Bill Rate Calculator
Calculate the hourly rate you need to charge to reach your income goals
Account for vacation, holidays, and non-billable time
Includes taxes, benefits, equipment, office space, etc.
How to Use This Calculator
Enter your desired annual income
Input the annual income you want to earn after accounting for all expenses and overhead.
Estimate billable hours per year
Calculate realistic billable hours accounting for vacation, holidays, sick days, and non-billable administrative time.
Enter overhead percentage
Include all overhead costs as a percentage: taxes, benefits, equipment, software, office space, insurance, etc.
Calculate required bill rate
View the hourly rate you need to charge to achieve your income goal after covering all overhead costs.
Formula
Bill Rate = (Desired Annual Income / Billable Hours) / (1 - Overhead%)
Example:
Desired Income = $100,000, Billable Hours = 1,600, Overhead = 30%
Base Rate = $100,000 / 1,600 = $62.50
Bill Rate = $62.50 / (1 - 0.30) = $62.50 / 0.70 = $89.29
You need to charge $89.29/hour to earn $100,000 after 30% overhead
About Bill Rate Calculator
The Bill Rate Calculator is an essential pricing tool for freelancers, consultants, contractors, and service-based businesses that charge by the hour. Determining the right hourly rate is one of the most critical business decisions, as it directly impacts your ability to earn a sustainable income while covering all business expenses. Many professionals make the mistake of setting rates based on what competitors charge or what feels reasonable, without properly accounting for overhead costs, taxes, benefits, and desired profit margins. This calculator helps you work backwards from your income goals to determine the minimum hourly rate you need to charge. The calculation accounts for overhead costs, which include all business expenses beyond direct labor costs: self-employment taxes, health insurance, retirement contributions, equipment and software, office space or home office expenses, professional development, marketing, insurance, and other operational costs. By understanding your true overhead percentage, you can set rates that ensure you not only cover your expenses but also achieve your desired income level. This tool is particularly valuable for new freelancers setting rates for the first time, experienced professionals considering rate increases, and anyone trying to understand whether their current rates are sustainable. The calculator also helps you understand the relationship between billable hours, overhead costs, and income goals, enabling better business planning and financial decision-making.
When to Use This Calculator
- Setting rates: Determine appropriate hourly rates for new services
- Rate increases: Calculate new rates needed to meet income goals
- Business planning: Understand the relationship between rates and profitability
- Pricing strategy: Evaluate whether current rates are sustainable
Why Use Our Calculator?
- ✅ Goal-based pricing: Set rates based on income goals, not guesswork
- ✅ Overhead awareness: Account for all business costs in your pricing
- ✅ Free tool: No registration or payment required
- ✅ Business insights: Understand the true cost of doing business
Frequently Asked Questions
What should I include in overhead percentage?
Include all business expenses: self-employment taxes (15.3%), health insurance, retirement contributions, equipment, software subscriptions, office space, marketing, professional development, insurance, and any other operational costs. A typical range is 25-40% for freelancers.
How do I estimate billable hours per year?
Start with total work hours (e.g., 2,080 for full-time), subtract vacation (2-4 weeks), holidays (10-12 days), sick days, and non-billable administrative time. A realistic range is often 1,400-1,800 hours per year for full-time freelancers.
Should I charge more than the calculated rate?
Yes, if market conditions allow. The calculated rate is the minimum needed to meet your goals. Consider adding a profit margin (10-20%) and adjusting for market rates, your experience level, and the value you provide.
What if my calculated rate is higher than market rates?
This may indicate you need to reduce overhead, increase billable hours, adjust income expectations, or find ways to add more value to justify higher rates. Consider your unique skills and value proposition.
Can I use this for project-based pricing?
Yes, convert the hourly rate to project estimates by multiplying by estimated hours. However, consider value-based pricing for projects where you can deliver significant value beyond time spent.