How the math works
Start with the money you want to take home and add your yearly business costs. Self-employed people also pay the taxes an employer would normally cover, so that total is grossed up by your self-employment tax rate. That is how much you need to bring in.
Then count the hours you can actually bill. A year has 52 weeks, but you will take holidays and be sick sometimes, and some weeks are slow. Most of your week also goes to things clients don’t pay for directly: email, sales, admin, invoicing. Few freelancers bill more than 25 to 30 hours a week over a whole year.
Divide what you need to bring in by your billable hours and you get your floor. Anything below it means you are earning less than you planned.
The usual mistake
New freelancers often take their old salary, divide it by 2,080 hours (40 hours times 52 weeks) and charge that. With costs, taxes and real billable hours, the right number is usually close to double.
Questions
Why can’t I bill 40 hours a week?
Should I include income tax?
Should I charge by the hour or by the project?
How do I know how many hours I really bill?
Know your real hourly rate
Track your time in Sheaf and see what each client and project actually pays per hour. Free during beta.
More free tools
- Free invoice generatorMake a professional invoice in a minute and download it as a PDF. Free, no sign-up, no watermark. Works for hourly work and fixed items, with tax and discounts.
- Time card calculatorFree weekly time card calculator. Add start times, end times and breaks to get total hours, decimal hours, overtime and pay. Handles overnight shifts.
- Convert hours and minutes to decimalConvert hours and minutes to decimal hours and back. 15 minutes is 0.25, 30 is 0.5, 45 is 0.75. Free converter with a full minutes to decimal chart.
- Free weekly timesheet templateFree weekly timesheet template you can fill in online. Track hours by project and task, mark billable time, then print, save as PDF or download as CSV for Excel or Google Sheets.