Client Profitability Calculator
Is this project actually worth what it looks like on paper? This tool compares your projected hourly rate against your effective rate after accounting for real production hours, revisions, and admin time. Use it to find where margin leaks and to price similar work more accurately next time.
Projected hourly rate
$175.00/hr
Effective hourly rate
$102.94/hr
Profitability warning: margin looks weak after revisions and admin time.
Why effective rate matters more than project fee
A project fee tells you what a client is paying. Your effective hourly rate tells you what you are actually earning, once all the hours are counted. The two can be very different — and the gap is where scope creep, revision overruns, admin load, and underpriced complexity quietly erode your margin.
The effective rate is calculated by dividing the project fee by the total hours spent, including revisions, client communication, project management, and handover — not just the direct production hours. A project that looked like £70/hr on paper might have produced £38/hr in practice once everything was counted. That gap is not an accident — it is a pattern that repeats on similar projects until you surface it and act on it.
Worked example
| Item | Estimate | Actual |
|---|---|---|
| Project fee | £3,500 | £3,500 |
| Production hours | 35 hrs | 38 hrs |
| Revision hours | 5 hrs | 12 hrs |
| Admin / comms hours | 5 hrs | 9 hrs |
| Total hours | 45 hrs | 59 hrs |
| Effective hourly rate | £77.78/hr | £59.32/hr |
The revision overrun and extra admin cost 14 hours — dropping the effective rate by £18/hr. On the next similar project, tighter scope language and a stricter revision limit recovers that margin.
What a large effective rate drop tells you
- Revision overruns: scope language was too vague, or the revision limit was not enforced. Tighten scope definition and add a change-order clause.
- Admin creep: excessive client communication, unclear approval processes, or missing project management structure. Set clearer communication rules at kickoff.
- Underestimated complexity: the project was harder than it looked. Use this data when pricing similar projects next time — raise the estimate by the actual overrun percentage.
- Client behaviour: some clients consistently generate high admin and revision load. This calculator makes that pattern visible so you can reprice, re-scope, or decline to renew.
Use the Scope Creep Clause Generator to tighten revision language on future contracts. Set your minimum acceptable effective rate using the Rate Calculator, then use this tool after each project to track how close you came to it.
How to read the results
A large gap between projected and effective rate is a signal, not a verdict. It tells you something specific about scope control, estimation accuracy, or client behaviour — each of which has a different fix.
Focus on the effective rate, not just the raw hour totals. The effective rate is comparable across projects and over time. If it consistently falls below your minimum sustainable rate, you have a pricing or scope control problem that needs addressing.
Best practice
Review this after every significant project. Build a simple log of projected vs effective rate by project type. Patterns across 5–10 projects are far more useful than any single data point.
Worked example
A £3,500 project estimated at 45 hours (£77/hr effective) that took 59 hours produces an effective rate of £59/hr — a margin drop of 24% caused by revision overruns and extra admin.
Swap your own assumptions to create a quote-ready number or policy clause.
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FAQ
Yes. Admin, client emails, calls, and project management are real costs of delivery. Excluding them overstates your effective rate and leads to systematic underpricing. Every hour you spend on a project that does not appear on an invoice is an unpaid hour.
There is no universal threshold, but a drop of more than 20% from projected to effective rate on a regular basis indicates a structural problem — usually scope language, revision limits, or client communication. A one-off 30% drop might be an unusually complex project. A consistent 25% drop across multiple projects is a pricing problem.
Yes. If a client consistently produces the lowest effective rates in your portfolio — due to high revision counts, poor brief quality, or excessive admin — that is financial data. Compare their average effective rate against your other clients and decide whether the revenue justifies the real cost.
Three levers: tighter scope language (fewer revision disputes), more accurate initial estimates (build in the admin overhead), and firmer enforcement of change-order processes. Use the data from this calculator to calibrate each one.