Chartered Financial Analyst specializing in small business finance and sole proprietorship models.
Find out how many projects (or billable hours) you need to complete to cover your monthly costs. Enter any three variables—Monthly Fixed Costs, Average Rate, Average Project Cost, or Number of Projects/Hours—to solve for the fourth.
Freelancer Breakeven Calculator
Freelancer Breakeven Formula
The breakeven formula for a freelancer finds the number of billable units (Q) – either projects or hours – required to cover all fixed and variable business costs.
Q = F / (P – V)
Solve for Fixed Costs (F):
F = Q * (P – V)
Solve for Average Rate (P):
P = (F / Q) + V
Solve for Avg. Variable Cost (V):
V = P – (F / Q)
Variables Explained
- Fixed Costs (F): Total monthly costs (e.g., software subscriptions, internet, insurance, co-working space, taxes).
- Average Rate (P): The average revenue you receive for one unit (one project or one billable hour).
- Avg. Variable Cost (V): The average cost tied to one unit (e.g., transaction fees, software usage fees, subcontractor).
- Breakeven Units (Q): The number of projects/hours you must bill per month to reach $0 in operating profit.
Related Calculators
- Hourly Rate Calculator for Freelancers
- Self-Employment Tax Calculator
- Project Pricing Calculator
- Consulting Fee Calculator
What is a Freelancer Breakeven Point?
The **Freelancer Breakeven Point** is the number of billable units (either hours or projects) you must sell each month to cover all your business expenses and taxes. This is the point where your profit is $0. Every hour you bill or project you complete *after* this point is pure profit.
This is the most essential calculation for financial freedom as a freelancer. It helps you understand the bare minimum you need to work to stay afloat. **Fixed Costs (F)** are your monthly overhead, like internet, phone, design software (Adobe), accounting software, and estimated taxes. **Variable Costs (V)** are costs tied directly to a project, like payment processing fees (Stripe/PayPal) or a subcontractor’s fee.
Your **Contribution Margin** (P – V) is the profit you make on each hour or project, which then goes to pay down your fixed costs. This calculator tells you how many “contribution margins” you need to stack up to “buy” your freedom for the month.
How to Calculate Freelancer Breakeven (Example)
Let’s calculate the breakeven point for a freelance graphic designer who bills by the hour.
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Identify Fixed Costs (F):
The designer’s total monthly fixed costs (Adobe suite, internet, insurance, estimated taxes) are $2,500.
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Identify Average Rate (P):
The designer’s standard billable rate is $100.00 per hour.
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Identify Avg. Variable Cost (V):
For each hour, there are no direct costs, but payment processing fees average out to $10.00 per hour (an estimate).
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Apply the Formula: Q = F / (P – V)
First, calculate the contribution margin per hour: $100.00 (P) – $10.00 (V) = $90.00.
Next, divide the fixed costs by this margin:
Q = $2,500 / $90.00 ≈ 27.78 -
Conclusion:
The designer must bill 28 hours (rounding up) each month to cover all costs. The 29th hour billed is their first hour of profit.
Frequently Asked Questions (FAQ)
Yes, absolutely. You should include your *minimum* monthly personal draw (what you need to pay your rent and groceries) in your (F). Your business’s first job is to pay you. If you don’t, this calculator only shows when your *business* breaks even, not when *you* get paid.
If you bill by the hour, use hours. If you sell fixed-price packages (e.g., “Logo Design Package”), use projects. If you use projects, (P) would be your average project price, and (V) would be your average costs for that project (e.g., stock photos, subcontractor fees).
Taxes are a major fixed cost. You should estimate your quarterly tax payments, divide by three, and add that amount to your monthly (F). For example, if you expect to pay $6,000 in quarterly taxes, add $2,000 to your (F).
Work backward. Decide your total Fixed Costs (F), add a buffer for profit (e.g., $3,000), add your variable costs (V), and decide how many hours you *want* to work (Q). Then, solve for (P). This tells you the rate you *must* charge to achieve your goal.