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//// Business · Freelance

Freelance Contract Value Calculator

Before you sign: gross value, effective hourly rate, payment timing discount, kill fee protection value, opportunity cost, and a go/no-go score with negotiation points.

Where this fits

📦 Business & Seller OpsGoing 1099FreelancersFounders

This tool lives inside Going 1099 and is most useful for freelancers and founders.

Corp Tax Rate21%
SE Threshold$400
FICA Cap 2024$168,600

Contract Structure

Contract type

Risk Terms

Payment terms

Hours & Opportunity Cost

Walk Away

Contract score

Gross value
$5,000
3 months
Risk-adjusted value
$4,513
90.3% of gross
Effective hourly rate
$41.67/hr
$34.72/hr with revisions
Net vs. opportunity cost
$9,888
unfavorable

Cash Flow Timeline

Deposit (50%)

At signing

$2,500

Final payment (50%)

Month 4

$2,500

Risk Flags

  • Effective hourly rate (with revisions) is below 80% of your opportunity rate

  • No expense reimbursement — confirm any travel or software costs are in your fee

Suggested Negotiation Points

  • 1.

    Add an expense reimbursement clause for software, tools, or travel

  • 2.

    Rate needs to increase by $3,296/mo to beat your opportunity cost

1

Gross contract value

grossValue = feeValue + reimbursements

= $5,000 + $0

= $5,000

Fixed fee $5,000 over 3 months

2

Effective hourly rate

effectiveRate = feeValue ÷ totalHours

= $5,000 ÷ 120 hrs

= $41.67/hr (before revisions)

40 hrs/month × 3 months = 120 hours

3

Revision buffer

revisionHours = totalHours × 10% × revisionRounds

= 120 × 10% × 2

= +24 unbillable hours → adjusted rate $34.72/hr

Each included revision round consumes ~10% of total project hours on average

4

Payment timing discount

timingDiscount = paymentTermsPenalty × feeValue

= 5.0% × $5,000

= −$250 (Net 30 (5% discount for delayed cash))

Discount represents late payment probability and time value of money for deferred cash

5

Cancellation risk discount

cancelDiscount = killFeeRisk × feeValue

= 5.0% × $5,000

= −$250 (kill fee: 25%)

Kill fee of 25% protects some value if client cancels early

6

Risk-adjusted contract value

riskAdjusted = fee × (1 − timingDiscount) × (1 − cancelDiscount) + reimbursements

= $5,000 × 95.0% × 95.0% + $0

= $4,513

7

Opportunity cost

opportunityCost = opportunityRate × adjustedHours

= $100.00/hr × 144 hrs

= $14,400

What you could earn in the same hours on alternative work at your target rate

8

Net advantage vs. opportunity cost

netAdvantage = riskAdjustedValue − opportunityCost

= $4,513 − $14,400

= -$9,888 (unfavorable)

This contract pays less than your best alternative. Consider negotiating or declining.

Key insight

Risk-adjusted value accounts for payment timing and cancellation probability. A net 60 contract with no kill fee can lose 37% of its face value before a single revision is logged.

Use this result in →

📊Project Profitability📅Invoice Late Fee💳Payment Terms

#ShowYourWork

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