The True Hourly Profit Calculator

Why the quoted rate overstates what you keep

The number on your proposal is revenue. What lands in your account is something else. Two forces sit between them: unpaid hours stretch the divisor, and running costs shrink the money that came in. Take a quoted rate of 75 with 110 billable hours a month, 35 unpaid hours and 400 in monthly costs. The real figure is 54.14 an hour. Same month of work, 28% lower.

The unpaid hours trap

Every billable hour carries a tail of hours nobody pays for: proposals that go nowhere, invoice chasing, scope conversations, the client email that turns into an afternoon. Most of that load scales with how many clients are on the books, and the count tends to run higher than people assume. Eurostat's 2017 survey of self-employment across the EU found that 61.2% of self-employed people had more than nine clients over twelve months, ranging from 44.3% in Latvia to 75.9% in Spain. The calculator does not use an average. You enter your own admin figure, and it lands in the denominator alongside the billable hours.

The expenses most freelancers forget

Software seats, professional indemnity cover, accountancy fees, a laptop that needs replacing every four years. These are ordinary business overheads, and they slip past because they arrive monthly or annually rather than showing up on any invoice. Totting them up for the first time tends to produce a bigger number than expected. A cost only moves the true rate through one channel here: it comes straight off the month's revenue before the division happens.

What a healthy freelance rate actually looks like

There is no universal answer. It shifts with location, sector, experience and cost base. What the arithmetic does say is structural: the wider the gap between hours worked and hours billed, the further the true rate sits below the quoted one, in direct proportion to the share of hours you actually bill. A freelancer billing 80% of their working hours loses about a fifth of the headline rate to that ratio alone. At 50% billable, half of it is gone before a single expense is subtracted.

Run it with sensible defaults

Enter four monthly figures: your quoted hourly rate, the hours you actually bill in a month, the hours you work without billing, and what the business costs you to run. Everything is per month, including the hours, so a 25-hour billing week goes in as roughly 108. Using a quoted hourly rate of 75, 110 monthly billable hours, 35 monthly unpaid admin hours and 400 of monthly business expenses, the calculation works out to 54.14/hr. Gross revenue of 8,250 becomes 7,850 after costs, spread across 145 hours worked. The defaults are a starting point, not a recommendation.

The levers in this calculation

Measured at the sample figures, Quoted Hourly Rate moves True Hourly Profit most, 1.05% per 1%, while Monthly Billable Hours moves it 0.29% and Monthly Unpaid Admin Hours moves it 0.24% in the opposite direction. Monthly Business Expenses barely registers at 0.05%. Rate and hours look like twins on the page, and they are not. An extra billable hour lifts revenue, but it also lands in the hours you divide by, so most of the gain cancels itself: the numerator rises 1.05% and the denominator 0.76%, leaving 0.29%. A rate rise touches the numerator alone.

How the math works

Monthly revenue is the quoted rate multiplied by monthly billable hours. Business expenses come off that, leaving net revenue. That figure is divided by total hours worked, billable plus unpaid, to give the true hourly profit. The division creates an asymmetry worth seeing clearly: an unpaid hour costs nothing in cash, yet it still dilutes every hour that earned. Tax is deliberately absent. Income tax and social contribution rates vary so widely by country that any figure baked in would be wrong for most readers, so the output is a pre-tax profit rate rather than take-home pay.