What the consulting project profitability calculator measures
The calculator combines billable hours and bill rate with project non-billable hours, loaded labor cost, project-specific non-labor cost and write-offs. It estimates the gross operating profit produced by the entered project period and the realized revenue per delivery hour.
It is an operating estimate, not a complete project or company income statement. The result excludes any overhead not already included in loaded labor cost, and it does not apply an accounting revenue-recognition policy.
How the project results are calculated
Gross project revenue equals billable hours multiplied by the average bill rate, less entered write-offs or discounts. Total delivery hours include billable and project non-billable hours. Labor cost applies the loaded cost rate to all delivery hours, because non-billable project effort still consumes labor.
Total delivery cost adds project-specific expenses such as travel, subcontractors or software that are not already contained in the loaded rate. Gross project profit is revenue less total delivery cost, and gross project margin divides that profit by revenue.
- Gross revenue = billable hours × average bill rate − write-offs
- Total delivery hours = billable hours + project non-billable hours
- Labor cost = total delivery hours × loaded labor cost
- Total delivery cost = labor cost + project non-labor cost
- Gross project margin = (revenue − total delivery cost) ÷ revenue × 100
- Realized hourly rate = revenue ÷ total delivery hours
Worked consulting project example
Assume a project records 420 billable hours at an average $185 rate, 36 project non-billable hours, a $72 loaded labor cost, $6,500 of project-specific expense and $2,500 of write-offs. Gross project revenue is $75,200 and total delivery cost is $39,332.
The estimated gross project profit is $35,868, margin is approximately 47.7 percent and realized revenue per delivery hour is about $164.90. Simplified break-even utilization is approximately 38.9 percent before project expenses and any company overhead not included in the loaded rate.
Interpret the result by commercial model
The input model works directly for time-and-materials work. For a fixed-fee engagement, use the dedicated fixed-fee calculator because revenue does not increase with billable hours. For a monthly retainer, use the retainer calculator to compare recurring fee, included capacity, over-service and approved overage.
Use complete project time even when an hour is not separately billable. Otherwise the effective rate and project margin will be overstated, and the next estimate will repeat the same error.
Move from a one-period result to a weekly project control
Review actual and provisional hours, current budget, forecast remaining effort, rates, scope changes, cost, revenue and margin on one cutoff date. Add a named action when the forecast moves beyond a threshold. A historical margin percentage is useful only when it changes staffing, scope, price or the next estimate.
Timecard Lab can calculate the operating view from approved hours and effective-dated rates, then support reconciliation with QuickBooks as the financial system of record.
Frequently asked questions
Should non-billable project hours be included in labor cost?
Yes. Work performed for the project consumes labor even when it is written off, included in a fixed fee, over budget or not eligible for separate billing. Keep it on the project so the margin and future estimate remain honest.
What should the loaded labor cost include?
Use the consistent basis your firm manages: commonly compensation, employer payroll taxes, benefits and documented labor burden. State whether overhead is included and avoid adding the same cost again as a separate expense.
Is realized hourly rate the same as the contracted bill rate?
No. Realized rate divides actual project revenue after write-offs by all entered delivery hours. Non-billable project time, discounts, caps and fixed-fee overruns can make it lower than the standard customer rate.
Does the result equal net profit?
No. The calculator estimates gross project profit using the costs entered. Company selling, general, administrative, financing and tax costs are not included unless your loaded rate or project-cost input explicitly includes them.
Primary sources
Review the executed contract and current official guidance before using a result for a compliance, accounting or contractual decision.