Step 1: Set the gross target in one period
A round number that sounds professional is a guess. You can defend a rate when you can recompute it from the gross you need, the hours you can sell, and a cushion for friction that never appears on the invoice. If the calendar is full and the account is not, fix the hours before you raise the sticker.
Write one figure in one period, yearly or monthly. Include living costs, tools, and a slow-month reserve. Do not start from a competitor's public rate. The calculator at the top of this page runs the next three steps. Its default is example A: a 72,000 target, 46 weeks, 22 billable hours, and a 15 percent cushion. Change the period to a month and it resets the week count, so you do not divide a monthly target by a year of weeks. Treat every figure here as planning math, not as tax or legal advice.
Name minimum viable revenue before the aspirational target: living costs, the tax set-aside you already plan to hold, and essential tools. The income target sits above that floor. A 72,000 yearly target is 6,000 a month, so a three-month contract is 18,000 gross. Put known costs in the target and late payment in the cushion. How to size the reserve is in how much buffer a freelancer needs.
Step 2: Count sellable hours, not desk hours
Estimate billable hours from the weeks you will work, then subtract sales, admin, learning, holidays, and recovery. Many solo practices land nearer 20 to 25 billable hours a week than 40. Forty hours at a desk are not forty hours on an invoice.
Count weeks first. Fifty-two weeks, minus vacation, public holidays, and a short shutdown, often lands near 46. If you will be away longer than that, use the weeks you will actually work. Billable time is what you can invoice. Use last quarter's median week, not the heroic one.
Example, assumptions stated. You work forty-five hours in total. Non-billable time averages twelve hours for admin, sales, and learning. That leaves thirty-three hours that could be billed before life events. Hold about 20 percent of that remainder as schedule buffer for feedback delays and overrun. Twenty percent of thirty-three is about seven hours. Sellable billable hours land near twenty-six a week, not forty-five. The rate formula must use twenty-six, or your tracked median, in the denominator. Dividing by forty-five times 46 (2,070 hours) prices a year you do not have.
Booking thirty-five billable hours when you deliver twenty-eight produces rush work. Quote start dates from capacity you can maintain. The gap between clock time and invoice time is in billable hours lower than working hours. A full calendar that does not finish paid outcomes is a different leak: busy vs finishing work.
| Trap | What you see | What to change |
|---|---|---|
| Pricing as if every hour sells | The rate looks modest and income still misses | Use last quarter's real billable average |
| Raising the rate while utilization falls | The calendar stays busy and the balance does not | Cut a non-billable leak or drop weak work |
| Ignoring unpaid revisions | The effective rate falls after the invoice | Cap rounds in the scope and price the extra |
| Matching a salary one to one | Benefits, idle time, and sales risk stay invisible | Compare with loaded cost plus your unpaid hours |
| Free quick calls | They consume the billable ceiling | A batched call window and a written status |
If last quarter averaged 18 billable hours and the plan says 28, recompute at 18. The plan is the error. Extra discipline rarely creates ten billable hours unless a whole category of work leaves the week.
Step 3: Divide by those hours and cushion once
Divide the gross target by honest billable hours. That quotient is the floor. Then add one cushion, ten to twenty percent, for revisions you absorb, payment delay, and scope creep. Apply it to the target or to the rate, not to both.
Example A: annual target
Assumptions: a 72,000 gross target, 46 working weeks, 22 billable hours a week, and a 15 percent cushion.
Billable hours in the year are 46 times 22, which is 1,012. The floor is 72,000 divided by 1,012, which is 71.15, about 71 euros an hour. The cushion is 71.15 times 0.15, about 10.67. Add it: about 82 euros an hour. The same result appears if you cushion the target instead: 72,000 times 1.15 is 82,800, and 82,800 divided by 1,012 is 81.82, still about 82. Pick one place to apply the 15 percent.
If you secretly believe you will bill 35 hours every week, 46 times 35 is 1,610 hours, and 72,000 divided by 1,610 is about 45 euros an hour. That sticker misses the target, because you never had 1,610 sellable hours. Rerun the math at 22 before you publish 45. If the calculator is set to a month, divide by the monthly hours it shows. Do not reuse 1,012.
Example B: monthly cash need
Assumptions: 5,000 euros needed in the month, four weeks, 80 billable hours realistic at 20 a week. The floor is 5,000 divided by 80, which is 62.50 euros an hour. If last quarter averaged 60 billable hours, the honest floor is 5,000 divided by 60, which is 83.33, so it jumps above 83. Quote from that month. Treat an 80-hour month as surplus.
Example C: part-time freelance
Assumptions: 24,000 of side income, 20 weeks active, 12 billable hours a week while active. Hours are 20 times 12, which is 240. The floor is 24,000 divided by 240, which is 100 euros an hour. A 10 percent cushion is 10 euros, so the quote is about 110. Part-time hours often need a higher rate because sales and context switching consume the non-billable time harder. The employed week does not donate its evenings for free.
If you leave 46 weeks in the formula out of habit, 46 times 12 is 552 hours, and 24,000 divided by 552 is about 43 euros an hour. You miss the target, because you are only active for 20 weeks.
Say the number as a sentence. "My rate is 85 euros an hour. That covers focused delivery. Admin and meetings outside the agreed cadence are scoped separately." A question mark invites a haggle. Unpaid extras shrink the collected hourly faster than the sticker shows: cheap freelance rates shrink real income.
Step 4: Compare sticker rate with effective rate
The sticker is what the proposal says. The effective rate is revenue divided by the hours the work actually took, after write-offs. If effective lags the sticker, find the leak before you only raise the number.
Example, assumptions stated. You billed 90 hours at 80 euros and still missed the cash target, because about 30 hours were unpaid scope creep and quick calls. Invoiced revenue is 90 times 80, which is 7,200. Hours actually spent are 120. Effective rate is 7,200 divided by 120, which is 60 euros. The sticker said 80. Those 30 unpaid hours are more than a week of sellable time given away.
Repair in this order.
- Put an hours cap and a revision count on the next contract.
- Track non-billable hours as their own category for one month, so the 30-hour leak has a name.
- Raise the rate only after the effective rate is close to the sticker.
Use a practical tolerance. If effective lags the sticker by more than about 15 percent, find the leak before you celebrate a raise. At an 82 euro sticker, a 15 percent lag means you are collecting near 70. That is the example A floor with the cushion stripped off. You are working at the uncushioned number and calling it 82.
Example, assumptions stated: a 60,000 salary plus a 25 percent load is 75,000 of employer cost. Multiplying your hourly rate by 1,760 hours prices a year of desk time you do not have. You have about 1,012 billable hours.
Worksheet for the monthly effective rate
Month:
Revenue collected (same definition every month):
Billable hours invoiced:
Write-off hours (unpaid revisions, free calls, absorbed overage):
Hours actually worked on delivery:
Sticker rate:
Effective on invoiced hours = revenue / billable hours invoiced
Effective after write-offs = revenue / (invoiced hours + write-off hours)
Gap = sticker minus effective after write-offs
One leak to fix before any raise:Fill the worksheet from invoices and an hour log, and keep one revenue definition, invoiced or received.
Example, assumptions stated, not an industry average. Monthly costs, plus the tax set-aside, plus a modest profit you need collected: 6,500 euros. Honest sellable hours in the month, after admin, sales, and a sick buffer: 110, about 26 a week if you take a light week off. Floor before cushion: 6,500 divided by 110 is about 59 euros an hour. A 20 percent cushion makes the quote floor about 71. If a lead wants 55, 110 hours collect 6,050 and miss 6,500. Cut scope until the hours still clear 6,500, or walk.
List every client below the new floor, with an end date. A permanent exception becomes the real rate. Example, assumptions stated: paying a subcontractor 50 euros an hour and billing 50 gives your own coordination a rate of zero.
Decide which pricing shape uses the rate
The hourly figure is an input. The shape is how you attach it to a promise.
| Shape | Use it when | Watch for |
|---|---|---|
| Hourly | The scope moves and the work is research-heavy | Creep with no change order |
| Fixed fee | The deliverable is defined and you can verify done | Dependencies you never priced |
| Day rate | The day is on-site or a workshop | A day that runs past the hours you assumed |
| Retainer | Access is steady and bounded | Unlimited quick questions |
Hourly fits when you cannot see the end. Quote the cushioned rate and cap the hours. A sentence clients can accept: "Includes up to 15 hours a month and two revision rounds on the agreed deliverables. Additional hours at the same rate with 48 hours of notice."
Build a fixed fee from the same math. Example, assumptions stated: 40 hours at 82 euros is 3,280. Quote that product when the scope is bounded. When the client adds a second audience, price the extra hours or cut something else of equal hours. Do not invent a round fixed number after you have done the arithmetic.
A day rate is the cushioned hourly times the hours you will actually work. Example, assumptions stated: six focused hours times 82 is 492. Eight times 82 is 656. Say the six hours in the proposal. A retainer needs a written hour cap or a response window, or it becomes a second job. A hybrid is a fixed discovery week, then a capped build. When each shape fails is in fixed price vs hourly when each works.
Rush work that displaces other hours can take a 25 percent cushion: 82 times 1.25 is 102.50. Thirty percent off 82 is about 57, under the floor of 71, so a discount has to remove hours. A portfolio piece needs a written hour cap, or those hours pay zero. Do not invent a tax percentage on the call.
Decide when to raise and what notice to send
Raise when the calendar is full, scope has crept, the work got bigger, or minimum viable revenue is no longer met. Resentment is a reason to open the worksheet, not a new rate by itself.
Send the notice without an apology tour.
I am updating my rate to X for work starting after [date]. Current projects in flight stay at the contracted rate through completion. Retainer renewals on [date] use the new rate. I am happy to discuss scope if the budget is fixed.
| Who | What you do |
|---|---|
| New clients | New rate on the next proposal |
| Existing clients | Written notice and an effective date. You may honor one more cycle |
| In-flight fixed projects | Honor the bid. Raise on the next statement of work |
A usable raise has a date, a number, and a scope sentence. Update the proposal text the same day. A trial week is the floor rate with a cap. You review the rate each January and at renewal.
Example, assumptions stated: moving from 82 to 90 is about 8,100 on 1,012 hours. If hours fall to 16 a week, 46 times 16 is 736, times 90 is 66,240, which misses 72,000.
Step 5: Build a week that can produce the hours
The sticker survives only if the week still contains the billable blocks you divided by. Protect the denominator the same way you protect the number.
Example, assumptions stated: the floor you quote is 85 euros an hour, and the week is built to hold about 22 billable hours.
| Day | What you protect | What you cap |
|---|---|---|
| Monday | Morning delivery: two 45-minute slices on the primary deliverable | Client chat only after lunch |
| Tuesday | A standing call window of 60 minutes | No ad-hoc quick calls |
| Wednesday | Morning deep delivery | Admin in a batch from 16:00 to 16:30 |
| Thursday | Reviews and revisions inside the scoped rounds | An extra round is a change order |
| Friday | The invoice and a short status with one ask | Unpaid polish you invented after the scope was met |
Four delivery days at five billable hours is 20. You still need about two sold hours inside the caps. Do not invent Friday polish to fill a non-billable close. The day shape is in structure a remote workday. Slice length is in choose focus length for real client work. A late review is a cost you buffer or price: client feedback delays and pricing.
Keep the rate on a calendar so it does not depend on memory.
| When | What you check | What you leave with |
|---|---|---|
| Monthly, 20 minutes | Billable hours against the hours in the formula | A yes or no: did the denominator hold? |
| Quarterly, about 15 minutes | Billed versus plan, one expense line, any client below the floor | One leak to fix, or a note that the floor still holds |
| Yearly, for example January, about 90 minutes | Exported billed hours, expense changes, the formula rerun | A new quote rate and the renewals you will notify |
Leave January with the quote and the renewal notices. Rerun sooner if a large cost appears or three months sit near 90 percent of planned hours. At 22 hours a week, that is about 20.
Decide to quote, cut scope, or walk
Pick one row before you send the next proposal. A discount with a hope attached is not an extra option.
| Situation | Decision |
|---|---|
| The lead wants a price below the floor after you used honest hours | Cut scope until the budget clears the floor, or walk |
| Effective rate lagged the sticker by more than 15 percent last month | Fix the leak before you raise the sticker |
| The calendar is full and minimum viable revenue is still missed | Raise on the next statement of work and notify retainers, or drop the lowest-fit client |
| The plan says 35 billable hours and delivery is 22 | Rerun the floor at 22 and quote from that number |
Clear minimum viable revenue on honest billable hours first, then keep the number on a calendar.