Transparent method
The formula
Worked example
Example inputs
How to interpret the result
A project priced from hours worked alone can look profitable on an hourly basis and still lose money overall, once materials, subcontractor costs, software and other direct expenses tied specifically to that project get subtracted from the fee actually collected.
Before you rely on it
What to check
List every direct project expense separately, materials, subcontractors, tools, before comparing the fee against hours worked alone.
The common error
Where people go wrong with project profitability calculator
Pricing a project purely off an hourly rate times estimated hours. Direct expenses specific to the project can consume a meaningful share of the fee, turning an apparently profitable hourly rate into a thinner real margin.
Sensitivity evidence
How client fee changes the project profit
| Client fee | Project profit | Project margin |
|---|---|---|
| $9,600 | $3,600 | 37.5% |
| $10,800 | $4,800 | 44.4% |
| $12,000worked example | $6,000 | 50.0% |
| $13,200 | $7,200 | 54.5% |
| $14,400 | $8,400 | 58.3% |
Every input, tested
Which input moves the project profit most
| Input | Tested from | To | Project profit at each end | Swing |
|---|---|---|---|---|
| Client fee | $10,800 | $13,200 | $4,800 to $7,200 | $2,400 (40%) |
| Internal hourly cost | $59 | $72 | $6,480 to $5,440 | $1,040 (17%) |
| Project hours | 72.0 hours | 88.0 hours | $6,520 to $5,480 | $1,040 (17%) |
| Direct expenses | $720 | $880 | $6,080 to $5,920 | $160 (2.7%) |
Two variables at once
Project profit by client fee and project hours
| Client fee \ Project hours | 64.0 hours | 80.0 hours | 96.0 hours |
|---|---|---|---|
| $9,600 | $4,640 | $3,600 | $2,560 |
| $10,800 | $5,840 | $4,800 | $3,760 |
| $12,000 | $7,040 | $6,000 | $4,960 |
| $13,200 | $8,240 | $7,200 | $6,160 |
| $14,400 | $9,440 | $8,400 | $7,360 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Client fee | $12,000 |
| Project hours | 80.0 hours |
| Internal hourly cost | $65 |
| Direct expenses | $800 |
| Project profit | $6,000 |
| Project margin | 50.0% |
Where the inputs come from
Client fee is what the customer pays for the project. Project hours are the hours you or your team spend, including revisions, meetings and management, not just the estimate. Internal hourly cost is what an hour of your time costs the business: for an employee, salary plus burden divided by productive hours, and for yourself, your target rate. Direct expenses are costs charged to the job such as software, subcontractors and travel.
When the result stops applying
The internal cost rate is an assumption, and setting it too low makes every project look profitable. The calculation excludes overhead such as rent and sales time unless you include it in the hourly cost. Scope creep and unpaid revisions are the usual reason profits fall. Payment timing and bad debt also matter.
What to compare it with
Set rates with the freelance hourly rate and billable hours calculators, and see the overhead rate page for allocating indirect costs. The contribution margin and break-even calculators show what margin you need to cover fixed costs. Track hours per project so the next estimate is grounded.
People also ask
Frequently asked questions
What project margin should I aim for?
Many service businesses aim for 30% to 50% after direct labor and expenses, enough to cover overhead and a profit. Your target depends on your fixed costs.
How do I prevent scope creep?
Define the deliverables and revision limits in the contract, and price extra work as change orders instead of absorbing it.
Should I include my own time at a cost?
Yes. Valuing your hours at your target rate shows whether the project pays you what you need, not just whether it covers expenses.