How to price freelance work without undercharging

Start from the income you need, not the hours you have

Decide on the take-home income you need, add your business costs (software, equipment, insurance, accounting), then add the tax you will owe. The result is the revenue the business must generate in a year. Divide that by the number of genuinely billable hours you can work, and you have a floor rate.

The key word is billable. A freelancer working a 40-hour week rarely bills more than 20-25 hours once admin, marketing, invoicing and client calls are counted. Assuming 40 billable hours a week produces a rate that is roughly half what it needs to be.

Account for the time you do not work

Employees get paid holidays and sick days. Freelancers do not. If you want four weeks of holiday and expect a week of illness, that is five weeks — around 10% of the year — that generates no revenue but must still be paid for by the weeks that do.

Add unpaid time spent on business development too. Winning the next client is part of the job, and the hours it takes are real even though no invoice is raised for them.

• Target take-home income for the year
• Add business costs — software, equipment, insurance, accounting
• Add tax and self-employment contributions
• Divide by realistic billable hours, not total hours
• This is your floor; never quote below it

Hourly, daily or project?

Hourly billing is simple and low-risk when scope is unclear, but it penalises your own efficiency and can cap your income. Daily rates reduce the administrative overhead and suit ongoing relationships. Project pricing is best when scope is well defined, because it lets you benefit from expertise instead of being paid for time.

When quoting a project, estimate the hours, multiply by your floor rate, then add a buffer of around 20% for the parts that always expand. Present the total as a fixed price, not an hourly breakdown.

Raising rates without losing clients

Raise rates on new clients first, so your existing income is not disrupted while you test the response. Then move existing clients up at a natural boundary — a new project, a renewal date, the start of a calendar year — and give plenty of notice.

Most freelancers who raise rates by 10-20% lose far fewer clients than they fear. If you lose none, you were probably charging too little; if you lose a lot, you moved too fast. The information is worth more than the safety of an unchanged rate.

Do not compete on price

The clients who choose purely on the lowest rate are rarely the ones who make a freelance business stable — they are often the most demanding and the least profitable. Competing on outcome, reliability and specialised knowledge gives you pricing power that a cheaper competitor cannot simply undercut.

Knowing your floor rate changes how you negotiate. When you know exactly what a project is worth to you, discounting becomes a deliberate choice rather than a panic response.