Set an hourly rate that actually pays the bills: take your target income plus business costs, and divide by your realistically billable hours — not all 2,080 working hours are billable.
The example
$80k income + $15k costs, 1,200 billable hrs.
| A | B | |
|---|---|---|
| 1 | Item | Value |
| 2 | Need + costs | 95000 |
| 3 | ÷ 1,200 hrs | → $79.17/hr |
The formula
The formula:
How it works
How it works:
- Add your target take-home income and annual business costs (software, taxes set-aside, insurance, equipment).
- Divide by realistically billable hours — admin, sales, and downtime aren’t billable.
- A full-time year is ~2,080 hours but often only 50–70% is billable — use that, not 2,080.
- Round up to a clean rate; the formula gives the floor, not a ceiling.
The billable-hours trap. Dividing target income by 2,080 hours badly underprices you — you can’t bill every working hour. If only 60% of your time is billable, that’s ~1,250 hours a year. Build the billable percentage explicitly: =2080 * billable_pct as the denominator, and the rate rises to something sustainable.
Try it: interactive demo
Target income, costs, billable hours.
Variations
Billable hours from %
Don’t use 2,080:
Day rate
From hourly:
Add a profit margin
Beyond breakeven:
Pitfalls & errors
Not all hours bill. Use billable hours (often 50–70% of working hours), never 2,080.
Include taxes & costs. Self-employment tax and overhead must be in the numerator.
This is the floor. The result is your break-even rate — add margin on top.
Practice workbook
Frequently asked questions
How do I calculate my freelance hourly rate in Excel?
How many billable hours should I assume?
Is this rate my final price?
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