Your overhead are the costs involved in running a business. For example, you immediately know that self-employment tax is one. What other costs are involved in doing business (your overhead)? Disability insurance; office furniture and equipment such as a computer and printer; office space; supplies; anything you need to run your business.

Our example’s overhead is a nice round number of $10,000. We already know the writer wants to make $40,000 per year and has an overhead of $10,000, so the writer now needs to make $50,000 per year.

Overhead __________ + salary (a)__________ = new salary ________ (f)

Don’t you Want to Make a Profit?

Many freelancers figure out their fixed costs and overhead and determine an hourly rate from that. Profit is never a bad thing, so be sure to calculate yours in! We’re shooting for a 25% profit to start. In our example 25% of $50,000 is $12,500 which we add to our former total of $50,000 to come up with a new salary projection of $62,500. This will cover the cost of living, overhead and leave some money left over as a profit. 

Desired profit _____ % x salary (f)___________ = profit __________ (g)

Profit (g) __________ + salary (f) __________ = final salary __________ (h)