The formula
- Contribution = project value − delivery cost.
- Contribution % = contribution ÷ project value.
- Delivery cost = logged hours × each person’s loaded hourly cost + direct expenses.
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.
A worked example
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.
How PLYNTUM handles it
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.