A competitor's rate, a desired salary or an attractive round number can inform a price, but none proves the project supports the business. A capacity-first model exposes the assumptions before the quote reaches the buyer.
Try the free price sanity check
Enter one set of assumptions to estimate a monthly revenue floor, gross hourly floor and minimum project price. All inputs and results stay in this browser.
This is a planning estimate, not a market quote, tax calculation or guarantee of demand. Validate the scope and buyer value separately.
Collect nine business assumptions
| Input | What it represents | Common mistake |
|---|---|---|
| Owner pay | Target monthly compensation before personal spending | Treating personal take-home pay as the only business requirement |
| Business overhead | Recurring software, insurance, admin and workspace costs | Ignoring annual costs or quiet subscriptions |
| Productive hours | Total working time available in the month | Using every calendar hour |
| Billable utilization | Share of productive time that can be charged | Excluding sales, admin and learning |
| Tax reserve | Editable planning allowance, not a tax calculation | Presenting one percentage as legally correct everywhere |
| Profit reserve | Amount intended to remain in the business | Calling owner pay and profit the same thing |
| Payment fees | Expected marketplace or payment deductions | Using the headline price as net proceeds |
| Direct costs | Project-specific contractors, assets, travel or software | Paying project costs from overhead twice |
| Rounding rule | Consistent increment used for client-facing prices | Rounding below the calculated floor |
Build the business floor
productive hours × billable utilizationtax reserve + profit reserve + payment-fee reserve(owner pay + overhead) ÷ (1 − combined reserve)monthly gross revenue floor ÷ monthly billable hoursThe combined reserve must stay below 100%, and every percentage needs a documented meaning. Tax reserve is a cash-planning assumption only: actual taxable income, deductions, indirect taxes, filing dates and rates vary by jurisdiction and entity.
Convert the floor into a project price
((delivery hours × hourly floor) + (direct costs ÷ (1 − combined reserve))) × (1 + scope contingency)round up(minimum project price × justified value factor)list price × (1 − planned discount)Delivery hours should include discovery, production, calls, quality checks, revisions and handoff. Use a value factor only when the offer has evidence to support it; it is not a license to invent arbitrary markups.
Find the discount boundary
1 − (minimum project price ÷ list price)If a requested discount exceeds this boundary, change the scope, payment terms, timeline or included revisions. Do not quietly leave the deliverables intact while removing required economic coverage.
Run two capacity checks
Projects that fit
Divide monthly billable hours by delivery hours per project and round down. This estimates physical delivery capacity.
Projects the target needs
Divide the monthly requirement by the net contribution of one project and round up. This estimates commercial volume.
If the target needs more projects than capacity allows, the model—not merely the salesperson—has a problem. Rework price, scope, capacity or the monthly requirement before promising delivery.
Worked example
Suppose owner pay is $5,000, overhead is $1,000, productive time is 160 hours, billable utilization is 60%, and combined reserves are 38%. Billable capacity is 96 hours. The gross monthly floor is about $9,677 and the hourly floor about $100.80. An 18-hour project with $120 direct cost and 15% contingency produces a minimum price around $2,310 before any supported value adjustment or rounding. These figures illustrate the method, not a recommended market rate.
Five mistakes to avoid
- Copying a market rate without checking whether it funds this business.
- Treating all working time as billable.
- Adding a tax reserve and calling it a tax calculation.
- Discounting the quote without recalculating the price floor.
- Hiding mandatory fees or charges until late in the buying process.
Official guidance used
U.S. Small Business Administration: Break-even point — total cost and revenue at break-even, contribution margin and service-level analysis.
Internal Revenue Service: Self-employed individuals tax center — net profit or loss, self-employment tax and estimated-tax responsibilities in the United States.
UK Competition and Markets Authority: Price transparency — clear pricing, mandatory fees, taxes and charges, and risks from drip or partitioned pricing.
Want the formulas and three offer tiers ready to adapt?
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View the pricing calculatorFrequently asked questions
How do I calculate a freelance project price?
Start with the monthly owner-pay and overhead requirement, adjust for billable capacity and planning reserves, then add project hours, direct costs, scope contingency and any justified value adjustment.
Should tax be added as a fixed percentage?
No universal percentage applies. A tax reserve is only a planning assumption. Taxable bases, rates, deductions, filing rules and indirect taxes vary by jurisdiction and require local advice.
How much can I discount a freelance project?
Calculate the largest discount that keeps the final quote at or above the defined project floor. If the buyer needs a lower price, reduce scope before quietly removing required coverage.