Episode 90
The Freelance Rate Show
May 26, 2017 · Mike Murphy
EP90: THE FREELANCE RATE SHOW In today's show, all about what to charge as a freelancer. Episode Summary: The tools and resources I used to help me find my base freelance rate. My exact process and calculate a freelance rate from start to finish with you. What is a P&L Statement?
Episode Summary: A full walkthrough of how to calculate a real freelance hourly rate — the tools used, the exact 6-step formula, a worked example landing on $93/hour, and a quick primer on P&L statements.
What You’ll Learn
- A 6-step process for calculating your true freelance hourly rate
- How to account for cost of doing business (CODB) and personal expenses separately
- A full worked example landing on a real $93/hour rate
- What a P&L statement is and why it matters for freelancers
Today’s goal: take the first real steps toward figuring out a bottom-line freelance rate — the number that covers expenses and hits an annual income target.
Personal note: pricing and charging clients is genuinely hard, especially in creative freelancing where no two jobs are alike and time estimation is inherently fuzzy. Rates, like everything else, take time, practice, and trial and error to dial in. The most critical first step is simply knowing your numbers — what you spend, and what you need to make to survive and eventually thrive.
Tools Used
FreshBooks for invoicing and expenses, G Suite & Google Sheets for tracking, the Mint app for personal finance, and the CreativeLive freelance rate calculator as a reference.
How to Calculate Your Freelance Rate
- Set your income goal. How much do you want to make per year?
- Calculate your CODB (Cost of Doing Business). Office rent, web hosting, internet, invoicing/accounting, office supplies, project management tools, phone, computer replacement fund, ads/marketing, software subscriptions, bad debt (unpaid invoices), accounting and legal, travel and education.
- Calculate personal expenses. Cost of living (rent + utilities), healthcare, taxes.
- Adjusted annual income = income goal + CODB + personal expenses.
- Figure out billable hours — how many hours a day can actually be charged to clients, after subtracting vacation, sick days, holidays, and non-billable admin/marketing time.
- Freelance rate = adjusted income ÷ billable hours.
Worked Example
- Income goal: $100,000/year
- CODB: $1,000/month → $12,000/year
- Personal expenses: $1,500/month → $18,000/year
- Adjusted target income: $100,000 + $12,000 + $18,000 = $130,000
Billable hours:
- Total working hours: 40 hrs/week × 52 weeks = 2,080 hours
- Minus 3 weeks vacation (15 weekdays × 8 hrs) = −120 hours
- Minus 5 sick days × 8 hrs = −40 hours
- Minus 7 holidays × 8 hrs = −56 hours
- Subtotal: 1,864 working hours
- Minus 25% for non-billable time (admin, marketing, networking) = 1,864 × 0.75 = 1,398 billable hours
Final freelance rate: $130,000 ÷ 1,398 = $93/hour
What Is a P&L Statement?
A Profit & Loss statement reports income and expenses over a specific period — a quick, useful snapshot for answering the most important question in the business: are you actually making money?