How to Price Your Freelance Services (Without Undercharging)
Most new freelancers undercharge by 30% or more. Here's a formula that covers your real costs, plus three pricing models to choose from.
To price freelance services, start with the income you need, add your business costs and taxes, and divide by the hours you can realistically bill in a year. That gives you a minimum hourly rate. From there, adjust up based on your experience, your market and the value you deliver — and consider packaging your work into project or retainer prices rather than selling hours.
When I first freelanced, I set my rate by looking at what a job paid per hour and adding a little. It took me a year to realise I’d forgotten about holidays, unpaid admin, software and tax. My “good” rate was actually below what I’d earned as an employee.
Step 1: Work out your minimum rate
Here’s the simple formula most freelancers should start with:
(Desired annual income + business costs + tax allowance) ÷ billable hours per year = minimum hourly rate
Desired income
What would you want to earn as a salary for this work? Be realistic, but don’t discount yourself because you’re new to freelancing.
Business costs
Include software, equipment, insurance, a website, professional fees, training, and anything an employer would normally cover — including health insurance and retirement contributions where relevant.
Billable hours
This is where most people go wrong. You won’t bill 40 hours a week, 52 weeks a year. Subtract holidays, sick days and public holidays, then assume only 50–70% of your working time is billable. The rest goes on admin, marketing, invoicing and finding clients.
| Item | Example |
|---|---|
| Desired income | $60,000 |
| Business costs | $8,000 |
| Tax and benefits allowance | $20,000 |
| Total needed | $88,000 |
| Working weeks | 46 |
| Billable hours per week | 25 |
| Billable hours per year | 1,150 |
| Minimum hourly rate | ≈ $77 |
That minimum rate is the floor. Charging below it means you’re effectively paying to work.
Step 2: Research your market
Next, look at what others charge. Check freelancer directories, industry surveys, professional associations and the rate pages some freelancers publish. Ask peers directly — most are happy to share ranges. Your goal is to understand where you sit: beginner, experienced or specialist.
Step 3: Choose a pricing model
| Model | How it works | Best for |
|---|---|---|
| Hourly | Charge for time spent | Unclear scope, ongoing support |
| Project (fixed) | One price for a defined result | Well-scoped work, experienced freelancers |
| Retainer | Monthly fee for agreed availability or output | Ongoing clients, predictable income |
| Value-based | Price tied to the result’s value to the client | High-impact work with measurable outcomes |
Hourly pricing
Simple and fair when the scope is uncertain. The downside is that you earn less as you get faster, and clients may watch the clock.
Project pricing
Estimate the hours, multiply by your rate, add a buffer of 15–25% for revisions and surprises, and quote a single figure. Clients like knowing the cost upfront. Define exactly what’s included and how many revision rounds they get.
Retainers
A retainer gives you predictable income and gives the client priority access. It works best once you’ve already done a project together and trust is established.
Step 4: Present your price with confidence
- Lead with the outcome and scope, then the price.
- Offer two or three options — for example, basic, standard and premium packages.
- Put everything in writing: deliverables, timelines, payment terms and what happens with extra requests.
- Ask for a deposit (often 30–50%) before starting new client work.
Don’t apologise for your rate. State it clearly and stop talking. Clients who value your work will respond to the proposal, not the discount.
When and how to raise your rates
Review your rates at least once a year. Raise them for new clients first — it’s the easiest place to test a higher price. For existing clients, give 30 to 60 days’ notice, thank them for the work together and explain what’s changing. Some may leave, but a 10–20% rise often more than covers the loss of one lower-paying client and frees up time for better work.
Common pricing mistakes
- Forgetting tax, holidays and non-billable time.
- Matching the cheapest rates on marketplaces.
- Starting work without a written scope.
- Saying yes to unlimited revisions.
- Never raising rates for long-standing clients.
Pricing is one part of running a sustainable freelance business. Keep a buffer for slow months — our guide to building an emergency fund suggests self-employed people aim for six months or more. If you’re formalising things, the IRS Self-Employed Tax Center explains US tax obligations, and our guide on writing a business plan helps you map the bigger picture.
Frequently asked questions
How do I calculate my freelance hourly rate?
Add your desired income, business costs and tax allowance, then divide by the number of hours you can realistically bill in a year.
Should freelancers charge hourly or per project?
Hourly suits unclear or ongoing work. Project pricing suits well-defined work and rewards you for being efficient.
How often should I raise my freelance rates?
Review them at least once a year, and raise them sooner if you’re consistently fully booked.
