The Formula for Setting Freelance Billing Rates
Unlike traditional W-2 employees, freelancers must cover their own employer-side self-employment taxes (15.3% in the US for Social Security and Medicare), private healthcare, equipment, software licenses, and unpaid vacation time.
Additionally, most freelancers can only bill around 60% to 75% of their total working hours due to administrative tasks, client pitching, invoicing, and marketing.
Frequently Asked Questions (FAQ)
What is a good billable ratio to aim for?
For solo consultants and freelancers, a 70% billable ratio (roughly 28 billable hours out of a 40-hour work week) is realistic and healthy.