How To Calculate Your Freelance Hourly Rate Step-By-Step: A Guide For The Go-Getter Freelancers

Dear go-getter freelancers, next time someone asks about your rate, channel the confidence of a lemonade mogul, stand tall, and remember—you're selling the crème de la crème of lemonades in this vast freelance market.
How To Calculate Your Freelance Hourly Rate Step-By-Step: A Guide For The Go-Getter Freelancers

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Greetings, go-getter freelancers! Imagine you're setting up shop at the world's most fabulous lemonade stand—except, instead of lemons, you're selling your incredible talent. Now, let's talk money. How much would you charge for a glass of your refreshing brilliance?

Ready to add some Moxie to your freelance game? Download Moxie now and witness the magic unfold in your freelance journey!

1. Factor in Your Desired Annual Salary

Understand your worth and ensure your freelance endeavors aren't shortchanging you.

You might think: "Okay, but how do I determine what I'm worth in the first place?"

Ah, the age-old quest for value! But don’t fret. Start by taking a look at your industry. What are people in full-time roles, similar to your freelance profession, earning annually? Websites like Glassdoor or Payscale can give you a ballpark figure. Alternatively, there are many freelance rate calculators available, including some from the AWAI, The Freelance Writer’s Guide, and our own partners at Millo.

Example: If, say, a graphic designer in a corporate setting is making $60,000 annually for their 9-to-5, why should your freelance graphic design work offer anything less? Remember, as a freelancer, you're also the CEO, the marketer, the accountant, and yes, the coffee maker.

Think about it. If Beyoncé was a freelancer, do you think she’d charge any less for her solo performances than she would with Destiny’s Child? Nope. So, neither should you.

2. Tally Up Your Business Expenses

To make money, sometimes you gotta spend money.

I hear you say: "But I just work on my laptop. What expenses?"

Freelancing might feel like a low-cost endeavor, but it's a sneaky beast. Those small costs? They add up. Consider everything from software subscriptions and marketing costs to that extra-large coffee you sip during those afternoon slumps.

Example: Say you have monthly expenses like Adobe Suite ($50), web hosting ($20), a coworking space ($250), and let's not forget the random software tools that promise to "boost your productivity" by 200% ($30). Monthly, you're already at $350, which equates to $4,200 annually! And this doesn’t even consider one-off investments like a new laptop or training courses.

Remember that your hourly rate isn't just about your time; it's about sustaining your business. Every overlooked expense is a slice of your lemon you're giving away for free.

3. Remember The Non-Billable Hours

Your watch might say, "Time is money," but not all hours have a price tag attached. You have to account for those non-billable hours.

You may be wondering: "What the heck are non-billable hours?"

We're talking about the hours you put into your business that aren’t directly tied to a project. Think of it as the behind-the-scenes work. It’s like preparing the lemons before the big squeeze.

Example: For every hour you spend designing a logo or writing an article, there might be another hour emailing clients, attending networking events, tweaking your portfolio, or—dare we say it—chasing after payments. If you're working 40 hours a week but only 20 of those hours are billable, you need to ensure your rate covers the full 40.

It's easy to think, "I'll just work more hours." But remember, even lemonade stands have closing times. And you, my hardworking friend, need a break too.

Moxie is especially useful for time tracking like this. Simply start and stop whenever you need to, add notes, and tally up all the time you’ve spent making the best lemonade you can.

4. Consider Future Investments and Savings

The future is as bright as freshly squeezed lemonade, so plan for it.

Now, you might wonder: "Why should my present earnings account for future endeavors?"

Freelancing is running a business, and any successful business invests in its growth.

Example: Maybe you're eyeing that advanced course to upgrade your skills or planning to attend a big industry conference. Perhaps there's that dream workstation setup you've been pinning on Pinterest. All these are investments that can boost your business, and hence, they should be factored into your earnings. And hey, don't forget about rainy day funds or, dare we dream, retirement!

Let's toast to the future, shall we? Picture it: Relaxing on a beach, sipping lemonade, and thinking, "Thank goodness I planned for this."

Intimidated? Don’t be, Moxie has you covered. Join one of our academies or visit one of our workshops on negotiating prices to learn more about the nitty-gritty of freelancing.

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5. Compare With The Market

In a market full of lemons, know where your lemonade stands.

You might muse: "But isn’t my unique blend of skills enough to set my price?"

While your unique blend of zest is unparalleled, the market can be a crowded place. To stand out and ensure you're neither underselling nor overshooting, it's vital to be aware of what others are charging.

Example: Meet Lucy, another go-getter freelancer. If Lucy, with similar skills and experience, charges $100/hr and her calendar is packed, while you, with your equally zesty brilliance, charge $200/hr and hear crickets, it might be time for some market reflection. But remember, if you offer extra value then, by all means, charge for that zesty twist!

Alternatively, meet John, yet another go-getter freelancer with maybe a little too much ambition. You notice his work just doesn’t have that zest yours does, but he still charges $250/hr and he still gets clients! Instead of cursing John for his zestless lemonade, take a page from his book. Be bold, charge what you know you’re worth, and others will come flocking to your stand begging for that luxury lemonade.

It's like being at a lemonade market. Some sell classic lemonades, some with a twist, and some as a luxurious experience. Know your lemonade type, its value, and price it accordingly.

Crunching Numbers: The Freelancer's Formula for Pricing Perfection

So, you've dived deep into understanding your worth, accounted for those sneaky expenses, and even considered your future dreams of lemon orchards (or, you know, just some comfy savings). But how do you distill all of this into a single hourly rate?

Here’s a nifty formula for you.

Desired Annual Salary / (40 hours x Number of Weeks Worked) x Overhead Multiplier = Your Hourly Rate

Example Time:

You aim for a zesty $100,000 annually.

$100,000 / (40 hours x 52 weeks) x 2.5 (for overhead) = $120.19

That's right, go-getter. Your lemonade's worth a whopping $120.19 per hour.

A Tangy Twist of Caution: The formula assumes you're on that grind every single week of the year. Want to sip your own lemonade on a sandy beach occasionally? Subtract your vacation weeks from the 52.

And let's be real—holidays, that sneaky cold, or the post-Thanksgiving food coma? They all count. From experience, clocking in 46-48 real, money-making weeks is a good benchmark. But feel free to adjust to your zest level.

Overhead, Understood: Why the 2.5 multiplier, you ask? Well, every hour you work doesn't translate to an hour billed. There's this thing called overhead. Think of it as the time you spend setting up your lemonade stand, cleaning up, or finding new lemonade drinkers.

This overhead is captured in a metric called utilization. The 2.5 times multiplier assumes you're billing for 40% of your total hours worked. If you manage to squeeze more billable hours out of your week, your utilization goes up, and you can adjust the multiplier.

For instance, turning 4 overhead hours into 4 billable ones each week pushes your utilization to 50%. And that means you'd use a multiplier of 2, not 2.5.

Still with us? If the math made your head spin, sign up for one of our freelancer accounting classes!

Moxie’s Recap: (Because who doesn’t love a quick look-back?)

  • Aim for an annual salary that makes your heart sing
  • Count those sneaky expenses. All of 'em.
  • Respect the hours that don't directly bring in cash.
  • Plan for future splashes (or splurges).
  • Stay juicy, and competitive, my friends.

Now, imagine the symphony of clinking coins and the sweet scent of success (which, for the purpose of our delightful metaphor, smells a lot like fresh lemonade). That's the sound and scent of a freelancer who's nailed their hourly rate. 

Dear go-getter freelancers, next time someone asks about your rate, channel the confidence of a lemonade mogul, stand tall, and remember—you're selling the crème de la crème of lemonades in this vast freelance market.

Freelancing can sometimes feel like juggling lemons, but with Moxie's freelance app, you've got a trusty sidekick to catch them all. From user-friendly accounting tools to dedicated client portals and seamless communication features, Moxie integrates everything a freelancer needs into one handy toolkit. Ready to simplify your freelance life with a dash of Moxie? Download the app, and let's get zesty!

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Our team of career freelancers writes about best invoice practices, what makes a great client, and repeats the mantra, "never work without a contract." We're opinionated about the future of work and will always be on the side of freelancers.
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