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        "rendered": "<p>Most unprofitable projects are not badly run. They are badly priced, and the damage is locked in before the kickoff call ever happens. If you want to <strong>calculate project profitability<\/strong> with any confidence, you have to do it while the quote is still a draft &mdash; when the scope, the hours and the number are all still yours to change. This is a spreadsheet exercise, not an accounting one, and you can build the first version in an afternoon.<\/p>\n<p>What follows is the arithmetic, one worked example, and a decision rule you can apply before you reply to the proposal request.<\/p>\n<h2>What Profitability Actually Means on a Single Project<\/h2>\n<p>Four numbers describe the economics of one engagement. Everything else is commentary.<\/p>\n<ul>\n<li><strong>Revenue.<\/strong> What the client actually pays you, after discounts, payment processing fees and any platform cut. Not the headline number on the proposal.<\/li>\n<li><strong>Direct cost.<\/strong> Delivery hours multiplied by your loaded cost per hour, plus every non-labor cost the project causes: subcontractors, stock assets, licenses, travel, ad spend you front.<\/li>\n<li><strong>Contribution.<\/strong> Revenue minus direct cost. This is what the project leaves behind to pay for rent, software, admin time and profit.<\/li>\n<li><strong>Effective hourly rate.<\/strong> Revenue divided by total delivery hours. The single most useful sanity check on a fixed fee.<\/li>\n<\/ul>\n<p>The word that does the work here is <em>loaded<\/em>. If you pay a designer $95,000 a year, that person does not cost you $95,000. Add payroll taxes, benefits, equipment and software, and you might be carrying around $119,000. Then divide by <em>delivery<\/em> hours, not paid hours. A full-time employee is paid for roughly 2,080 hours a year, but sick days, holidays, internal meetings, sales support and admin eat a large share. If you only budget 1,300 genuinely billable delivery hours, your loaded cost is about $91 per hour, not the $46 the payroll number suggests.<\/p>\n<p>Use your own numbers for this. The ratio differs a lot between a solo consultant, a four-person studio and a firm with a project manager on salary.<\/p>\n<h2>The Five Inputs You Need Before You Can Calculate Project Profitability<\/h2>\n<ol>\n<li><strong>Loaded cost per delivery hour, per role.<\/strong> One figure for each person or role who will touch the work, including yourself. Founders who price their own time at zero produce permanently misleading estimates.<\/li>\n<li><strong>An hour estimate broken down by phase and role.<\/strong> Not a single total. Discovery, design, build, review, launch, handover &mdash; each with the role attached. Totals hide the phase where you always overrun.<\/li>\n<li><strong>Non-labor direct costs.<\/strong> Anything you would not spend if this project did not exist.<\/li>\n<li><strong>A contingency percentage.<\/strong> Based on how this type of work has actually gone for you, not on optimism. Tighter for repeat work with a known client, wider for anything new.<\/li>\n<li><strong>Overhead absorption per delivery hour.<\/strong> Take your annual fixed costs &mdash; rent, software, insurance, accounting, non-billable admin salary &mdash; and divide by the delivery hours your team can realistically produce in a year. That gives you the overhead each project hour has to carry.<\/li>\n<\/ol>\n<p>Five columns. That is the entire model. The difficulty is never the formulas; it is being honest in the cells.<\/p>\n<h2>A Worked Example: A Fixed Fee That Looks Fine and Is Not<\/h2>\n<p>Assume a three-person studio quotes $18,000 for a ten-week brand and website project. Loaded costs: you at $75 an hour, a senior designer at $91, a contract developer billing you $65.<\/p>\n<p>The estimate by phase:<\/p>\n<ul>\n<li>Discovery and strategy &mdash; you, 20 hours &mdash; $1,500<\/li>\n<li>Design &mdash; senior designer, 90 hours &mdash; $8,190<\/li>\n<li>Build &mdash; contract developer, 60 hours &mdash; $3,900<\/li>\n<li>Project management, QA and client communication &mdash; you, 25 hours &mdash; $1,875<\/li>\n<\/ul>\n<p>That is 195 hours and $15,465 of direct labor. Add non-labor costs: $300 for stock assets and fonts, $120 for staging and hosting during the build, $1,200 for a subcontracted copy pass. Direct cost becomes $17,085.<\/p>\n<p>Contribution is $915 on $18,000 of revenue. Roughly five percent. At this point many people stop, see a positive number, and send the quote.<\/p>\n<p>Now apply the two inputs most estimates skip. A 15% contingency adds about 29 hours and roughly $2,300, pushing direct cost to $19,385 &mdash; already above the fee. And the studio&#8217;s fixed costs run $9,000 a month, $108,000 a year, against about 3,900 deliverable team hours. That is about $28 of overhead per delivery hour, so 224 hours of work must carry around $6,270.<\/p>\n<p>The real result is an operating loss of roughly $7,650. The effective hourly rate is $80 against a true breakeven of about $115 per hour. To earn a 20% operating margin, this project needed to be priced near $28,000.<\/p>\n<blockquote>\n<p>A positive contribution number tells you the project pays for itself. It does not tell you the project pays for your business.<\/p>\n<\/blockquote>\n<p>The useful part is that this took about fifteen minutes and happened <em>before<\/em> anyone committed. The options are all still open: cut the design phase, drop the subcontracted copy, raise the fee, or decline and keep 224 hours of capacity free for better work.<\/p>\n<h2>A Decision Rule You Can Apply in Ten Minutes<\/h2>\n<p>Resist the urge to adopt a generic margin benchmark. Your floor is not a benchmark; it is arithmetic. Run these five checks on every quote above a size that would hurt you to get wrong.<\/p>\n<ol>\n<li><strong>Effective rate versus true breakeven rate.<\/strong> Revenue divided by estimated hours, compared with loaded labor cost plus overhead per hour. Below breakeven, the answer is no, regardless of how much you like the client.<\/li>\n<li><strong>Contribution after contingency.<\/strong> Apply the contingency first, then read the margin. A margin that only survives a perfect delivery is not a margin.<\/li>\n<li><strong>Contingency size as a scope signal.<\/strong> If you need more than about 25% contingency to feel safe, the scope is not defined well enough to fix-price. Quote a paid discovery phase instead.<\/li>\n<li><strong>Capacity share.<\/strong> If one project consumes more than roughly a third of a quarter&#8217;s delivery capacity, price in the concentration risk and check what you are displacing.<\/li>\n<li><strong>Cash timing.<\/strong> Profit and cash are different problems. If most of the fee arrives after delivery while you are paying subcontractors monthly, fix the payment schedule before you fix the price.<\/li>\n<\/ol>\n<p>Fail one check, renegotiate scope or price. Fail two, walk away. Writing the rule down before you are emotionally invested in a specific client is most of the value.<\/p>\n<h2>Close the Loop: Compare the Estimate With What Happened<\/h2>\n<p>An estimate you never check is a guess with formatting. The comparison is what turns pricing from instinct into a skill, and it needs only three numbers per finished project: estimated hours versus actual hours, estimated direct cost versus actual, and planned contribution versus realized contribution.<\/p>\n<p>Keep it light or it will not happen. Any project that overruns hours by more than 20% gets a fifteen-minute review with two outputs: one sentence naming the cause, and one change to how you estimate that phase next time. Common causes repeat &mdash; unbilled revision rounds, client response delays that stretch project management hours, a discovery phase that was really design.<\/p>\n<p>After five or six closed projects you will have something far more valuable than a margin target: a contingency percentage and a set of phase estimates grounded in your own history. If you want a structure that already pairs the pre-quote estimate with post-project actuals and ties both to capacity, the <a href=\"\/en\/product\/project-profitability-capacity-planner\/\">Project Profitability &amp; Capacity Planner<\/a> is built around exactly that loop, and there are more operational walkthroughs like this one on the <a href=\"\/en\/blog\/\">Cursiqa blog<\/a>.<\/p>\n<h2>Where a Spreadsheet Stops Being Enough<\/h2>\n<p>Be honest about the ceiling. A spreadsheet handles project-level economics well, and it handles these situations badly:<\/p>\n<ul>\n<li><strong>No time tracking.<\/strong> Without recorded actual hours, the variance review is fiction. This is the real dependency, not the tool.<\/li>\n<li><strong>Shared people across many live projects.<\/strong> Once six or more concurrent projects compete for the same specialists, you need resource scheduling, not a monthly capacity column.<\/li>\n<li><strong>Beyond roughly eight to ten delivery staff.<\/strong> Per-person utilization forecasting and role-level cost updates become maintenance work nobody owns.<\/li>\n<li><strong>Retainers and long multi-phase contracts.<\/strong> Revenue spread across periods needs real recognition rules, and that is a conversation with your accountant, not a formula.<\/li>\n<li><strong>Nobody maintains it.<\/strong> A model only one person updates dies when that person gets busy.<\/li>\n<\/ul>\n<p>Until you hit one of those, a spreadsheet you actually fill in beats a project system you bought and abandoned.<\/p>\n<p>If you would rather start from a model than a blank sheet, the <a href=\"\/en\/shop\/\">Cursiqa shop<\/a> has the Project Profitability &amp; Capacity Planner with the estimate, actuals and capacity views already wired together. Either way, build the quote-stage check first &mdash; that is where the decision still belongs to you.<\/p>",
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