Question 1

Billable hours

Accepted Answer

are the specific units of time you spend actively executing work that a client has explicitly agreed to pay for. This includes drafting a document, writing code, designing a logo, or sitting in a paid consultation. Non-billable hours encompass all the time spent running your business that cannot be directly invoiced to a client. This includes marketing, pitching new clients, writing proposals, sending invoices, doing bookkeeping, updating your portfolio, and engaging in professional development. A critical realization for any freelancer is that non-billable hours must be financially subsidized by the rate charged during billable hours.

Question 2

Profit

Accepted Answer

is not the money you use to buy groceries or pay your rent; that is your salary. Profit is the financial surplus your business generates after all expenses, taxes, and your personal salary have been paid. This margin is retained in the business to fund future growth, purchase upgraded equipment, float the business during slow months, or serve as an annual owner's bonus. A healthy freelance business typically targets a profit margin of 15% to 25% on top of all other costs.

Question 3

How do I handle clients who push back on my calculated rate?

Accepted Answer

Client pushback is a normal part of business negotiation. When a client says your rate is too high, do not immediately offer a discount, as this devalues your work and cuts directly into your profit margin. Instead, reduce the scope of the project to match their budget. If your calculated flat fee is $5,000 and their budget is $3,500, explain that you can accommodate their budget by removing specific deliverables, reducing the number of revisions, or extending the timeline. This maintains your calculated hourly baseline while respecting their financial constraints.

Question 4

Should I charge different rates for different types of work?

Accepted Answer

Yes, this is a common and effective strategy known as dynamic pricing. Your calculated hourly rate is your baseline for your core competency. However, if a client asks you to perform highly specialized, high-stress work (such as emergency weekend troubleshooting or advanced strategic consulting), you should charge a premium multiplier (e.g., 1.5x or 2x your base rate). Conversely, if you are doing low-level administrative work for a long-term client, you might offer a slightly lower rate, provided it never dips below your absolute minimum CODB floor.

Question 5

How often should I recalculate and raise my freelance rates?

Accepted Answer

You should run your numbers through the freelance rate calculation framework at least once every twelve months, ideally at the end of the fiscal year. Inflation naturally degrades your purchasing power, meaning if you do not raise your rates annually by at least 3% to 5%, you are effectively taking a pay cut. Additionally, you should recalculate your rate whenever you experience a major life event (buying a house, having a child) or a significant business change (investing in expensive new software or hardware) that alters your baseline financial needs.

Question 6

Does my geographic location dictate my rate, or does the client's?

Accepted Answer

Your geographic location dictates your minimum baseline rate, because your local cost of living determines your personal salary requirements. However, the client's geographic location and the size of their business dictate your maximum potential rate. A startup in rural Ohio has a vastly different budget than a Fortune 500 company in Manhattan. Smart freelancers use their personal location to keep their overhead low, but market their services to clients in high-cost-of-living areas to maximize their profit margins.

Question 7

How do I factor in unpaid vacation and sick days?

Accepted Answer

The mathematical framework accounts for this during the "Billable Hours" calculation phase. You do not bill clients for your vacation time; instead, you reduce your total available working days for the year before you divide your total revenue target. If you plan to take 20 days off for vacation and holidays, you subtract those 160 hours from your annual capacity. This mathematically forces your hourly rate to increase slightly, meaning you are effectively earning the money to fund your time off while you are actively working.

Question 8

What is a good target utilization rate for a beginner?

Accepted Answer

Beginners should be highly conservative and estimate a utilization rate of no more than 40% to 50%. When you are first starting, you do not have a steady stream of inbound leads or retainer clients. You will spend a disproportionate amount of your time setting up your business entity, building your portfolio, cold-emailing prospects, and figuring out your accounting software. Assuming you will be billing 70% of your time in your first year is a dangerous fantasy that will result in setting your hourly rate far too low to survive the lean months.

Freelance Rate Calculator

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