Does the agency actually pay better?

Running an agency vs working as a freelancer changes the income math meaningfully. An agency with 300,000 gross revenue and 40% overhead (staff, tools, rent) nets 180,000. A senior freelancer billing 1,200 hours at 150/hour grosses 180,000, minus 15,000 in expenses, for 165,000 net.

The comparison doesn't favour one model universally. Agencies scale revenue but add management complexity. Freelancers cap out at their personal billable hours but keep almost everything they earn. This calculator puts both models on the same footing: effective hourly rate after overhead or expenses.

Agency owners typically earn 60-120/hour effective after overhead, scaled across a team. Top freelancers earn 80-200/hour net. The agency path only beats freelancing financially if you build past 3-5 staff and maintain utilisation. Below that, freelancing usually pays better hour-for-hour with less stress.

A worked example

Try the defaults: agency annual gross revenue of 300,000, agency overhead of 40%, agency owner hours weekly of 50, freelance hourly rate of 150. The tool returns -15,000.00. You can adjust any input and the result updates as you type — no submit button, no reload. That's the real power here: seeing how sensitive the output is to one or two assumptions.

What moves the number most

The result responds to Agency Annual Gross Revenue, Agency Overhead, Agency Owner Hours Weekly, Freelance Hourly Rate, and Freelance Billable Hours per Year. Two inputs usually tip the answer one way or the other. Identify which ones matter most by flipping each value past a round threshold and watching whether the winning option changes.

The formula behind this

Agency net = gross × (1 - overhead/100). Agency hourly = net / (weekly hours × 48). Freelance gross = rate × hours. Freelance net = gross - expenses. Freelance hourly = net / hours. Everything the calculator does is shown in the formula box below, so you can check the math against your own spreadsheet if you want.

Re-running after each rate change

Freelance rates aren't set once. After any rate change, re-run this — the monthly and annual totals drift faster than people expect, and your runway number changes with them.

What this doesn't capture

Freelance income is lumpy. The calculation assumes steady work; reality includes dry spells, delayed invoices, and client churn. Plan against a pessimistic version of the result, not the central case.