit, taxes you may have underestimated, and the inevitable months where work dries up. That pushes this example toward $75–80/hour as a healthy target rate.

Skip the math: use the calculator

You don’t have to run this by hand. The free freelance rate calculator does every step above and shows you the working. Enter your income goal, expenses, billable hours and time off, and it returns your minimum and target rate instantly. No signup.

The number that matters more than your rate

Here’s the catch: calculating your target rate is only half the job. The rate you charge and the rate you actually earn are rarely the same, because of scope creep, under-quoted projects, and unbilled hours.

That gap is your effective hourly rate, the number that tells you whether your business is really working. The rate you just calculated is the floor you decided is worth your time, and CronLoom keeps score against it: track your time, and CronLoom turns it into your real effective rate per client, then flags every client and fixed bid that slips below your floor. Try it free during early access and know what your hours really earn.