How to Set Your First Freelance Rate

The shortcut that sets everyone up to fail

The most common way to set a first freelance rate is to take a salary that sounds right, divide by 2,080 working hours in a year, and quote the result. A $70,000 salary becomes roughly $34 an hour, which feels reasonable and is dramatically too low.

It fails for three reasons, and they compound.

• Tax. In the United States, self-employment tax is 15.3 percent of 92.35 percent of net profit, on top of income tax. An employer used to pay half of that contribution. Now you pay all of it.
• Benefits. Health cover, paid holiday, sick leave, pension contributions and equipment were part of that salary. None of them are part of your rate unless you put them there.
• Unbillable hours. The 2,080 figure assumes every working hour is paid for. In freelancing, finding work, writing proposals, invoicing, chasing payment, bookkeeping and admin are all unpaid.

Taken together, a realistic freelance rate usually falls somewhere between 1.5 and 2.5 times the naive hourly equivalent of a salary you would accept. The $70,000 example lands closer to $60 to $85 an hour than $34.

Step one: build the number from your own costs

Work out four figures, in this order. Be honest rather than optimistic; the optimistic version is the one that leaves you short in month seven.

1. Income you need to live on, after tax. Your actual cost of living plus something for savings, not an aspirational figure.
2. Annual business expenses. Software, equipment, insurance, accounting, a share of your internet and phone, professional memberships, and health cover if you now buy it yourself. New freelancers consistently underestimate this.
3. Tax. Not a flat percentage guess. It depends on your total income, filing status and where you live, and it is charged on profit rather than revenue.
4. Realistic billable hours. The part nearly everyone gets wrong, and the subject of the next section.

The rate calculator does this arithmetic, including solving the circular problem that the tax you owe depends on the revenue you need, which depends on the tax you owe.

Step two: be realistic about billable hours

In your first year, 15 to 20 billable hours a week is a normal and respectable figure. Not because you are working part time, but because a large share of a new freelancer's week goes to work nobody pays for: finding clients, writing proposals, setting up systems, learning the business side, and the gaps between projects.

Established freelancers with a steady pipeline often reach 25 to 30. Very few sustain more than that over a full year without burning out or letting the business side rot.

Then subtract weeks. Fifty-two weeks a year is not the number either. Holiday, illness, and quiet periods reduce it, and 46 working weeks is a reasonable planning assumption. The guide to billable hours goes into how to measure your own figure.

Step three: check it against the market

Once you have a number built from your own costs, compare it against what the market pays for your profession, experience level and region. This is a sanity check, not a substitute for the calculation.

Two outcomes are possible and both are informative. If your calculated rate sits near or below the benchmark, quote it with confidence. If it comes out far above, that usually means your billable hours assumption is too low or your expenses are unusually high, and both are worth examining before concluding the market is wrong.

Benchmarks for 24 professions, broken down by experience and country, are on the rates by profession pages.

Why quoting low does not work the way people expect

The intuition is that a low rate wins work while you build a portfolio, and you raise it later. In practice it mostly changes which clients approach you.

Clients shopping at the bottom of the market tend to be the ones with the least budget, the least clarity about what they want, and the most revisions. They are also the ones most likely to pay late. The work is harder, not easier, and the portfolio you build from it attracts more of the same.

Raising the rate afterwards is also harder than it sounds, because every existing client has to be renegotiated and your testimonials all come from the wrong tier of the market. It is much easier to start at a defensible number and hold it.

If you genuinely need a lower price to win early work, trade it for something rather than giving it away. A reduced rate in exchange for a detailed case study, a referral, a testimonial, or a longer commitment is a deal. A reduced rate because you feel new is a habit.

Quoting it without flinching

New freelancers give themselves away in the wording, not the number. The tells are apologising, explaining at length, and adding a softener that invites negotiation before anyone asked for it.

State the number, say what it includes, and stop talking. The silence after a quote feels much longer to you than it does to the client.

Plan the first increase before you need it

Decide now what will trigger your first rate rise, because the decision is much harder to make in the moment. Reasonable triggers:

• After three or four completed projects with good outcomes.
• When you are turning work away, or booked more than a month ahead.
• At six months, regardless, as a scheduled review.

Apply it to new leads first, where there is no precedent to renegotiate. By the time you raise it with existing clients you will have said the number out loud a dozen times, and it will have stopped feeling like a claim. The guide to raising your rate covers the notice period and the wording.