How to Set Your Freelance Rate
A step-by-step guide to determining what to charge.
Every freelancer eventually asks the same question: What should I charge?
There isn't one rate that works for everyone. A freelance designer with five years of experience, a developer working in a specialized niche, and a new copywriter building a portfolio will all have different numbers.
The problem is that many freelancers start by looking at what other people charge. That can be useful as a reference, but it doesn't tell you what you need to earn.
A better starting point is to calculate your own baseline.
The Basic Formula
Your minimum hourly rate should cover three things: the income you want, the costs of running your business, and the taxes you expect to owe.
(Target annual income + Business expenses + Estimated tax reserve) ÷ Realistic billable hours per year = Minimum hourly rate
This gives you a baseline rather than a price to send to every client.
Your actual rate may be higher depending on your experience, specialization, the type of client, and the demands of the project.
A Realistic Example
Suppose a freelance designer wants to earn $65,000 per year.
Her annual business expenses — software, hardware, insurance, and other costs — come to about $6,000. She also sets aside an estimated $16,250 for taxes.
That means she needs roughly $87,250 in annual revenue to cover everything.
She plans to work 46 weeks during the year and expects to bill around 28 hours per week. The remaining time goes toward proposals, marketing, administration, client communication, and other work that isn't directly billable.
28 hours × 46 weeks = 1,288 billable hours
Then:
$87,250 ÷ 1,288 = approximately $68/hour
So $68/hour is her baseline.
That doesn't necessarily mean she should quote every client $68/hour. It tells her where the floor is and gives her a starting point for setting a target rate.
Why You Can't Bill 40 Hours a Week
This is where many new freelancers get the math wrong.
A full-time employee might work around 2,080 hours in a year. That doesn't mean a freelancer can bill 2,080 hours.
You still need time for:
- Finding clients
- Sales calls
- Writing proposals
- Invoicing and bookkeeping
- Marketing
- Learning new skills
- Project management
- Email and client communication
- Taking time off
For many freelancers, 1,200–1,500 billable hours per year is a more realistic starting point. Your number may be higher or lower depending on your type of work and how your business operates.
The important thing is to use a number you can actually achieve.
If you assume you'll bill 40 hours every week and consistently fall short, your hourly rate won't cover what you expected it to cover.
Minimum Rate vs. Target Rate vs. Market Rate
It's useful to think about your rate as three different numbers.
Minimum rate is your floor. It's the rate you need to cover your financial requirements over time.
Target rate is what you actually want to charge on most projects. It gives you room above your minimum and reflects your experience, skills, and the type of clients you want to work with.
Market rate is what clients in your niche are actually willing to pay.
These numbers won't always match.
You might calculate a minimum rate of $60/hour but discover that clients in your niche regularly pay $90–120 for someone with your experience. That's an opportunity to increase your target.
On the other hand, if clients consistently reject a rate that's well above what your market supports, you may need to rethink your positioning, specialization, or target clients.
Your minimum protects the business. Your target guides your pricing. The market tells you what is realistically available.
What Can Justify a Higher Rate?
Your minimum rate is only the starting point. Several factors can justify charging more.
Experience
Experience can support a higher rate, but years alone aren't what clients pay for. They pay for better decisions, better work, and fewer problems.
Specialization
A freelancer who solves a specific problem for a specific type of client can often charge more than a generalist offering the same basic service.
Project complexity
A straightforward landing page and a complicated website with custom functionality shouldn't necessarily have the same pricing.
Client requirements
Projects involving multiple stakeholders, frequent meetings, tight deadlines, or significant coordination can require substantially more effort.
Demand
If clients are actively looking for your skills and there aren't many qualified freelancers available, you may have more room to increase your rates.
When Accepting a Lower Rate Makes Sense
There are times when taking a project below your normal target rate can make sense.
Maybe the project gives you a strong portfolio piece. Maybe the client is likely to provide steady work. Or perhaps you're deliberately moving into a new niche and need a few relevant projects to establish credibility.
The important distinction is between a deliberate trade-off and simply undercharging.
If you accept a lower rate, know what you're getting in return.
A useful question is:
What am I getting from this project that makes the lower price worthwhile?
If the answer is nothing beyond "I need the money," that's usually a sign to look more carefully at the deal.
Common Pricing Mistakes
Setting your rate based entirely on what other freelancers charge
Their expenses, goals, experience, and client base are different from yours. Use market rates as a reference, not as your entire pricing strategy.
Assuming every working hour is billable
It isn't. Build non-billable work into your calculation.
Keeping the same rate for years
As your skills, portfolio, and client base improve, your pricing should be reviewed too. Checking your rates every six to twelve months is a reasonable habit.
Dropping your rate too quickly during negotiation
If a client can't afford the original price, try reducing scope before reducing your rate.
Calculate Your Rate
Your rate is easier to set when you know the numbers behind it.
Enter your desired annual income, annual business expenses, weeks worked per year, working hours per week, and billable percentage to calculate your recommended hourly rate.
Related Guides
Related Tool: Try our Freelance Rate Calculator