Worked example: 1,104 billable hours, not 1,840
With 46 working weeks and 40 hours per week, you have 1,840 available hours. At 60% billable utilization, only 1,104 earn project revenue. A 60,000 compensation budget plus 12,000 overhead requires 90,000 revenue at a 20% planning margin: about 81.52 per billable hour.
Test utilization before raising the rate
Keep a baseline, then change utilization from 60% to 50%. Billable hours fall to 920 and the required rate rises to about 97.83. This is the same cost budget spread over fewer earning hours. The result does not predict market demand or tell you whether a client will accept the rate.
Use the rate as a check on fixed-price work
A billing rate is not a labor cost rate. For a fixed-price estimate, record the underlying cost of performing the work, then set the selling price separately. Read cost rate versus billing rate and the billable-hours walkthrough. The freelance pricing guide connects this annual check to an individual project.
Frequently asked questions
Does this calculate my after-tax income?
No. The compensation and overhead inputs are cost budgets that you supply. The calculator does not estimate income tax, payroll obligations or deductions.
Is the calculated rate a market benchmark?
No. It is the rate implied by your cost, hours, utilization and margin assumptions. All default numbers are illustrative.