The Danger of the "2,080 Hour" Myth
One of the most common mistakes new freelancers, consultants, and agency owners make is pricing their services using a standard corporate employee math model. A standard 40-hour workweek over 52 weeks equals 2,080 hours. If you want to make $100,000 a year, it is tempting to divide $100,000 by 2,080 and charge $48 per hour.
If you do this, you will go out of business.
Why You Cannot Bill 40 Hours a Week
As a business owner, you wear multiple hats. You must spend time on non-billable tasks that clients do not pay for, including:
- Sales calls, writing proposals, and pitching.
- Invoicing, bookkeeping, and chasing late payments.
- Marketing, posting on LinkedIn, and updating your portfolio.
- Self-education and industry research.
Because of this, most successful freelancers and agencies target a Billable Utilization Rate of 60% to 70%. This means out of a 40-hour workweek, only 24 to 28 hours are actually billed to a client.
Factoring in Overhead and Vacations
When you are employed, the company pays for your software subscriptions, health insurance, employer taxes, and paid time off (PTO). When you are independent, you must bake these costs into your hourly rate. Our calculator automatically adds your overhead expenses to your target salary to ensure your gross revenue covers everything before calculating the final hourly rate.
Frequently Asked Questions
How do I calculate my billable rate for a fixed-price project?
If a client wants a flat fee for a website build, simply estimate the total number of hours the project will take (always add a 20% buffer for revisions) and multiply it by the hourly rate generated by our calculator.