Free Project Profitability Calculator
Run a real project-level P&L. See gross margin, effective hourly rate, and profit per hour based on revenue, actual time logged, and direct costs.
Revenue
Labor
Direct Costs
Project P&L
Gross Margin
35.6%
Acceptable
Effective Rate
$156.25/hr
Profit Per Hour
$55.63
Run this at project close: The gap between your quoted hours and actual hours is where profitability lives or dies. Track both to improve estimates.
How to Use This Calculator
Enter total project revenue. For fixed-fee projects, that's the contracted amount. For time-and-materials, it's total billed. Hours worked should come from your time tracking tool, not memory. The blended hourly cost is your team's fully-loaded cost per hour, which already accounts for salary, taxes, benefits, and overhead.
Add direct project costs: subcontractors, materials, project-specific software, stock, and anything else tied uniquely to this engagement. Leave out shared overhead; that's already in the loaded hourly cost.
The calculator returns gross profit, gross margin, effective hourly rate, and profit per hour. Run this on every completed project to build an honest picture of which work actually makes money.
What to Do With the Results
- Healthy (50%+ margin): Capture what made this work. Document scope, team assignments, and process so you can repeat it.
- Acceptable (30-50%): Review time breakdown. Often one phase blew up and dragged the rest down; fix the estimate for next time.
- Thin (10-30%): Investigate root cause. Was it scope creep, underestimating, inefficient process, or wrong team assignment?
- Unprofitable (under 10%): Do a full post-mortem. Don't sign similar engagements without addressing the cause; these projects rarely fix themselves.
Frequently Asked Questions
How do I calculate project profitability?
Take total project revenue, subtract labor cost (hours worked multiplied by blended fully-loaded hourly cost), then subtract direct costs (subcontractors, materials, software specific to the project). The result is gross profit. Divide by revenue to get gross margin percent.
What is a healthy project gross margin?
Agency projects should target 50-60% gross margin. Above 60% is strong. Between 30-50% is acceptable if volume makes up for it. Below 30% is thin and risky; any overrun eats the entire margin. Below 10% is unprofitable once shared overhead is factored in.
Should I use billable rate or cost rate for hours?
Use cost rate (fully-loaded cost per hour) to calculate profitability. Using billable rate circularly assumes the project is profitable. The gap between revenue and cost-based labor math is your actual margin, which is what matters for business decisions.
What direct costs should I include?
Only costs tied specifically to this project: subcontractor or freelancer fees, licenses purchased just for this engagement, stock assets, travel reimbursed by client, hosting, testing tools. Do NOT include general overhead like office rent or shared software; those are factored into loaded hourly cost.
Why is my effective hourly rate lower than my billable rate?
Because actual hours exceeded estimated hours. This is the most common silent killer of project margin. If you quoted $20k for 120 hours of work ($166/hr effective) but delivered in 180 hours, your effective rate dropped to $111/hr. Track this every project to improve estimates.
Know project margin before it's too late
AgencyPro tracks time, costs, and budget burndown per project in real time so you know exactly where margin is going while there's still time to course-correct.