Setting Your First Freelance Rate: Costs, Income and Billable Hours
Become a Freelancer! · Part 2 of 5
“What’s your hourly rate?” Your first project conversation is going well – now it’s time to talk about your fee. With your own calculation, you can answer this question with confidence.
You need two perspectives: What should your business earn? And what price can you justify for your experience and the specific assignment?
1. Set your annual revenue target
Start with the disposable income you want. Add operating costs such as software, hardware, accounting and insurance. Also factor in taxes, personal protection and retirement savings. The Netherlands Chamber of Commerce (KVK) builds its calculation from the same components.
Plan additional financial headroom for reserves and investments. Have your tax and retirement needs checked for your country and situation. Make sure you count each item only once.
The result is your revenue target excluding VAT – not your personal net income.
2. Work with billable time
Holidays, training, client acquisition and admin all belong in your annual plan. What matters is not how many hours you can work, but how many of them clients pay for. Germany’s Gründerplattform stresses that this share depends on your business model and cannot be fixed across the board.
A freely chosen planning example: after holidays, public holidays and a buffer for absence, you have 200 working days of eight hours each. Of these 1,600 hours, you reserve 400 for non-billable tasks and gaps between projects. That leaves 1,200 billable hours.
Replace these assumptions with your own plan – and later with your actual experience.
3. Calculate your target rate
The basic idea is simple: spread the revenue you need across the hours you can actually bill. Germany’s Existenzgründungsportal also bases pricing on possible productive hours.
Annual revenue target ÷ annual billable hours = calculated hourly rate
Suppose your fully calculated revenue target is 96,000 euros:
| Billable hours per year | Required hourly rate |
|---|---|
| 1,200 hours | 80 euros |
| 1,000 hours | 96 euros |
Both figures are worked examples excluding VAT, not market prices. They show how strongly your utilisation affects the rate you need.
4. Compare your number with the market
Your calculation describes your financial goal. For your offer, comparable fees as well as supply and demand come into play – also key criteria for the KVK.
Our suggestion: compare projects with a similar role, responsibility, specialisation and working model. Talk to recruiters and experienced freelancers about exactly this setup rather than adopting a general average.
New to self-employment does not mean new to your field. Build on the project examples from Part 1: How to Market Your Skills: what experience do you bring to this assignment?
5. Make your fee easy to understand
Agree on which services and additional costs your rate covers. The KVK explicitly recommends clarifying travel costs, for example, in advance.
One possible wording:
“For the scope we discussed, I charge [amount] euros per hour, plus VAT where applicable. We will set out the scope of work and any travel costs in the proposal.”
Your next step: write down your revenue target, billable hours and a well-reasoned offer price. After your first projects, check which assumptions actually hold.
Your hourly rate doesn’t have to be set in stone. It should fit your business – and the work you do for your clients.
Next in the series: Part 3: How to Find Your First Freelance Clients