To calculate your hourly rate, divide the salary you’re aiming for by the hours you actually bill, not the hours you spend at your desk. Most entrepreneurs know their target salary. Few know this number. Yet it’s the one that should drive every decision: which client to keep, which task to turn down, what to delegate. So before you set a price or take on a new client, you need to run this calculation once, seriously.
Why Your Target Salary Doesn’t Tell the Whole Story
Say you’re aiming for $60,000 a year. Divide that by 2,000 hours, and you get $30 an hour. That’s the math almost everyone does. And it’s wrong. In reality, a good chunk of those 2,000 hours never gets billed to anyone: prospecting, quotes, calls, bookkeeping, emails. Studies on the topic agree: entrepreneurs typically lose around 30% of their working time to non-billable tasks. In other words, out of 2,000 hours worked, barely 1,400 are actually sellable. Your real hourly rate climbs mechanically once you strip out what doesn’t count.
Calculate Your Hourly Rate: The Full Method
The method comes down to four steps. First, set the net annual salary you’re aiming for. Then add your expenses: contributions, insurance, software, workspace, equipment. This addition follows the same logic as cost price, a concept taught in accounting: better to know all your costs than to guess a price by feel. Next, work out your real working hours for the year, minus vacation. Finally, subtract about 30% of that total for non-billable hours. What’s left is your actually sellable hours. To calculate your hourly rate, just divide the total amount by those billable hours. The result is almost always higher than what the entrepreneur had in mind at the start.
A Real Example: Calculate Your Hourly Rate
A freelance graphic designer is aiming for $45,000 net a year. Her expenses add up to $15,000. So her business needs to generate $60,000. She works 1,800 hours a year. But about 30% of that goes to prospecting, quotes, and admin work. That leaves her with 1,260 actually billable hours. To calculate her hourly rate, she divides $60,000 by 1,260. The result: about $47.60 an hour, almost double the $25 she used to charge, a rate set by gut feeling rather than by the numbers.
What Your Hourly Rate Changes About Your Decisions
Once you know your real hourly rate, everything gets evaluated with that number in mind. For example, if your real hourly rate is $47 and an administrative task takes you three hours a week, that’s roughly $140 a week you never bill. Over a year, that adds up to well over $7,000. So the question changes shape. It’s no longer “do I have time to do this myself,” but “is this hour worth more than what I’d pay to delegate or automate it.”
Keep It, Delegate It, or Automate It Based on Your Hourly Rate
In practice, this number acts as a filter. Any task worth less than your hourly rate becomes a candidate for delegation or automation: data entry, invoice follow-ups, repetitive replies. Here’s a simple comparison: no one would hire a surgeon to mow their lawn, even if he’s great at it. Yet that’s exactly what a lot of entrepreneurs do. It’s worth recalculating your hourly rate once a year, since your expenses and prices change.
Use This Number to Decide Faster
By the way, you don’t need to guess what these tasks are costing you. Meriaky’s manual task cost calculator applies the same principle as this article: it shows you, in real numbers, what your admin workload actually costs you each month. It’s free, and it takes two minutes to fill out. In the end, your hourly rate isn’t just a number for setting prices. It’s a decision-making tool, one to pull out every time a task sits on your desk for too long.
Frequently asked questions
Add up the net salary you’re aiming for and your annual expenses, then subtract about 30% of non-billable hours from your total hours worked. Divide the total amount by the hours you have left: that’s your real hourly rate.
Your gross hourly rate includes all your expenses (contributions, insurance, equipment), while your net hourly rate is what’s left once those expenses are paid.
Because a big chunk of an entrepreneur’s time goes to non-billable tasks: prospecting, quotes, bookkeeping, emails. Without subtracting that time, calculating your hourly rate gives you a number that’s too low and misleading.
About the author
Terry Vilver · Co-founder of Meriaky
A computer engineer with 5 years of experience between EDF (France’s national electricity provider) and Meriaky. At EDF, he built a ticketing system that automatically assigns customer files to the right operators. For the past 2 years at Meriaky, he has been helping small business owners free themselves from repetitive tasks: client follow-up runs automatically, and they save time and money.
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