Determining your hourly rate is crucial for freelancers, consultants, and service-based businesses to ensure profitability and cover all expenses and desired income. This calculator helps you determine a suitable hourly rate based on your income goals, expenses, and billable hours.
Understanding the Calculation
To calculate your hourly rate, you need to consider:
Desired Annual Income: How much you want to earn before taxes per year.
Annual Business Expenses: The total cost of running your business or freelance practice for a year (software, insurance, marketing, office supplies, etc.).
Billable Hours Per Week: The average number of hours you actually spend working on client projects or billable tasks each week. This is often less than 40 hours due to administrative tasks, marketing, and client acquisition.
Weeks Worked Per Year: The number of weeks you plan to work, taking into account vacations, holidays, and potential sick days.
The formula is:
Total Annual Costs = Desired Annual Income + Annual Business Expenses
Total Annual Billable Hours = Billable Hours Per Week × Weeks Worked Per Year
Hourly Rate = Total Annual Costs / Total Annual Billable Hours
Example Calculation
Let's say you want to earn $60,000 a year, have $10,000 in annual business expenses, plan to bill 30 hours a week, and work 48 weeks a year: