It is close to the accounting term contribution margin (revenue minus variable costs), but applied to one project, with the team’s time counted as a project cost. It is not net profit: overhead still has to be paid out of the total contribution.
"},{"heading":"A worked example","html":"An example. A project is worth $8,000. The team logged 120 hours at an average loaded cost of $35 ($4,200) and spent $1,000 on direct expenses. Delivery cost is $5,200. Contribution is $2,800, or 35%. If the company’s monthly overhead is $9,000, it needs about $9,000 of contribution a month from all projects together to break even. The profit margin calculator turns a target margin into a price.
"},{"heading":"How PLYNTUM handles it","html":"From Core, project profitability compares a project’s value with its labor cost and its expenses. Labor cost is logged hours × each person’s hourly cost, derived from their salary and working hours and fixed on each time entry. Salary figures are visible to leadership only. See finance.
See also delivery cost, which clients pay for your company and all terms in the glossary.
"}]},"faq":[["Is contribution the same as gross margin?","Close. Gross margin usually comes from the accounts; contribution before overhead is worked out per project from logged hours and expenses."],["Why not show net profit per project?","Net profit needs overhead allocated to projects, and every allocation rule is a judgment. Contribution stays factual."],["What is a healthy contribution for an agency project?","There is no universal number. It has to cover overhead and leave profit, so work backwards from your overhead."]]}