How to calculate project profitability as a freelancer

Use the Project Profitability Calculator

Revenue is not profit.

Busy is not profit.

Use this framework:

Cash profit = project fee - direct expenses - contractor costs - overhead allocation - payment fees
Profit margin = cash profit ÷ project fee × 100
Effective hourly rate = cash profit ÷ your hours

Then compare cash profit to owner-time value:

Owner time value = your hours × target hourly rate
Surplus after owner time = cash profit - owner time value

If surplus is negative, the project got paid but did not actually support your target hourly value.

FAQ

What is project profitability?

Project profitability is how much money a project keeps after costs. For freelancers, it should also account for owner hours so you can compare the project to your target hourly rate.

How do freelancers calculate project profit?

Subtract direct expenses, contractor costs, overhead allocation, and payment fees from the project fee. Then divide the remaining cash profit by your owner hours to calculate effective hourly rate.

Is revenue the same as profit?

No. Revenue is the project fee or invoice amount. Profit is what remains after costs. A project can have strong revenue and weak profit.

Should I include my own time as a cost?

Yes. Even if you do not pay yourself like an employee, your time still has a target value. If the project cannot cover that value, the pricing may be too low.