Project Profitability Calculator

Project profitability is what is left from a single project once you subtract the cost of the time spent delivering it. It is usually shown as a profit figure and a margin percentage. Unlike agency-wide profit, it isolates one job so you can see which projects actually make money and which quietly drain it. Tracking it per project is the fastest way to find the work worth repeating.

Start with revenue. For a fixed-price project that is the agreed fee; for an hourly project it is hours logged multiplied by your bill rate. Then work out cost as hours logged multiplied by your internal cost rate. Profit is revenue minus cost, and margin is profit divided by revenue times 100. For example, 12,000 in revenue with 90 hours at a 55 cost rate gives 4,950 of cost and 7,050 of profit, a 59 percent margin.

Bill rate is what you charge the client per hour. Cost rate is what that hour actually costs you, usually the salary, on-costs and a slice of overhead for the person doing the work. The gap between the two is your gross margin per hour. If a designer costs you 55 an hour and you bill them at 130, every billable hour they log on a project earns 75 of contribution before overhead.

Budget burn is the share of a project budget already consumed by cost. It is calculated as cost divided by budget times 100. At 50 percent burn you have used half the budget; at 100 percent you have spent the whole thing and any further hours eat into profit. Watching burn against percent complete is the earliest warning that a project is heading for a loss.

On an hourly project, margin is fixed by the gap between your bill rate and cost rate, so it stays roughly constant no matter how many hours you log. On a fixed-price project, revenue is capped at the agreed fee, so every extra hour you spend lowers the margin. That is why fixed-price work needs tight scope control: efficiency is pure profit and overruns come straight out of your margin.

Fixed-price projects often target 40 percent or more because the cost rate sits well below the bill rate and efficient delivery is rewarded. Hourly projects usually land lower because the margin is locked by your rate card. Below 20 percent a project is thin and leaves little room for revisions or scope creep. A negative margin means the budget was wrong or the job ran long, and it should prompt a post-mortem.

Agencies run dozens of projects at once, so the trick is consistency. Use a standard cost rate per role, log every billable hour against the right project, and compare burn to the agreed budget weekly. The projects with the strongest margins tell you which services and clients to lean into, and the weak ones reveal where scope or pricing needs fixing before you take on more of the same.

For an independent consultant, the cost rate is the income you need to draw per hour plus a share of your own overhead. The margin on each engagement then shows the buffer above your target pay. If a fixed-fee engagement is burning faster than expected, you can see it early and decide whether to tighten scope or treat the overrun as the cost of winning a reference client.

Yes. Freelancers usually fold their own pay into the cost rate, so a positive margin is the profit on top of the income they wanted from the job. It is especially useful for fixed-price work, where it shows whether a flat quote still pays a fair effective rate once the real hours are in. If the margin keeps landing thin, your quotes are too low for how long the work actually takes.

Scope creep is the main reason a profitable quote turns into a thin or negative project. The defence is visibility: set a budget in hours or fees, track logged time against it, and flag every request that pushes past the original brief. When budget burn climbs faster than the work is progressing, that is the moment to raise a change order rather than absorb the extra hours silently.

Realized rate is revenue divided by hours actually logged, so it reflects what you really earned per hour. On a fixed-price project it drops below your bill rate whenever the job runs long, because the fee is fixed while the hours keep climbing. On hourly work, discounts and unbilled time pull it down too. A realized rate well under your bill rate is a clear sign the project is leaking value.

For a quick check, a cost rate of just salary and on-costs is fine. For a truer picture, load a share of overhead into the cost rate so the margin reflects the full cost of delivery, not only the direct labour. Be consistent across projects so the comparison stays fair. Whichever you choose, use the same basis every time so trends mean something.

Check it weekly for active projects, not just at the end. Reviewing margin and budget burn while there is still time to act lets you re-scope, raise a change order or reassign work before the project tips into a loss. End-of-project numbers are useful for pricing the next quote, but mid-flight numbers are what protect the margin on the job in front of you.

Yes. It is completely free, needs no signup, works in multiple currencies, and produces a link you can share with a partner or client. It runs entirely in your browser, so none of your numbers are stored or sent anywhere. When you want the same numbers tracked automatically from real time entries and pushed to Xero, Hour Cap picks up where the calculator leaves off.