What should you charge
per hour?

Your cost rate is the floor — what one hour of your time costs to deliver once you account for salary, taxes, benefits, and overhead, divided by the hours you can realistically bill. Your billable rate is what you actually charge: the cost rate plus profit. The cost rate tells you whether the work is sustainable; the billable rate tells you whether it's profitable. Setting a billable rate without knowing your cost rate is the mistake almost every firm makes, because the billable rate alone is just a guess at what the market will pay.

Far fewer than a full-time year. A solo designer realistically bills 1,000–1,200 hours annually — some with strong systems hit 1,400, but most don't. The rest of the year goes to sales calls, sourcing, admin, vendor outreach, and unsigned proposals. Those hours are real and necessary, but they're covered by your overhead and salary, not billed to clients. If you've never tracked your time, you're almost certainly overestimating; actual billable hours commonly come in 30–40% below what people assume.

Because you don't bill 2,000 hours. A full-time year is roughly 2,080 hours, but only a fraction of those are spent producing billable work. Dividing your annual cost by 2,000 spreads it across hours you'll never invoice, which produces a cost rate roughly half of reality — and a rate that feels profitable while quietly losing money. Divide by the hours you actually bill, not the hours you actually work.

Start with their fully loaded cost, which is not their salary. Add payroll tax (about 8%), benefits ($10,000–$18,000 a year for competitive coverage), paid time off (about 12% of working hours), and their share of firm overhead. That stacks up to roughly 1.4–1.6× their base salary. Divide by their realistic billable hours — a senior at a well-run firm might bill 1,500 — then add your markup. A faster sanity check: most employees should bill at 2.5–3.5× their base hourly pay. If you're well below that, you're losing money on every hour they work.

Everything it costs to run the business that isn't salary or taxes: office or studio rent, your full software stack, business insurance (general liability plus E&O — don't skip E&O), marketing, trade memberships and your sample library, travel for trade shows and sourcing, and professional development. For most solo designers this lands around $17,000 a year; home-office firms run closer to $8,000, and established studios in major markets push past $40,000. Most people guess about half of their real software spend.

Often it isn't. Flat fees usually beat hourly for defined work, because hourly billing penalizes you for being efficient — the faster you work, the less you earn. But your cost rate still matters: it's what you use behind the scenes to estimate whether a flat fee is actually profitable. Knowing your number makes you better at every pricing model, not just hourly.

Then you've learned something important before it cost you a year of underpriced work. Your cost rate tells you what you need to charge to be profitable; the market tells you what's competitive. When the two don't line up, the answer usually isn't a lower rate — it's fewer billable hours leaking to scope creep, tighter operations, or a different pricing model. Lowering your rate below your floor just means losing money on purpose.