The most common pricing mistake
When a freelancer moves from employment to self-employment, they often set their rate by working backward from their old monthly salary. If you earned €3,000 a month, you divide by working hours and call it a day.
The problem is that this ignores all the costs that come with running your own business. You no longer have an employer covering insurance, paid holiday, sick leave, and other benefits. Those costs now fall entirely on you.
Good pricing starts with knowing exactly what you need each month — and building your rate on top of that.
Start by calculating your actual monthly needs
Before thinking about what to charge clients, work through your costs in two categories.
Personal costs (what you need to live):
- Rent or mortgage
- Food, transport, phone
- Insurance and other living expenses
Business costs (what running the business costs):
- YEL pension insurance (mandatory if income exceeds €9,208/year — around 24% of your confirmed YEL income)
- Accounting and software
- Marketing
- Professional development
- Buffer for quiet months
Add these up. That's your monthly minimum before tax.
Your billable time is not 100%
Unlike an employee, you don't bill every hour you work. Time spent on admin, sales, networking, holidays, and sick days produces no income.
A realistic estimate of billable time depends on your field and experience, but it's typically 50–70% of available time. If your total available time is 160 hours per month, you may realistically bill 80–110 hours.
This is critical: you need to cover all your monthly costs from those billable hours — not from all hours worked.
The three main pricing models
1. Hourly rate
The most straightforward model: you charge a fixed hourly rate for time spent. Works well for projects with unclear scope or work that evolves as it progresses.
The downside: clients can see exactly how long things take, and slower work can appear expensive.
2. Fixed project price
You charge a single fee for a defined deliverable. The client knows upfront what they'll pay. For experienced freelancers who can accurately estimate scope, this model tends to be more profitable.
The risk: if the project expands, you're under pressure to absorb extra work. Define the scope clearly in writing before starting.
3. Value-based pricing
You price based on the value your work delivers to the client — not the time it takes. Suited to experienced professionals whose work is clearly measurable (e.g. sales results, cost savings).
Requires deep understanding of the client's business and confidence in your own value. Usually only practical once you've built a strong track record.
VAT and how it affects your pricing
If you're VAT-registered (turnover above €20,000/year), you add 25.5% VAT on top of your fees. The price you quote to clients is typically the net (pre-VAT) price — VAT is added on top.
Remember: VAT is not your income. It's a tax you collect on behalf of the Finnish Tax Administration and pass on in your VAT returns. Keep it separate from your operating cash.
For business clients who are themselves VAT-registered, they can deduct the VAT they pay — so VAT doesn't affect price competitiveness in B2B markets.
How to raise your rates over time
Many freelancers start too low because they fear losing work. That's understandable, but it's a slow trap: cheap pricing attracts clients who push for even lower rates and makes later increases difficult.
A few practical notes:
Review your rates at least once a year. Your costs go up — YEL contributions, software, living costs. Your rates need to keep pace.
Raise prices for new clients first. It's easier to test a higher rate with new work than to renegotiate existing relationships.
If every client accepts your rate immediately, you're probably too cheap. A healthy rejection rate is a sign you're priced in the right range — at the higher end of the market, where serious clients look.
The short version
Calculate your monthly needs first. Factor in side costs and the reality that you can't bill all your hours. Choose a pricing model that fits your field and experience. And don't be afraid to raise rates — underpricing is a slow path to burnout.
NoCFO helps sole traders track income and expenses easily, so you always know whether your pricing is working. Try it free →