What is left after this project?

What the number assumes

Cost per hour is what the work costs you, not what you charge for it. For your own time, use the figure from the hourly rate calculator; for employees, use fully loaded cost.

The formula defines the arithmetic. It does not define your business. A figure from this page is a starting point for a decision rather than the decision.

How project margin is calculated

Margin is the agreed price, minus the hours you will spend multiplied by what an hour costs you, minus the direct expenses of the job. Expressed as a percentage of the price, it is the share of the invoice that stays behind after the work is done.

The cost per hour in this calculation is your cost, not your rate. Confusing the two is the single most common error in project pricing, and it produces a margin figure of zero on every job, because if you cost what you charge, there is nothing left by definition.

Why margin disappears between the quote and the invoice

Almost always for one of three reasons. The hours ran over, which is an estimating problem. The scope grew without the price moving, which is a contract problem. Or the work was priced against a blended rate while being delivered by the most expensive people in the studio, which is a staffing problem.

Each has a different fix, and the margin figure alone will not tell you which one you have. Tracking hours against the estimate as the project runs is what distinguishes them, and it is the difference between finding out in week two and finding out at the invoice.

The margin you need is set by the work you do not bill

A studio that spends a fifth of its capacity on pitching, admin and the unpaid gaps has to recover that fifth from the projects it does deliver. That is what makes a 15 per cent project margin dangerous: it does not fail on the project, it fails on the year.

Work out what share of your capacity is genuinely billable, then set the minimum project margin above the level that covers the rest. It is a floor, and it is worth writing down where the person quoting can see it.

What to do with a thin margin before you sign

Change one of three things: the price, the scope, or who does the work. Raising the price is the most direct and the least often attempted. Cutting scope keeps the price and removes the hours, which protects the margin and is usually easier to sell than it sounds. Clients rarely want the least valuable third of a proposal.

Changing who does the work is the quiet one. A project that does not need your most expensive people should not have them, and a studio that cannot answer who will actually deliver a job cannot price it.

If none of the three moves, the answer is to decline. A project that makes no margin occupies the capacity that a profitable one would have used, and that opportunity cost never appears on the invoice.

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