You avoid undercharging by working backward from the income you need, turning it into a realistic hourly floor, and pricing each project against that floor with room for revisions, communication, and unpaid admin. Most freelancers who undercharge are not bad at math. They price the visible task and forget everything wrapped around it.
The method below has six steps: find your floor, estimate the full job, price the risk, pick a format, protect the price in the proposal, and say the number plainly. All dollar figures are invented for illustration. Your numbers will differ, so check what comparable freelancers in your field and region actually charge before committing.
Why freelancers undercharge
The usual pattern is to estimate the hours needed to produce the deliverable, multiply by a rate that feels reasonable, and send the quote. The deliverable is only part of the job. Work that rarely makes it into the estimate:
- Discovery calls, email threads, and clarifying a vague brief
- Revision rounds and the back-and-forth around feedback
- Status updates and waiting on approvals
- Invoicing, file prep, handoff, and follow-up questions after delivery
- Schedule disruption when one project slips into another
A freelance hour is also not an employee hour. You pay for your own software, equipment, and insurance, and a good share of each week goes to selling and admin that nobody pays for. Quoting as if every working hour is billable produces less income than the number suggests.
Step 1: Find your pricing floor
Your floor is the lowest rate at which a project is still worth taking. A worked example:
- Target income. Say you want $60,000 a year for yourself.
- Business costs. Add $6,000 for software, equipment, insurance, and accounting. Revenue target so far: $66,000.
- Tax and benefits cushion. Employees often have an employer covering part of health coverage, retirement, and paid leave. Say you add 25 percent to cover those and taxes, which brings the target to about $82,500. The 25 percent is a placeholder. The IRS explains that self-employed people generally pay self-employment tax and make estimated payments during the year, and an accountant can tell you what applies to you.
- Billable hours. If only about 22 of a 40-hour week are billable and you take 6 weeks off, that is 46 x 22, or about 1,012 hours.
- Divide. $82,500 / 1,012 is about $81 an hour.
That is a floor, not a price. Run the same steps with your own costs and tracked time. For a second opinion on whether your current rate holds up, see how to know if a freelance rate is high enough.
If the floor feels unrealistic for your market, there are three levers: lower your income target for a set period, cut business costs, or narrow your work toward what clients value more. Pretending the floor is lower only delays the problem.
Step 2: Estimate the full job
Break the project into phases and estimate each. A small website-copy project might look like this:
| Phase | Estimated hours |
|---|---|
| Kickoff call and brief review | 2 |
| Research | 4 |
| First draft | 8 |
| Feedback call and revisions (2 rounds) | 5 |
| Communication and admin | 3 |
| Final delivery and handoff | 1 |
| Total | 23 |
At the example floor that is about $1,863 before any buffer. Only 8 of the 23 hours are “writing the draft,” so quoting just the draft would charge for roughly a third of the work.
Estimates tend to run low. Many freelancers add a buffer when the brief is clear and more when it is not. Comparing estimated and actual hours on a few projects shows how far off you usually are, and even a basic spreadsheet does it.
Step 3: Price the risk
Two projects with the same deliverable can deserve different prices. Look at the client as well as the task. Common risk factors:
- Unclear goals or a brief that keeps changing
- Several stakeholders who all give feedback
- A history of rejecting first drafts
- Rushed timelines that push other work aside
- Missing assets you will have to chase
For each factor you have two choices: raise the price or tighten the scope. How much to add is a judgment call, not a formula. The point is to make the risk visible in the number instead of absorbing it silently. If several people give feedback, name them in the proposal and state who gives final approval. Setting a project scope that does not drift shows how to write that down.
Step 4: Pick a pricing format
| Format | Best when | Main risk to you |
|---|---|---|
| Hourly | Scope is unknown or likely to change | Rewards slowness, caps upside, clients scrutinize hours |
| Fixed project fee | Scope and deliverables are clear | You absorb overruns if scope is loose |
| Retainer | Ongoing work with steady monthly demand | Scope creep inside the monthly bucket |
| Value-based | The result has a clear business impact | Hard to justify without evidence of the value |
A fixed fee separates your price from your speed, so getting faster raises your effective rate. It only works when the scope is written down. If one client needs work every month, compare options in retainer vs project pricing.
Step 5: Protect the price in the proposal
A good number can still become a bad deal if the proposal is vague. At minimum it should state the deliverables, the number of revision rounds, timeline assumptions, the payment schedule, how extra work is priced, and an expiry date for the quote. The full checklist is in what a freelance proposal should include, and how to write one without overcomplicating it covers format and length.
A deposit before work starts is common in many freelance fields and reduces the risk of working for a client who disappears. Terms and what is enforceable depend on your contract and where you live, so have a qualified professional review your standard agreement.
Step 6: Say the number and watch the pattern
State the price plainly. Hedging, apologizing, or offering a discount unprompted signals that the number is negotiable. For example: “The project fee is $X for the deliverables listed, with two rounds of revisions included. I can start on [date] if we confirm this week.” Then let the client respond.
Judge pricing over a series of quotes. If nearly everyone accepts at once, you may be low. If almost nobody accepts and the objections are about value, positioning or targeting may be off. A mix of pushback and acceptance is a healthier sign. Keep a short log of each quote, price, and outcome, and do not read much into two or three.
When a client says the price is too high
Do not drop the number first. Ask what budget they had in mind, then offer a smaller version: “If the budget is closer to $Y, I can cover A and B but not C. Would that work?” This keeps your rate intact and gives the client a real choice. If you suspect the objection is only about comparing cheaper bids, spotting a prospect who is price shopping can help you decide how much effort to spend.
To turn an income goal into an hourly and day rate, use the freelance rate calculator.
Where this comes from
The tax points rely on the IRS guidance on self-employment tax and estimated taxes. The pricing method (income-based floor, phase-by-phase estimates, risk buffers, format comparison) reflects commonly published freelance pricing guides and general project estimating practice; it is a framework, not a regulated standard. All dollar examples are invented. Rates, tax rules, and market conditions change, so check current figures at the IRS and with a qualified professional.
General information, not legal, tax, or financial advice.