Why Most Freelancers Underprice Themselves
Picking a rate is the first big decision every new freelancer faces — and the one most people get wrong. The most common mistake is working forward ("what feels competitive?") instead of backward ("what do I actually need to earn?").
A full-time employee earning $80,000 a year and a freelancer targeting $80,000 net income are not in the same situation. The freelancer pays both sides of Social Security and Medicare (~15%), covers their own health insurance, has no paid vacation, and spends a significant portion of their time on non-billable work. The numbers have to account for all of that.
The Formula
SoloRates uses a three-step formula:
Step 1 — Gross up for taxes
If you want to take home $60,000 after a 30% effective tax rate, you need:
$60,000 ÷ (1 − 0.30) = $85,714 in profit
Step 2 — Add annual business expenses
Add your monthly expenses × 12. Software, equipment, insurance, co-working space — anything you spend to run your freelance practice.
$85,714 + ($1,000/mo × 12) = $97,714 in gross revenue
Step 3 — Divide by billable hours
This is where most people go wrong. You don't have 40 billable hours a week — you have 40 total hours, and 30–40% of that goes to non-billable work (admin, proposals, onboarding, slow weeks).
$97,714 ÷ (48 weeks × 40 hrs × 65%) = $78/hr
That's your minimum viable rate. Anything below it and you will not hit your income goal.
The Safety Buffer
The minimum rate is your floor, not your quote. Add a buffer — typically 20–25% — to protect against slow months, late invoices, and underestimated expenses.
$78/hr × 1.25 = $97/hr
Quote $97. If a client negotiates down to $90, you're still above your floor.
Use the Calculator
Enter your actual numbers into SoloRates to get your specific minimum and safe rates instantly. Adjust the billable percentage to see how dramatically it shifts the required rate — it's the single biggest lever in freelance pricing.