The Independent Tech Consultant's Playbook
New consultants reach for the easiest number they know - their old salary divided by the hours in a year. Here is why that math quietly bankrupts you, and what to calculate instead.
The first question every engineer asks when they consider going independent is also the one they get most wrong: "What should I charge?" The instinct is reassuringly simple. Take your old salary, divide by 2,080 - the number of working hours in a year - and there's your hourly rate. If you earned 104,000, that's 50 an hour. Round it up to feel like a raise, call it 65, and start sending proposals.
It feels logical. It is also the fastest way to work harder than you ever did as an employee while earning less.
What the salary number hides
That 2,080 figure assumes you bill every working hour of every working week. No employee does productive billable work for all 2,080 hours, and an independent consultant comes nowhere close. Your day does not divide neatly into chargeable time.
Consider where your hours actually go when no one else runs the business, because now that person is you. You have to find clients, which means calls, proposals, follow-ups, and the ones that go nowhere. You have to invoice, chase late payments, do your books, and file taxes. You have to keep your skills current, because no employer is funding your training anymore. And between contracts there are gaps - weeks where you have no client at all but your rent does not pause.
When you subtract all of that, a year of roughly 250 working days often leaves only 120 to 150 days you can actually bill. The other half of your year is the unpaid cost of running a one-person company.
The costs your salary never showed you
A salary is the visible tip of your total compensation. Your employer was quietly paying for a great deal more, and now that bill lands on your desk.
- Their share of payroll taxes, which you now cover entirely yourself.
- Health coverage, retirement contributions, and paid leave - all gone, all now your expense.
- Software licenses, hardware, a laptop, a phone, perhaps an office.
- Insurance, an accountant, and the legal templates you need to operate safely.
- Every sick day and holiday, which used to be paid and now earns nothing.
None of these appeared in your salary, so dividing that salary by hours captures none of them. Price off the salary and you are volunteering to absorb all of it out of your own pocket.
Doing the honest math instead
The correct calculation runs backward, from the life you want rather than the job you left. Decide the income you genuinely need to take home in a year. Add every business cost above. Then divide that total - not by 2,080 hours, but by the realistic number of days you can actually bill.
Say you want to clear 120,000 and your business costs run 30,000. That is 150,000 your billable work must cover. Divide by 130 billable days and your day rate is roughly 1,150 - the equivalent of about 144 an hour, more than double the naive 65 you would have charged off your salary. That is not greed. That is the number that keeps you solvent through the unpaid half of your year and the costs your employer used to hide.
The figure looks shocking only because we are trained to compare it to a salaried day. But a salaried day was subsidized. Yours is not. The high-looking rate is simply the true cost of your time once nobody else is paying the overhead.
Better still: stop selling time
Even the honest day-rate math has a ceiling, because there are only so many days. The deeper problem with the salary-divided-by-2,080 mindset is that it frames you as labor to be metered, when your value is the outcome you produce.
When your work stops a six-figure outage, rescues a stalled launch, or unlocks new revenue, the hours you spent are almost irrelevant to what that result is worth. Pricing against that value - rather than your time - is how independent consultants finally break the income ceiling that hourly billing builds for them. It also rewards expertise instead of punishing it: the salaried mindset means the faster you solve a problem, the less you earn, which is exactly backwards.
That shift takes confidence and real discovery, and a sustainable day rate is a fine place to begin. But begin with this: your rate is not your salary divided by 2,080. It is the cost of your business plus the value you create, divided by the far smaller number of days you can truly sell. Get that right, and independence pays for the freedom it promised.
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