Project Profitability Calculator: Margin and Burn Rate

Project margin on fixed price or T&M, blended rate and burn rate

A project's gross margin is revenue − (hours × each profile's internal hourly cost + external costs). On time and materials, revenue is hours spent × billing rate, and the cost covers those same hours. On a fixed price, the contract price is compared with the cost of the whole project: each profile's budgeted hours, or hours spent if they exceed them. The burn rate shows the share of the hours budget already used: 183 h out of 240, or 76.3%, in the default example.

Calculations

• Internal cost used = sum of hours spent × each profile's hourly cost.
• Revenue = fixed contract price, or on time and materials the sum of hours spent × billing rate.
• Margin = revenue − internal cost − external costs; the internal cost is that of hours spent on time and materials, and of budgeted hours (or hours spent if higher) on a fixed price; margin rate = margin ÷ revenue.
• Burn rate = hours spent ÷ hours budgeted; the bar turns red above 90%.
• Blended daily rate = average billing rate weighted by budgeted hours × 8 hours.

Example with the default values

Four profiles (project manager, architect, designer, tester), 240 h budgeted, 183 h spent, €2,500 of external costs. Internal cost used: €7,355. On a €35,000 fixed price, the 240 budgeted hours cost €9,510: the margin shown is 35,000 − 9,510 − 2,500 = €22,990, or 65.7%. On time and materials, the 183 h are billed at €17,890 and the margin drops to €8,035, or 44.9%. The blended rate is €96/h, i.e. €768 a day.

Watch out on fixed price

On a fixed price, the margin shown is the end-of-project margin: each profile counts for its budgeted hours, or for its hours spent once they exceed the budget, so any overrun reduces the margin straight away. If the architect spends 150 h instead of 120, the margin falls to €21,640, or 61.8%. If you expect a larger overrun, raise the budgeted hours of the profile concerned.

Limits

• Internal hourly costs should be fully loaded (salary, employer charges, overheads).
• Amounts exclude VAT, and the tool does not handle deposits or billing delays.

Among the site's project tools, this one tracks the profitability of sold work; the EVM calculator forecasts the final cost of an internal project, and the working-days calculator sets the schedule.

Frequently Asked Questions

How do you calculate the gross margin on a fixed-price project?

Subtract from the contract price the internal cost of the hours (hours × each profile's fully loaded hourly cost) and external costs. For a €35,000 fixed price, €12,010 of planned costs leave a margin of €22,990, or 65.7%.

What is a project burn rate?

It is the share of the hours budget already used: hours spent ÷ hours budgeted. At 183 h out of 240, the burn rate is 76.3%; the tool turns the gauge red above 90%, when the remaining work must fit into less than 10% of the hours.

How do you calculate a blended daily rate?

Weight each profile's billing rate by its budgeted hours, divide by total hours, then multiply by 8 hours. In the example, €23,150 billable over 240 h gives €96/h, a blended daily rate of €768.

Fixed price or time and materials: which is more profitable?

On a fixed price, the margin depends on keeping to the hours: every extra hour cuts it. On time and materials, every hour spent is billed, so the margin per hour is fixed. In the example, T&M gives a 44.9% margin on 183 h, while the €35,000 fixed price gives 65.7% if the 240 planned hours hold.

Is this tool really free?

Yes, all tools on Kristools are 100% free and accessible without registration.

Is my data protected?

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