Calculate your billable hours

Salaried employees get paid the same amount no matter how they structure their days — but as a freelancer, you’re in control of how much you make in a given day. It can also help you think critically about how you want to structure your client load. Do you want to work on a bunch of projects at a lower rate or fewer projects at a higher rate? It does take some upfront work to secure a client and get initially onboarded onto a project — building time in your schedule for these non-billable tasks can help you better structure your schedule. 

One factor you may not realize when it comes to calculating your hourly rate is that not all your hours will be billable. While any work you do for a client, including meetings, should be billable, you’ll spend a portion of your day completing tasks that can’t be billed to a client, including administrative work or networking.    ‍

It’s important not to overestimate how much you can bill — while it’s certainly ambitious to think you’ll be working eight hours every day that you can bill to clients, you also need to keep in mind all the hours of work that can’t be billed. If you’re not sure how much to estimate, consider using an hourly time tracker to keep track of your work. We recommend using time-tracking software like Harvest or Toggl (both are free!). This can help you more accurately estimate how much time you’re spending actually completing billable tasks (searching on Linkedin for new clients doesn’t count as a billable task, unfortunately). It’s up to you to balance your time.‍

Determine the number of billable hours 

Now it’s time to estimate how much of your day will be spent on billable tasks. This is typically shown as a ratio. When calculating your freelancer rate, you can adjust this ratio to match your salary expectations and progress. Let’s say you plan to spend around between 50-75% of your day on billable projects — for an eight-hour workday, that’s around four to six hours. 

First, find the estimated total hours you plan to work annually to help you find an accurate hourly rate—refer back to the workbook exercise you completed in Step 5 to see the estimated total number of working days per year you landed on.  

Let’s say you plan to work 223 days each year at six hours each day. 223 x 6 hours/day = 1,338 hours per year. 

Use your workbook to calculate your own estimated total hours. 

Recap

• You thought about how you might structure your client load.

• You learned that not all the hours you work are billable to a client.

• You discovered the importance of tracking your time.

• You determined your number of billable hours per year.