Freelancers, Do the Math

Photo by Bekky Bekks on Unsplash

A mentor shared an observation, “Over the years, the people I’ve known who spoke more openly about money ended up with more of it. The people who weren’t comfortable talking about money always seemed to struggle getting enough.”

Making money is an important element of freelancing. It’s what separates freelancing from merely a hobby.

The following exercise is designed to get real about what you want and need from freelancing. Don’t worry about being overly precise. All forecasts end up being wrong, but some can be useful.

If you don’t know an amount or percentage, input your best guess and round up. It’s better to be wrong but conservative (in this exercise) than wrong and overly optimistic. The goal is to establish a baseline to build from.

Write your responses and equations on a sheet of paper or enter them into a spreadsheet.

How many hours per month do you want to work?
How much money do you want to take home per month?

Non-billable Time

Account for non-billable time, and deduct the time from hours of work. Let’s call the resulting number “Billable Hours per Month”:

  • Marketing/Sales (Ex. 10%)
  • Operations/Admin. (Ex. 10%)
  • Invoicing and Bookkeeping (Ex. 5%)

Example: Sally wants to work 40 hours per month. Each month she spends 25% of her time on tasks she can’t bill the client. She has 30 billable hours per month.

Required Monthly Income

Account for monthly costs, then add the total to the money you want to take home. Let’s call the resulting number “Required Monthly Income” :

  • Taxes (33%)
  • Professional Services ($)
  • Tools, Memberships, and Subscriptions
  • Cost of Goods and Supplies

Example: Sally wants to take home $5,000 per month freelancing. She spends $2,000 per month on things like taxes, tools, and supplies. She needs to generate $7,000 of required monthly income.

Lastly, divide the required monthly income by the number of billable hours per month. From the example provided, the resulting rate is $234/hr.

This means if you were to bill hourly, the minimum you can afford to charge per hour while still taking home enough money is $234/hr. Assuming errors in our estimate, let’s round up to $250/hr.

If you’re a lawyer, a $250/hr rate is low.
If you’re a graphic designer, $250/hr is high-end.

Most freelancers either aren’t charging enough or need to work more hours than they expected.

We’ll eventually talk about value-based pricing instead of hourly pricing but for now, the lesson for most freelancers is simple: Tweak the math until it works.




CTO at Fast Company’s World Most Innovative Company (x4). Author of “Code School”, a book to help more people transition into tech.

Love podcasts or audiobooks? Learn on the go with our new app.

Recommended from Medium

Steal My Brand Awareness Engagement Secrets — Part 23

pic of small boy feeding alpacas

6 Ways Your Service Based Business Can Generate Clients!

How Automating Your Client Onboarding Can Change Everything + A Free Workbook!

Donald Trump would never tolerate this.

Freelance Sports Reporter | James Green

5 Side Hustle Ideas for the Real Estate Industry (I Made $1,000 in One Day)

What’s My $50,000 Secret as a Full-time Freelance Writer?

How I Apply A Boardgame Strategy to my Freelancing Business

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Morgan J. Lopes

Morgan J. Lopes

CTO at Fast Company’s World Most Innovative Company (x4). Author of “Code School”, a book to help more people transition into tech.

More from Medium

The Truth About Upwork from a Top-Rated Freelancer

How To Take A Guilt-Free Vacation As A Freelancer

3 Instagram Myths That Stop Your Account From Growing

Follow 6 Crucial Principles to make your Upwork Cover Letter Work!