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This is actually the formula I prefer to use. It’s simple, and based predominantly on an even simpler goal: how much money you want left in your pocket (profit) at the end of the year.

You’ll find that having a numbers goal is a motivationally helpful tool to boot.

1. Specify how much target profit you want from freelancing at year’s end. Profit, if you’ll recall, is your net earnings (what you keep) after expenditures.

Example: $75,000

2. Divide your target profit by 1,500, which is the total billable hours you have in a year, to get your target hourly profit.

We get 1,500 by multiplying 6 hours in a day (remember, 1/4 goes to overhead) by 5 days a week, which we then multiply by 50 weeks for total billable hours a year.

Example: $75,000 / 1,500 = $50

3. Take your total weekly expenses (Internet access, rent, supplies, phone, etc.) and divide that by 30 hours to get your overhead per hour.

Example: $525 / 30 = $17.50

4. Add your target hourly profit to your overhead per hour to get your billing rate.

Example: $50 + $17.50 = $67.50

One of the things I like most about this formula is that it’s relatively easy to adjust the numbers accordingly, depending on the amount of time you want to achieve your goal (say, instead of $75K in a year, you want to get $50K in 9 months).

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