Most new freelancers set their rate by guessing, or by copying what an employee in their field earns per hour. Both approaches leave money on the table — sometimes a lot of it. The right rate starts from the income you actually need, not the market average.
Start with your target take-home income
Say you want to replace a $75,000 salary. As a freelancer you also need to cover self-employment tax (an extra ~7.65% beyond what an employer would normally pay), health insurance (roughly $6,000/year for an individual plan), and no paid time off. A reasonable target gross revenue to net $75,000 comfortably is closer to $95,000-$100,000.
Account for unbillable hours
A full-time freelancer working 2,000 hours a year does not bill all 2,000. Realistically:
- Admin, invoicing, emails: 15-20% of time
- Marketing and finding clients: 10-15% of time
- Actual billable client work: 65-75% of time
At 70% billable, 2,000 working hours becomes only 1,400 billable hours per year.
The math, worked out
Target gross revenue of $98,000 divided by 1,400 billable hours gives an hourly rate of $70/hour. Compare that to simply dividing a $75,000 "equivalent salary" by 2,000 hours, which gives just $37.50/hour — a rate that would leave you earning far less than the salaried job you're replacing once taxes, benefits, and unbillable time are factored in.
Adjust for experience and niche
Once you have your baseline rate, adjust it for market reality:
- Specialized or high-demand skills: add 20-50% above the baseline
- New to freelancing, building a portfolio: it's reasonable to start 10-20% below baseline temporarily, with a plan to raise rates within 6-12 months
- High client demand / fully booked: this is the clearest signal to raise rates — being booked solid for 2+ months at your current rate means you're underpriced
Price projects, not just hours
Once you know your true hourly rate ($70 in the example above), use it to quote flat project fees. A project estimated at 12 hours should be quoted at $840-$1,000 (adding a buffer for scope creep) rather than billed hourly — clients often prefer the certainty, and you're rewarded for working efficiently instead of penalized for it.
Find your number
The right rate depends on your income goal, expenses, and realistic billable hours — all of which vary by person. Use the Freelance Rate Calculator to plug in your own numbers and get a rate built for your situation.