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How To Calculate Your Freelance Average Hourly Rate (and What It Should Be)


How To Calculate Your Freelance Average Hourly Rate  (and What It Should Be)

Last week, we took an in-depth look at some handy tips for  financial planning for freelancers. In that post, we touched briefly on charging what you’re worth. Finding prices that are both fair to you and the market can be difficult, but it’s an integral skill if you are planning to make it as an entrepreneur. So in this post we are going to share ways to calculate your current freelance average hourly rate and how to find out what it needs to be to live the life you want.

Why You Need To Calculate Your Freelance Average Hourly Rate

Whether you are freelancing as a side hustle or looking to make it your full-time job, knowing your freelance average hourly rate is one of the simplest ways to plan for long term success. While you might start out aimlessly pricing yourself and burning the candle at both ends to fulfill orders, eventually you have to do the math to find out if you’re building a sustainable business model.

Here’s an example…

Imagine that you are working a full-time job, 40 hours a week, that pays $20 an hour. And let’s say that you’ve also started offering your web design services on Legiit, working nights and weekends to slowly grow your side hustle.

If you have no idea what your freelance average hourly rate is for your web design business, you won’t know if it’s actually more profitable than your day job. Imagine you’re only making $12 an hour building WordPress sites. You’ve basically got two choices:

  • Ditch the side hustle and just work  extra hours at your 9 to 5 (Lame!).
  • Or raise your freelance rates so that it is actually profitable (Legiit!).

But, if you don’t know what your freelance average hourly rate is, you’ll never be able to make that decision.

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What Should Your Freelance Hourly Rate Be?

If you are looking to make the switch from side hustle to full time freelancer, you need to be sure that your business can actually replace your current wages.

For example, let’s say that you’re current annual salary at your $20 per hour job is $41,600 (before the government takes its bite). That’s working 40 hours a week for 52 weeks a year. If you want to go full-time freelancing without reducing your spending habits, you’ll need to make at least that much.

Even better, when you are able to increase your pay as a freelancer, you can make the same money with less work. If you can get your freelance average hourly rate to $30 per hour, for instance, you’ll be able to replace your current income with just about 26 hours of work per week.

To find out your absolute minimum hourly rate, just use this formula:


So, if you want to make $100,000 in a year working 40 hours per week, your minimum hourly rate would be…

$100,000  ÷ 40 hours  ÷ 52 = $48.07 per hour

How To Calculate Your Current Freelance Average Hourly Rate

Hopefully by now you can see the value in knowing what your hourly rate is. With that out of the way, let’s look at how to figure out what you’re currently making. Here is a simple process to calculate your freelance average hourly rate. It may seem a bit tedious, but you only have to do it for a week. After that, you’ll have a really clear picture of what your time is actually worth.

Step 1: Track Your Time

For one week, keep a running list of any time you spend on your business. This obviously includes time doing whatever work it is you do (writing, web design, video editing, etc.), but you also need to keep track of the other day-to-day activities like responding to client inquiries.

Step 2: Track Your Revenue and Expenses

During that same week, keep a clear tally of the money you are bringing in as well as any money you are spending on business expenses. Only include the stuff that is directly related to the time you are tracking for this week.

So if by chance this is the week that you need to invest in a new business laptop, don’t figure that into these calculations. For now, we are more concerned with expenses such as outsourcing tasks or purchasing stock images.

Step 3: Do Some Simple Math

At the end of the week, calculate your total profit as follows:  PROFIT = REVENUE – EXPENSES

Then, use this formula to work out your average freelance hourly rate:  HOURLY RATE =  PROFIT  ÷ HOURS WORKED

An Example

Let’s say you track a total of 15 hours worked on your business for the week. You brought in $400 in revenue and spent $75 on outsourced tasks.

  • $400 – $75 = $325 profit
  • $325  ÷ 15 hours = $21.67 per hour <== Your Hourly Rate  

If your orders tend to ebb and flow, you may have to track the numbers for a little bit longer, say two  weeks to a month. But a single week, as long as it’s a relatively normal week, should give you a ballpark figure to at least know where you stand.

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How To Increase Your Freelance Average Hourly Rate

If we continue with the same example, than your $21.67 per hour rate is enough to replace your full time job. But, as a freelancer, you generally want a little more of a safety cushion in order to account for things like life and health insurance, which may have been taken care of when you were working for someone else.

So, if you are looking to increase your hourly rate, here a few simple ideas that anyone can implement.

Streamline Client Communication

One place we tend to lose a lot of time is in communicating back and forth with clients. If you respond to every message or email the moment you get it, then you are likely interrupting other more profitable tasks. One study found that the average office worker takes 25 minutes to get back on task after being interrupted.

If you schedule two 30-minute intervals every day to respond to client messages, you’ll probably be able to get more work done in less time. Similarly, you can reduce the number of clients who ping you with pre-order questions by create a robust FAQ and service description that answers everything up front.

Outsource What You Can

Some freelancers want to do everything themselves. If you are comfortable, though, consider training assistants to take care of some of the tasks that don’t require as much of your expertise. For example, maybe you bring someone on to take care of communicating with clients for you. If paying them $10 an hour frees up time that you can spend making $30 an hour, you come out on top.

Likewise, if a service you offer involves a lot of mindless data entry or manual account creation, you could easily save hours a day by outsourcing this task to someone else.

Raise Your Prices

This one seems like a no brainer, but so many freelancers think they have to compete on price. “If some other guy is doing it for $10,” they’ll say, “who am I to charge $20?”. Especially after you’ve built up a strong client base, you can start to experiment with raising your fees.

Even if it costs you a few regular customers, your total hourly rate will still likely increase. And you probably won’t attract as many cheap tire kickers any more. Just remember that after you raise your rates, you may want to spend another week tracking hours and profit to make sure that you aren’t costing yourself money.

Get in The Right Crowd

Part of earning more money as a freelancer is building trust with clients. If you aren’t already selling your services on  Legiit, consider checking it out. With a very active community that encourages buyers and sellers to build lasting relationships, we think it’s one of the best marketplaces on the web for freelancers to earn the money they deserve.

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