How to set your freelance rate
without underselling.
Most freelancers set their rate by asking what feels reasonable or checking what competitors charge. Both methods lead to underpricing. Here's how to calculate the number you actually need.
Setting your rate without a framework usually ends one of two ways: you charge too little and work yourself into exhaustion, or you charge based on what a client will pay without knowing whether it actually covers your real costs. Either way, you're guessing.
The right approach starts with your minimum viable rate — the floor below which you literally cannot sustain your business — and builds upward from there.
Calculate your minimum viable rate first.
Everything you personally need to live: rent, food, utilities, insurance, transportation, debt payments, healthcare, everything. Be honest — this is your survival number.
Software subscriptions, equipment, professional development, accounting fees, any tools or services your business requires to operate.
Self-employment tax plus federal income tax. If you're in a state with income tax, add that too. As a self-employed person, you pay both sides of FICA — don't forget this.
Not your total working hours — your billable hours. A 40-hour week leaves roughly 15–20 hours for admin, sales, marketing, and professional development. Most freelancers have about 1,000–1,200 truly billable hours per year.
This is your floor, not your rate. It's the number below which you cannot survive, let alone save, invest, or take time off. Your actual rate should be higher — this formula just tells you where you cannot go below.
Research what the market actually pays.
Once you know your floor, compare it to market rates. The goal isn't to undercut competitors — it's to understand the range and position yourself deliberately within it.
Where to research market rates:
- LinkedIn Salary Insights — filter by job title, location, and experience level. This shows what employees make; freelancers typically charge 1.5–2.5× the equivalent hourly employee rate to account for overhead, taxes, and unpaid time.
- Glassdoor and Levels.fyi — useful for tech and design rates
- Freelance communities — Reddit's r/freelance and industry-specific communities are surprisingly transparent about rates
- Direct outreach — ask other freelancers you respect. Most are happy to share ranges.
Hourly vs project rates — which is better.
Hourly rates protect you when scope is unclear. Project rates reward your speed and expertise. As you get faster and better at your work, hourly rates punish you for that improvement — the same output that took 10 hours in year one takes 4 hours in year three, cutting your effective rate by 60%.
The ideal path for most freelancers: start with hourly rates for new clients to understand scope, then shift to project rates as you gain confidence. Quote projects based on the value delivered, not hours spent.
Project pricing example: You write a landing page. It takes you 4 hours. At $75/hr, that's $300. But a well-written landing page can generate $10,000+ in client revenue. Pricing it at $600–$800 is not unreasonable — and no client paying you $300 is telling you the page is worth only $300 to them.
How to raise your rates without losing clients.
Most freelancers are afraid to raise their rates because they assume clients will leave. The reality: clients who value your work rarely leave over a reasonable rate increase. Clients who leave over a rate increase were price-sensitive from the start and were never going to grow with you anyway.
- Give 30–60 days notice for existing clients. "Starting [date], my rate for new projects will be $X. I wanted to give you advance notice." No apology needed.
- Raise rates for new clients first — test the new rate with someone who doesn't know your old one. If they accept without hesitation, you're probably still underpriced.
- Raise rates annually, even just to keep up with inflation. A rate you set in 2022 has lost 15–20% of its purchasing power by 2026.
- Raise rates when you're busy, not when you're desperate. Clients can sense desperation. The best time to raise rates is when you have more work than you can handle.
Use a rate calculator tool.
If you want to run this calculation with your own numbers — and compare what different rates translate to at different hours — our Freelance Rate Calculator template on Etsy does the math automatically. Enter your expenses and target income, and it shows you the minimum hourly rate and the equivalent project rates for common deliverables.
Enter your income target and expenses. Get your minimum viable hourly rate, equivalent annual income at different rates, and a comparison table. Built in Google Sheets — download once, use forever.