Bring it all together

You’ve done a ton of calculations and estimates over the past few steps, and now it’s time to put it all together and get your starting number. Notice the word “starting” here—it may not be your final number, which we’ll get into in the next step. ‍

Let’s review: ‍

1. First, you did research to figure out how much other freelancers were charging and what companies were paying for your services. 

2. Next, you added up all of your expenses, including living expenses and business expenses.

3. Then, you took into account any other savings goals or adjustments needed for your income goal.

4. Next, you factored in any sales fees and taxes that you’ll need to set aside.

5. And lastly, you determined how many days you plan to work and how many hours you plan to work each day. ‍

By now, you should have both your minimum target revenue and your total number of billable hours per year you are aiming for. It’s time to run the final calculation — divide your total revenue by your billable hours to get your billable hourly rate. 

Using the example above:

$66,991 / 1,338 hours = $50 

This is how much you would need to charge hourly to break even. 

If you’re curious about how much that number factors into a daily or weekly rate, simply multiply the figure by the number of hours worked. In this example, since you plan to work five days a week (at six hours a day), your day rate would be $300 and your weekly rate would be $1,500. ‍

Now, use your workbook to calculate your billable hourly rate. 

It’s a good time for a gut check 

Is this hourly figure in line with what you saw during your research? If so, it may be a good sign you’ve calculated an hourly rate that works for you and the services or goods you’re offering. If it’s too high, you may want to revisit some of your income goals. If it’s too low, you may want to boost your income goal. But remember, this is the minimum amount you should make to succeed, so think of this number as a starting point. You should be increasing your rates over time, as you gain additional skills and experience. 

Establishing your hourly rate can help you guard against fluctuating work and income. There will be both high-hour months and low-hour months, but there’s no guarantee that every hour will be filled (or billed). This means you may want to add a buffer to your hourly rate to help smooth things out — but keep in mind that the trade off the higher your hourly rate, the harder it may be to get clients. ‍

Recap 

• You considered your starting number.

• You identified your billable hourly rate required to break even. 

• You conducted a gut check to make sure your hourly rate is in line with your expectations.