YOUR

HOURLY RATE
Calculating your hourly rate will require a bit of math and a bit of research. This will
also change as you get more experienced, and understand a little bit more of what
your expenses look like in YOUR particular business. This is also an entirely personal
process, since there can be a ton of variables based on your personal financial
situation as well as what industry you’re in.

However, below is a general calculation to get you started, and you can tweak from
there.

1. Determine what you want your take-home salary to be

annually.
This is an entirely personal decision, but come up with the number you would like
to bring in for yourself as salary through your business.

Is it $20,000? Is it $200,000? Only you can decide this part.

I want my take-home
annual salary to be:

2. Ballpark what your annual expenses will be for the business.

This part is really tricky when you’re first starting out, as so many of these things
haven’t come up yet. However, you should still do the research based on averages…
don’t just skip this step.

Think about alllllllll the expenses you’ll have in your business, even if they feel silly.
If you don’t know the amount, do a little research to look up averages for your
industry and/or your area, and then fill out the sections on the next page.

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 your ANNUAL inputs here

Office rent*
Office utilities*
Internet*
Cellphone*
Office equipment
Software/Subscriptions**
Website hosting
Contractors/Employees
Legal Fees
Accounting Fees
Professional Memberships
Marketing Materials
Taxes***
Insurance, Workers Comp, Benefits/Healthcare, Etc***
OTHER
OTHER
OTHER
TOTAL:
*if you’re using your home, figure out what percentage of your home is being used for office, and
take that percentage of your rent/mortgage payment for this.

**accounting software, e-commerce software, stock photo subscriptions, Adobe CC, etc. This will
vary business-to-business!
***this will depend on where you live/what the requirements are– do some research here and get
yourself set up on the right foot.

My total annual
expenses are:

3. Determine your working hours in a year (aka "billable hours").

This is the number of hours you will be actually working for pay per year. It doesn’t
include the hours you’re working on your website or doing social media marketing,
for example.

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There are 52 weeks in a year. If you assume a 40 hour work week, that’s 2,080
“working” hours.

Now, start figuring out how many of those hours will actually apply to you.

How much vacation do you want? (circle your answer)

2 weeks vacation = 80 hours off
3 weeks vacation = 120 hours off
4 weeks vacation = 160 hours off
5 weeks vacation = 200 hours off
OTHER: ___ weeks vacation = ________ hours off

How many paid sick days/paid days off (for appointments, etc) do you
want to allow yourself? (fill in the blanks)
_______ # of paid days off x 8 hours = __________ hours off

How many holidays will you observe/take off? Do some research about
the standard statutory holidays in your country.
_______ # of paid holidays x 8 hours = __________ hours off

Now total up all of those hours off, and subtract them from 2,080...
2,080 work hours – ________ total hours off = ___________ total work hours per year

And lastly, determine how many of those work hours are actually
BILLABLE, meaning you’re spending them on client work.

You can adjust these numbers for yourself, but let’s assume you take a 1 hour lunch
per day, and you spend 1.5 hours on non-client work (ie. answering emails,
marketing on social media, misc meetings, shopping for supplies, updating your
website, etc).

That’s 2.5 hours a day that you aren’t actively billing for, which equals 31.25% of your
time.

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So take your total work hours and remove that 31.25% of them…
_________ total work hours per year – 31.25% = ________ actual billing hours per year

My actual # of billing
hours per year is:

4. Do the final calculation, using all of those numbers!

Salary Number + Total Expenses

= Hourly Rate!
÷ Billing Hours

Now do yours!

+
=
÷

5. Assess. (This is important!)

Look at your number. Does it feel low? Does it feel outrageously high?

This is the part where you have to take into account the variable stuff. Take the
number you came up with, and tweak it to your comfort level based on whatever
combination of these factors makes sense:

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– How experienced are you? How realistic is your salary expectation, based on the
amount of time you’ve been working at this? Perhaps adjust your expectations a
little bit.

– What is the market average in your industry? Do some digging and find out
what others are charging for this work. A lot of the time, your competitors are
probably happy to share if you approach them properly– it’s in their best interest to
make sure you’re not undercutting them.

– What are potential clients/customers WILLING to pay? This one can be hard to
determine, but think about it realistically. Just because you THINK your knitted
scarf should be worth $400 doesn’t mean that’s what customers will be willing to
pay. Sometimes a specific market just might not be super profitable.

And lastly, remember that just because you KNOW your

hourly rate does not mean you need to (or should) charge
hourly. Often, it is simply just a reference number in the
back of your mind to make sure you’re hitting AT A
MINIMUM.

Want more
pricing help?
Find more from me at:
www.panicfreepricing.com

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