Risk-adjusted · Cash flow timeline · Client-side

freelance contractcontract valuekill feepayment termsnet 60opportunity costgo no gocontract risk

//// 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.

Corp Tax Rate21%(federal flat rate)

SE Threshold$400(net earnings floor)

FICA Cap 2024$168,600(SS wage base)

Contract Structure

Contract type

Total project fee ($)Total contract value

Duration (months)

Monthly expense reimbursement ($)Travel, tools, etc. reimbursed by client (0 if not included)

Risk Terms

Payment terms

Kill fee % (if client cancels early)% of remaining contract paid if client terminates. 25-50% is standard.

Revision rounds includedEach round adds ~10% of total hours as unbillable work

Hours & Opportunity Cost

Estimated hours per monthYour honest estimate including calls, revisions, and admin

hrs/mo

Your alternative hourly rate ($/hr)What you could earn per hour on other work — your 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

Gross contract value

grossValue = feeValue + reimbursements

= $5,000 + $0

= $5,000

Fixed fee $5,000 over 3 months

Effective hourly rate

effectiveRate = feeValue ÷ totalHours

= $5,000 ÷ 120 hrs

= $41.67/hr (before revisions)

40 hrs/month × 3 months = 120 hours

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

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

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

Risk-adjusted contract value

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

= $5,000 × 95.0% × 95.0% + $0

= $4,513

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

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