How do I calculate my margin on a client project when I pay a subcontractor to do part of it?
Treat the whole project as one product: everything you pay out for it is the cost, and the fee you invoice before tax is the selling price. Enter both in the calculator, and the margin it shows is your real share of the client's money.
What counts as project cost
Working alone, almost all of the client's fee is yours. Once you bring in a developer, designer or writer for part of the job, the project starts to look like trading: you buy work and resell it inside a package. At that point you need to know what you keep.
- The subcontractor's fee.
- Paid assets bought for this project specifically: photos, fonts, themes, plugins.
- A tool subscription opened just for this client.
- Transfer fees for paying the subcontractor, if you carry them.
Subscriptions you keep for every client do not belong to one project. They are general overheads of your business.
Example: a website for a Dubai boutique
You agreed a fee of 5000 before VAT.
You paid a developer 2500 and spent 500 on a theme and stock images. Cost: 3000.
In the Profit margin calculator: profit 2000, margin 40%, markup 66.67%.
A 40% margin means you keep 40 of every 100 the client pays, in return for managing the project, handling the client and checking quality.
When revisions eat the margin
The client asks for extra rounds of changes that were never in the brief, your developer charges 800 more to do them, and you do not bill the client for any of it. Re-run with a cost of 3800 and the same price of 5000: profit 1200, margin 24%. Sixteen points of margin gone because of something the proposal did not spell out.
That is why it pays to state the number of revision rounds in your proposal and price extra work as its own line. You can put together an itemised proposal with the Quotation generator.
Your own hours are not in the number
The calculator measures the money you keep, but it has no idea how many hours you spent on calls and reviews. A profit of 2000 over 25 hours is one thing; 1200 over 35 hours is quite another. Log your time on the project with the Timesheet calculator, divide the profit by it to see what you really earn per hour, and compare that with doing the work yourself.
Common questions
Do I enter the fee including VAT?
No. If you charge the client VAT, it is not your money. Enter your fee before tax.
The client pays in instalments. Do I run each one?
Run the project once as a whole: everything the client will pay against everything you will pay out.