Which projects actually make money?
A practice can be busy, win awards and still be earning far less than it should. If project margins are not clear, leaders may continue taking on work that looks attractive on the surface but quietly weakens the practice financially.
Get a finance reviewWhether the work being won is actually worth doing, once the cost of delivering it is accounted for.
See all KPIs →(Project fee − Direct costs − Allocated overheads) ÷ Project fee × 100
Around 10% to 20% after overheads is a reasonable aim for many professional practices. Consistently below 5% means the fee does not reflect the effort.
The profit a project makes after its direct costs and a fair share of overheads. Direct costs are the time of the people who worked on it, at their full cost rather than charge-out rate, plus expenses and subcontractors. The overhead share is usually applied as a rate per hour worked.
A practice can be busy, win awards and still earn far less than it should. Without project margins, leaders keep taking on work that looks attractive but quietly weakens the business, often for the clients who feel like the best relationships. Project margin shows which clients, sectors and project types to pursue, which to reprice and which to decline.
Calculate a full cost rate for each person, covering salary, employer costs and a share of overheads, and use it consistently. Time recording must be complete, including non-billable time spent on the project. Review margin at each stage as well as at the end, and compare it with the margin assumed when the fee was set. The gap between the two is often the most useful number in the business.
Most owner-managed businesses don't, or they work it out in a way that flatters the result. We'll calculate it from your own numbers and show you what it's telling you.
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