Billable Hours for Freelancers
Learn how billable hours work, how to calculate billable utilization and why understanding your real working time is essential for setting sustainable freelance rates and revenue goals.
What are billable hours?
Billable hours are the hours you spend doing work that can be charged directly to a client. For a freelancer, this might include design work, development, writing, consulting, research or client meetings that are part of a paid project.
These hours are especially important because they directly generate revenue. The more accurately you understand your billable time, the easier it becomes to evaluate whether your workload, pricing and revenue goals are financially sustainable.
Billable vs. non-billable hours
Not every hour you work as a freelancer can be invoiced to a client. You also spend time running your business.
Non-billable work can include writing proposals, responding to emails, bookkeeping, marketing, networking, administration and business development. These activities may not generate direct revenue, but they are still necessary for maintaining and growing your freelance business.
This is why freelancers should avoid assuming that every working hour can be charged to clients. Your freelance rate needs to account for both billable and non-billable time.
How to calculate billable utilization
Billable utilization shows what percentage of your total working time generates client revenue.
Billable utilization =
Billable hours ÷ Total working hours × 100
For example, imagine you work 40 hours during a week and spend 28 of those hours on client projects that you can invoice.
28 ÷ 40 × 100 = 70%
Your billable utilization for that week would therefore be 70 percent.
Why billable utilization matters for your hourly rate
Your hourly rate should not be based on the assumption that every hour you work produces revenue. If a significant part of your week is spent on administration, marketing or finding new clients, your billable capacity is lower than your total working time.
This means your billable utilization has a direct impact on the revenue your business can generate and therefore on the hourly rate you may need to charge.
How many billable hours should a freelancer work?
There is no universal number of billable hours that every freelancer should target. Your realistic billable capacity depends on your working schedule, type of work, client pipeline and the amount of time required for running your business.
Instead of choosing an arbitrary target, track your actual hours over a representative week or month. This gives you a practical utilization figure that you can use when planning your freelance pricing and revenue.
Track your real billable hours
Estimates can be useful when planning your business, but your own time data is usually more valuable than a generic assumption. Tracking a representative week or month can show how much of your time is actually spent on client work.
Once you know your actual billable utilization, you can use that number when evaluating your workload, revenue goals and freelance pricing.
Billable hours and project pricing
Understanding your billable time can also improve your project pricing. When estimating a fixed-price project, it is important to account for the actual work required as well as project-specific costs, uncertainty and other factors that affect profitability.
Calculate your billable hours for free
The Freelero Billable Hours Calculator helps you track billable and non-billable time, calculate your utilization and estimate the revenue generated by your billable work.