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Your "cost of doing business" is every dollar you must bring in before you've earned a cent of profit — overhead, plus the salary you pay yourself, plus the tax on it. Add it up here and it hands you the floor rate no client should ever talk you below.
Nothing you type leaves your browser. This isn't tax advice — talk to an accountant about your situation.
Cost of doing business — CODB for short — is a number every studio, agency, and seasoned freelancer keeps in their head: the total revenue you have to bill in a year just to keep the lights on and pay yourself a living. It's the opposite of guessing a rate that "sounds about right." You build it from the ground up out of three honest piles of money:
Add those together and you have your cost of doing business — the revenue floor. Divide it by the hours and days you can realistically bill, and you have the rate floor: the price below which you are quietly paying clients for the privilege of working for them.
They meet in the middle from opposite directions, which is exactly why pros run both. The Rate Calculator works top-down: you tell it the take-home and margin you want and it sets a target rate. This tool works bottom-up: you itemize what you genuinely spend and the salary you'll accept, and it returns the floor you can't go below. When the two numbers agree, you can quote with confidence. When the floor comes out higher than the rate you've been charging, you've found the leak — you've been subsidizing the work out of your own pocket.
The two inputs people underestimate are billable hours and time off. A 40-hour week is rarely 40 billable hours — between sales calls, invoicing, and email, 25 is a healthy real number. And every week you take off is a week that earns nothing, so the weeks you do work have to carry it. Drop your billable hours or add a few weeks of vacation and watch the floor climb. That movement isn't the math being harsh; it's the true cost of running a one-person business finally showing up on the page.
Spread it over its useful life. If you expect that laptop to last three years, put $800 in the equipment line, not $2,400. The goal is a steady yearly figure that reflects what the business really consumes, not a spike in the year you happened to buy something. Do the same for any large, infrequent purchase.
That's your call, but be consistent. Most freelancers treat personal health insurance, retirement contributions, and personal living costs as things their salary pays for — so they leave them out of overhead and make sure the salary figure is big enough to cover them. The expense lines here are for the cost of the business, not your household.
Use your combined effective rate — federal and state income tax plus the ~15.3% self-employment tax. For many US freelancers that's somewhere between 25% and 35%, but it depends on your income and location. For a precise figure, run your profit through the Self-Employment Tax and Quarterly Tax calculators, or ask your accountant.
It's a floor, not a sticker price. It's the lowest rate at which the business breaks even on your terms — anything below it loses money. You can and should charge more when the value warrants it. If the floor is higher than what you've been billing, the honest read is that your old rate was too low, not that the calculator is wrong.
No. Every calculation runs entirely in your browser — nothing you type is sent to a server or stored. The link in your address bar updates so you can bookmark or share a scenario, but that link only contains the numbers you chose.
Keep going
The top-down companion: start from the take-home you want and get a target rate.
Nail the billable-hours number this tool divides by — and your true utilization.
Quote by the day? Convert your floor hourly into a clean day rate and back.