How to Price Your Freelance Services: Hourly vs Project-Based

September 5, 2026 · 5 min read

Pricing is the hardest part of freelancing. Charge too little and you burn out. Charge too much and you lose clients. The right price covers your costs, pays you fairly, and reflects the value you deliver. There is a formula for this — you do not have to guess.

The Cost-Based Formula

Start with your desired annual income (e.g., $80,000). Add your annual business expenses (software, insurance, equipment, marketing — e.g., $12,000). Add self-employment tax and income tax (roughly 30% — $27,600). Total needed: $119,600. Divide by billable hours (typically 1,000-1,200 per year, not 2,080 — you spend significant time on admin, marketing, and learning). $119,600 / 1,100 = $109/hour.

Market Rate Validation

Your calculated rate must be validated against the market. Research what competitors charge for similar work. If your rate is significantly above market, you need exceptional differentiators (portfolio, specialization, reputation). If it is below market, you may be undercharging. Adjust based on your experience level, niche demand, and geographic market.

Hourly vs Project-Based

Hourly pricing is fair when scope is uncertain (consulting, support, ongoing maintenance). Project pricing is better when scope is defined (build a website, design a logo, write 10 blog posts). Project pricing rewards efficiency — as you get faster, your effective hourly rate increases. Hourly pricing penalizes efficiency.

When and How to Raise Rates

Raise rates when you are consistently booked (demand exceeds supply). Raise rates for new clients first while honoring existing agreements. Give existing clients 30-60 days notice. A 10-15% annual increase keeps pace with inflation and growing expertise. Clients who leave over a reasonable rate increase were not valuing your work properly.

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Also useful: our Invoice Generator for related calculations.