Work out the rate you need to actually hit your income target after business expenses, tax, and the hours you cannot bill for.
| Gross revenue you must invoice | — |
| Billable hours per year | — |
| Total working hours per year | — |
| Take-home per billable hour | — |
| Required day rate (8 billable hours) | — |
Required rate = (Take-home + Expenses) / (1 - Tax rate) / (Hours per week x Weeks per year x Billable ratio)
Two things push this number higher than people expect. Tax applies to profit, so you must gross up rather than add a flat percentage. And billable hours are far fewer than working hours: a 40 hour week at a 60 percent billable ratio is 24 invoiceable hours, not 40.
Take-home target $60,000, expenses $8,000, 30 percent tax, 40 hours a week, 46 weeks, 60 percent billable:
Notice the gap: the freelancer wants $60,000 but must charge $88 an hour. Charging $50 an hour, a number that feels reasonable, produces about $55,000 in revenue and roughly $30,000 take-home.
| Work type | Typical billable ratio | Why |
|---|---|---|
| Retainer clients, established | 70 to 80% | Little sales time, predictable scopes |
| Project work, repeat clients | 60 to 70% | Some scoping and admin overhead |
| Project work, new clients | 45 to 60% | Sales calls, proposals, onboarding |
| Consulting with heavy marketing | 35 to 50% | Content, outreach, and pipeline work |