The calculation nearly everyone does
"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."
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.
Billable hours are not working hours
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.
For 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.
This single fact roughly doubles your rate before you have added a single cost.
The costs nobody writes down
Write them down. All of them, annually.
- the take-home you actually need to live
- software and subscriptions — and note that free tools are not free: fonts, stock, a domain, a backup drive, a font licence for commercial use
- hardware, spread over its life. A laptop you will replace in three years is one third of its price, every year.
- internet, power, phone, and a backup connection, because a dead link on delivery day costs you a client
- an accountant, once a year, which is almost always cheaper than the mistake
- tax. An employee's tax is deducted before they see the money. Yours is not. Money sitting in your account is not yours.
- gaps. You will not bill twelve months. Budget on ten.
- unpaid time: sick days, a family emergency, one broken laptop
The worked example
Say you want to take home 40,000 a month. That is 480,000 a year.
Costs, annually: software 18,000, laptop amortised 25,000, internet and power 24,000, phone 9,000, accountant 12,000. Total 88,000.
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.
Now the hours. Ten earning months, at 80 billable hours a month, is 800 billable hours.
668,000 divided by 800 is 835 an hour.
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.
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 30 an hour — not the 9 an hour that "1,500 divided by 160" suggests.
What this number is and is not
It 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.
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. The market tells you how far above the floor you can stand.
One 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.
Do this today
Open 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.
Then never quote that number to a client. It is for you. What you say out loud is the next lesson.
Before you move on