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· 4 min read
How to Price a Freelance Project Properly
Heshan Fernando
Co-founder & COO
You want to earn 4.8 million a year. There are roughly 2,000 working hours in a year, so the rate is 2,400 an hour. Quote accordingly, work a full year, and end up substantially short.
The error is in the hours. Almost nobody bills 2,000 hours a year, and the gap between working hours and billable hours is where freelance pricing goes wrong.
Billable hours are about half of working hours
The hours nobody pays for directly:
Finding work. Proposals, calls, portfolio updates, follow-ups. For an established freelancer this might be 10-20% of the week; when starting out it’s more.
Admin. Invoicing, chasing payment, bookkeeping, tax, contracts, insurance.
Learning. Keeping current is required to stay employable and is never on a client’s invoice.
Unpaid revisions. Work beyond an agreed scope that you absorb because arguing costs more than doing it.
Gaps. Time between projects, which is real and unpaid.
Holiday and sickness. Nobody pays you for these.
Add it up and 20-25 genuinely billable hours a week is realistic for many independents. Over 44 working weeks that’s around 1,000 hours a year — not 2,000.
rate = (target income + business costs) ÷ (billable weeks × billable hours per week)
For 4.8 million over 44 weeks at 22 billable hours: 4,800,000 ÷ 968 ≈ 4,959 an hour. Roughly double the naive figure, and that’s before business costs — software, equipment, insurance, accountant, pension.
Contingency, added correctly
Estimates run over. Not occasionally — reliably, and in one direction.
The correct handling is to estimate honestly and then add a contingency percentage, rather than padding the estimate itself. Two reasons: a padded estimate is untrackable, so you never learn how accurate you actually are; and it’s harder to defend line by line if a client questions it.
Twenty percent is a reasonable starting contingency. Track your own overruns for a few projects and you’ll have a better number, which is more valuable than any rule of thumb.
| Component | How to set it |
|---|---|
| Billable hours | Track for a month — don’t estimate |
| Rate | Target income ÷ actual billable hours |
| Estimate | Honest hours, not padded |
| Contingency | 20% initially, then your own data |
Fixed price or hourly
Fixed price transfers estimation risk to you. Get faster and you earn more per hour; underestimate and you absorb it. Clients generally prefer it because their cost is known.
Hourly transfers the risk to the client and penalises efficiency — the faster you work, the less you earn, which is a genuinely perverse incentive.
Fixed price with a bounded scope is the usual compromise: a defined deliverable, a stated number of revision rounds, and additional work priced separately. It gives the client certainty and protects you from the scope creep that makes fixed pricing dangerous.
Common mistakes to avoid
- Dividing target income by 2,000 hours.
- Quoting a rate that matches what an employee costs per hour, which ignores that employees don’t pay their own tax, equipment, insurance or unpaid time.
- Padding the estimate instead of adding a visible contingency.
- Fixed pricing an unbounded scope.
- Never tracking actual hours against estimates, so the next quote is as much a guess as the last one.
How to do it with Freelance Quote Calculator
The Freelance Quote Calculator derives the rate from real billable hours.
- Estimate the project hours honestly.
- Derive your rate from target income and genuinely billable hours, not working hours.
- Add contingency as a separate figure rather than inflating the estimate.
- Track the actual hours afterwards — that’s what makes the next quote better.
Other business calculators are in the tools directory.
Frequently asked questions
How many hours a week are actually billable?
For most independents, around half of working hours. Sales, admin, invoicing, learning and unpaid revisions all consume time nobody pays for directly.
Should I show the contingency in the quote?
Usually not as a separate line, since it invites a negotiation to remove it. Build it into the number and be prepared to explain the estimate if asked.
Fixed price or hourly?
Fixed price transfers estimation risk to you and rewards efficiency. Hourly transfers it to the client and penalises speed. Fixed price with a bounded scope is the usual compromise.
Final thought
Track your billable hours for one month before setting a rate. Most freelancers discover the number is far lower than they assumed, and that discovery is worth more than any pricing formula.