{"course":{"slug":"independent-creative","title":"Working for Yourself","url":"https://addaly.com/learn/independent-creative","level":"intermediate","track":"create"},"lesson":{"slug":"the-arithmetic","title":"Your rate is about three times the number you first thought","url":"https://addaly.com/learn/independent-creative/the-arithmetic","position":31,"of":84,"minutes":10,"answer":"Your floor is annual take-home plus all costs, divided by ten months of realistic billable hours, not twelve months of working hours.","keyIdea":"Your floor is annual take-home plus all costs, divided by ten months of realistic billable hours, not twelve months of working hours."},"body":{"format":"markdown","text":"## The calculation nearly everyone does\n\n\"I want to take home forty thousand a month. A month is about a hundred and sixty hours. So two hundred and fifty an hour.\"\n\nEvery term in that sentence is wrong, and the error compounds. People then spend two years wondering why working constantly does not produce the income they calculated.\n\n## Billable hours are not working hours\n\nYou do not get paid for the hours you spend pitching, writing proposals, replying to messages, making invoices, chasing invoices, doing your accounts, learning a tool, fixing a corrupted file, or redoing work because a brief was vague.\n\nFor a solo freelancer, **50 to 60 percent billable is a good year.** In the first year it is often 30 to 40. That means a genuine 40-hour week contains something like 20 to 24 hours you can charge for.\n\nThis single fact roughly doubles your rate before you have added a single cost.\n\n## The costs nobody writes down\n\nWrite them down. All of them, annually.\n\n- the take-home you actually need to live\n- software and subscriptions, and note that free tools are not free: fonts, stock, a domain, a backup drive, a font licence for commercial use\n- hardware, spread over its life. A laptop you will replace in three years is one third of its price, every year.\n- internet, power, phone, and a backup connection, because a dead link on delivery day costs you a client\n- an accountant, once a year, which is almost always cheaper than the mistake\n- **tax.** An employee's tax is deducted before they see the money. Yours is not. Money sitting in your account is not yours.\n- **gaps.** You will not bill twelve months. Budget on ten.\n- unpaid time: sick days, a family emergency, one broken laptop\n\n## The worked example\n\nSay you want to take home 40,000 a month. That is 480,000 a year.\n\nCosts, annually: software 18,000, laptop amortised 25,000, internet and power 24,000, phone 9,000, accountant 12,000. Total 88,000.\n\nSo you need 568,000 after tax. If your effective rate is 15 percent (it will differ; this is a placeholder), you need roughly 668,000 of revenue.\n\nNow the hours. Ten earning months, at 80 billable hours a month, is 800 billable hours.\n\n668,000 divided by 800 is **835 an hour.**\n\nThe number you started with was 250. The real floor is more than three times it. That gap is not greed and it is not market positioning. It is arithmetic that was skipped.\n\n> Figure: The same take-home, costed four times. Bars (rupees an hour, as a floor): Take-home divided by 160 working hours a month 250; Ten earning months at 80 billable hours each 600; Plus 88,000 of annual costs 710; Plus tax at an effective 15 per cent 835. Forty thousand a month of take-home, on the worked example in this lesson. The first number is the one nearly everybody quotes and it is a third of the floor, below which every hour you work makes you poorer.\n\nThe shape is identical in any currency. Someone quoting in dollars who wants 1,500 a month take-home, with 2,000 of annual costs, needs about 23,500 of revenue, which over 800 billable hours is about **30 an hour**, not the 9 an hour that \"1,500 divided by 160\" suggests.\n\n## What this number is and is not\n\nIt is a **floor.** Below it, every hour you work makes you poorer, and you will discover this slowly, about eighteen months in, when you notice you have no savings despite never having had a free evening.\n\nIt is not a price. What you can charge is a market question: what the work is worth to the client, what your reference work supports, who else they are talking to. The floor tells you when to walk away. The market tells you how far above the floor you can stand.\n\nOne more consequence, which is worth carrying into the next lesson. If you price by the hour and a new tool halves your production time, your income halves for identical output. The arithmetic above is exactly why hourly billing has become a worse deal than it was five years ago.\n\n## Do this today\n\nOpen a spreadsheet, Google Sheets or LibreOffice, both free. Two columns: annual costs, and the take-home you need. Divide by realistic billable hours. It takes fifteen minutes and most people who do it discover they have been working below their own floor for a year.\n\nThen never quote that number to a client. It is for you. What you say out loud is the next lesson."},"check":{"question":"A video editor calculates his rate by dividing the monthly income he needs by 160 working hours. Eighteen months later he has been fully booked throughout and has no savings. What went wrong first?","options":[{"text":"He charged the same rate to every client instead of pricing according to what each project was worth to them.","correct":false,"tempting":"Jumps to market positioning when the underlying floor was miscalculated."},{"text":"He counted every working hour as billable, so the hours that pay had to carry the pitching, admin and chasing that do not.","correct":true},{"text":"He did not raise his rate over eighteen months, so inflation and rising costs quietly eroded the margin.","correct":false,"tempting":"Treats a rate that was never viable as one that merely aged."},{"text":"He took on too many small projects, and the overhead of many clients ate the profit that fewer large ones would have kept.","correct":false,"tempting":"Blames project mix for a shortfall that exists at any project size once the divisor is wrong."}]},"prev":{"slug":"the-slow-channels","title":"Teaching, writing, speaking, being useful","url":"https://addaly.com/learn/independent-creative/the-slow-channels"},"next":{"slug":"the-quote-document","title":"The document that fixes what you agreed","url":"https://addaly.com/learn/independent-creative/the-quote-document"},"authorship":"Founder and series editor: Dr Mustafa Mun. Written by AI models to a written standard. Exam keys checked blind by a second model: 3,665 of 3,666 agreed. Academic review invited.","review":{"status":"Draft, open for academic review"},"cite":"Addaly (2026) 'Your rate is about three times the number you first thought', in Working for Yourself. Edited by M. Mun. Addaly. Available at: https://addaly.com/learn/independent-creative/the-arithmetic (Accessed: 31 October 2026).","licence":{"name":"CC BY-NC-SA 4.0","url":"https://creativecommons.org/licenses/by-nc-sa/4.0/"},"reader":{"schema":1,"title":"Your rate is about three times the number you first thought","courseTitle":"Working for Yourself","module":{"index":4,"slug":"the-money","title":"The money"},"answer":null,"keyIdea":"Your floor is annual take-home plus all costs, divided by ten months of realistic billable hours, not twelve months of working hours.","hero":{"kind":"figure","figure":{"t":"figure","label":"Figure 4.1","figure":{"type":"bars","unit":"rupees an hour, as a floor","title":"The same take-home, costed four times","series":[{"label":"Take-home divided by 160 working hours a month","value":250},{"label":"Ten earning months at 80 billable hours each","value":600},{"label":"Plus 88,000 of annual costs","value":710},{"label":"Plus tax at an effective 15 per cent","value":835,"highlight":true}],"caption":"Forty thousand a month of take-home, on the worked example in this lesson. The first number is the one nearly everybody quotes and it is a third of the floor, below which every hour you work makes you poorer."},"alt":"Figure: The same take-home, costed four times. Bars (rupees an hour, as a floor): Take-home divided by 160 working hours a month 250; Ten earning months at 80 billable hours each 600; Plus 88,000 of annual costs 710; Plus tax at an effective 15 per cent 835. Forty thousand a month of take-home, on the worked example in this lesson. The first number is the one nearly everybody quotes and it is a third of the floor, below which every hour you work makes you poorer."}},"blocks":[{"t":"h2","id":"the-calculation-nearly-everyone-does","runs":[{"text":"The calculation nearly everyone does"}]},{"t":"p","runs":[{"text":"“I want to take home forty thousand a month. A month is about a hundred and sixty hours. So two hundred and fifty an hour.”"}]},{"t":"p","runs":[{"text":"Every term in that sentence is wrong, and the error compounds. People then spend two years wondering why working constantly does not produce the income they calculated."}]},{"t":"h2","id":"billable-hours-are-not-working-hours","runs":[{"text":"Billable hours are not working hours"}]},{"t":"p","runs":[{"text":"You do not get paid for the hours you spend pitching, writing proposals, replying to messages, making invoices, chasing invoices, doing your accounts, learning a tool, fixing a corrupted file, or redoing work because a brief was vague."}]},{"t":"p","runs":[{"text":"For a solo freelancer, "},{"text":"50 to 60 percent billable is a good year.","b":true},{"text":" In the first year it is often 30 to 40. That means a genuine 40-hour week contains something like 20 to 24 hours you can charge for."}]},{"t":"p","runs":[{"text":"This single fact roughly doubles your rate before you have added a single cost."}]},{"t":"h2","id":"the-costs-nobody-writes-down","runs":[{"text":"The costs nobody writes down"}]},{"t":"p","runs":[{"text":"Write them down. All of them, annually."}]},{"t":"ul","items":[[{"text":"the take-home you actually need to live"}],[{"text":"software and subscriptions, and note that free tools are not free: fonts, stock, a domain, a backup drive, a font licence for commercial use"}],[{"text":"hardware, spread over its life. A laptop you will replace in three years is one third of its price, every year."}],[{"text":"internet, power, phone, and a backup connection, because a dead link on delivery day costs you a client"}],[{"text":"an accountant, once a year, which is almost always cheaper than the mistake"}],[{"text":"tax.","b":true},{"text":" An employee’s tax is deducted before they see the money. Yours is not. Money sitting in your account is not yours."}],[{"text":"gaps.","b":true},{"text":" You will not bill twelve months. Budget on ten."}],[{"text":"unpaid time: sick days, a family emergency, one broken laptop"}]]},{"t":"h2","id":"the-worked-example","runs":[{"text":"The worked example"}]},{"t":"p","runs":[{"text":"Say you want to take home 40,000 a month. That is 480,000 a year."}]},{"t":"p","runs":[{"text":"Costs, annually: software 18,000, laptop amortised 25,000, internet and power 24,000, phone 9,000, accountant 12,000. Total 88,000."}]},{"t":"p","runs":[{"text":"So you need 568,000 after tax. If your effective rate is 15 percent (it will differ; this is a placeholder), you need roughly 668,000 of revenue."}]},{"t":"p","runs":[{"text":"Now the hours. Ten earning months, at 80 billable hours a month, is 800 billable hours."}]},{"t":"p","runs":[{"text":"668,000 divided by 800 is "},{"text":"835 an hour.","b":true}]},{"t":"p","runs":[{"text":"The number you started with was 250. The real floor is more than three times it. That gap is not greed and it is not market positioning. It is arithmetic that was skipped."}]},{"t":"p","runs":[{"text":"The shape is identical in any currency. Someone quoting in dollars who wants 1,500 a month take-home, with 2,000 of annual costs, needs about 23,500 of revenue, which over 800 billable hours is about "},{"text":"30 an hour","b":true},{"text":", not the 9 an hour that “1,500 divided by 160” suggests."}]},{"t":"h2","id":"what-this-number-is-and-is-not","runs":[{"text":"What this number is and is not"}]},{"t":"p","runs":[{"text":"It is a "},{"text":"floor.","b":true},{"text":" Below it, every hour you work makes you poorer, and you will discover this slowly, about eighteen months in, when you notice you have no savings despite never having had a free evening."}]},{"t":"p","runs":[{"text":"It is not a price. What you can charge is a market question: what the work is worth to the client, what your reference work supports, who else they are talking to. The floor tells you when to walk away. 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