Most freelancers set their rate by guessing, copying someone else, or charging what they think the market will accept. There's a better way.
Ask a freelancer how they settled on their hourly rate and most will give you one of three answers. They looked at what others were charging and went slightly lower to be competitive.
They took their old salary, divided it by 2,080, and called it a day.
Or they picked a number that felt about right and have been second-guessing it ever since.
None of these is a rate. They're guesses dressed up as strategy.
The problem with guessing is that it usually guesses low - and once a rate is set, it has a way of sticking. Clients expect it. You feel awkward raising it. The years go by.
Here's what a rate actually needs to cover.
Start with what you need to take home. Not your gross revenue - your actual take-home, after income tax and superannuation. That's the number that pays the mortgage, the groceries, the insurance. Call it your target net income.
Then add back the tax. Add back the super. Add your business expenses - software, insurance, accountant fees, equipment, professional development.
Now you have the revenue you need to generate just to break even on your own life.
But here's where most rate calculators stop, and where most freelancers get into trouble: that revenue figure assumes you're billing every hour you work. You're not.
A freelancer working five days a week doesn't have five billable days. There's admin, business development, invoicing, quoting, CPD, the odd sick day, the week between contracts. Realistically, many sole traders bill somewhere between 55% and 70% of their available hours.
If you're calculating your rate against 100% utilisation, you're building a shortfall into every week before you've started. And right now there's something else worth modelling: the market is under genuine pressure.
AI tools are handling work that used to take hours.
Competition has increased. Some clients are pushing back on rates. The freelancers who are thriving are the ones who know their floor - the rate below which they cannot work sustainably - and hold it.
That floor is what Bottom Line calculates.
It works backwards from your target take-home income — accounting for tax, super, expenses, and realistic pipeline — to show you the minimum hourly rate you need to charge.
It then runs a Reality Check: what happens to that rate if your pipeline drops 20%?
If AI tools reduce your billable hours? If a slow quarter hits?
The result isn't a ceiling. It's the number you don't go below. Everything above it is margin.
Knowing your floor doesn't make you inflexible - it makes you confident. You can negotiate from a position of clarity instead of anxiety. You can spot a below-rate project and make a conscious choice about it rather than a desperate one.
Most freelancers are undercharging. The ones who aren't know their numbers.
Get Bottom Line — Rate Calculator → Also available as part of the Sharp Tools Bundle — all five tools for $75.
Available at theideasbunker.com/freelance-tools. Tools are practical planning aids and do not constitute financial, tax, or legal advice. Always consult a qualified accountant for personalised guidance.