Freelance business
Agency markup vs freelancer
Convert an agency's cost per hour and gross margin into its bill rate and markup, then compare the project total with a freelancer.
Bill rate = cost per hour / (1 - gross margin). An agency paying $60 an hour at a 40% gross margin bills $100 an hour, which is a 66.7% markup. With 10% project-management time on 50 hours it charges $5,500 against $4,250 from a freelancer at $85.
Your numbers
Result
Worked example
Cost $60, margin 40%: bill rate = 60 / 0.60 = $100 an hour, a markup of 66.7% on cost. For 50 hours plus 10% project management the agency charges 100 x 55 = $5,500. A freelancer at $85 x 50 hours charges $4,250, so the agency costs $1,250 (29.4%) more. The agency's gross profit is $5,500 - $3,300 = $2,200.
How it works
Margin and markup are different: a 40% margin is a 66.7% markup, because margin is a share of the price and markup is a share of the cost. Agencies often quote one while clients assume the other.
The comparison is arithmetic on your numbers. Agency cost, margin and the freelancer rate are your inputs; a higher price may buy a team, continuity and account management that one freelancer cannot, so the cheaper total is not automatically the better deal.
Sources and basis (checked 2026-10-08): arithmetic on the numbers you enter. No published rates, tax rules or benchmarks are built in; any figure described as a rule of thumb is labelled as one. This is a planning estimate, not financial, tax or legal advice.
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FAQ
What is the difference between agency markup and margin?
Markup is profit as a share of cost; margin is profit as a share of price. A $60 cost billed at $100 is a 66.7% markup and a 40% margin.
Why do agencies cost more than freelancers?
Agencies carry overhead, account management and a profit margin on top of the cost of the person doing the work. In the example that lifts $60 of cost to a $100 bill rate.
Is a freelancer always cheaper?
Not always. The tool compares only price on your numbers; it does not value team depth, capacity or continuity.
What margin should I enter?
Use the agency's actual figure if you know it, or test a few values. This tool does not assume a typical agency margin.