Project Profitability Tracker

Time-track all hours per project. Revenue per project / fully-loaded cost per hour × hours = profit margin. Aim for 50%+ project margins for service businesses. Below 30% suggests scope creep, mis-estimation, or under-pricing.

Most common: scope creep (clients add work without changing fee), under-estimation of hours (multiply your gut estimate by 1.5x), unbilled support after delivery, junior staff handling senior work, poor change order discipline. Track variance from estimate by project type to improve estimating.

Everything attributable directly to that project: materials, subcontractors, project-specific travel, dedicated software licenses, and any expense that would not exist if the project did not exist. Shared overhead belongs in the overhead allocation, not in direct costs.

Take the gross annual salary and multiply by 1.25 to 1.40 to include payroll taxes, insurance, and benefits. Then divide by annual billable hours (typically 1,600 to 1,800 for a full-time employee). That is your loaded cost rate, the true cost of an hour of labor.

Compare estimated hours against actual hours every week. If you have burned 50% of the budgeted hours but completed only 35% of the work, you are already trending toward a loss. Act then: discuss a change order with the client or renegotiate the scope rather than absorbing the extra work.