CalculateY
Quick Answer
A project requiring 40 hours at $100/hour with $500 in expenses and a 20% profit margin produces a project price of $5,400, including $900 in profit.
Software, materials, subcontractors, etc.
Additional profit above costs.
Common Examples
| Input | Result |
|---|---|
| $100/hr, 40 hours, $500 expenses, 20% margin | Project price $5,400, profit $900 |
| $75/hr, 60 hours, $1,000 expenses, 15% margin | Project price $6,325, profit $825 |
| $150/hr, 20 hours, $200 expenses, 25% margin | Project price $4,000, profit $800 |
| $50/hr, 100 hours, $2,000 expenses, 10% margin | Project price $7,700, profit $700 |
| $125/hr, 80 hours, $0 expenses, 30% margin | Project price $13,000, profit $3,000 |
How It Works
This calculator uses a cost-plus pricing formula for project-based work:
Labor Cost = Hourly Rate x Estimated Hours
Total Cost = Labor Cost + Project Expenses
Profit = Total Cost x (Profit Margin / 100)
Project Price = Total Cost + Profit
Effective Hourly Rate = Project Price / Estimated Hours
Where:
- Hourly Rate = your base rate for labor
- Estimated Hours = total hours expected to complete the project
- Project Expenses = direct costs beyond labor, such as software licenses, materials, subcontractor fees, travel, or equipment
- Profit Margin = the additional percentage applied on top of total cost to build in profit
- Effective Hourly Rate = what you actually earn per hour when the profit margin and expenses are factored into the total price
Why Add a Profit Margin on Top of Your Rate
Your hourly rate covers your time, but it may not fully account for business risk, project management overhead, scope creep, and opportunity cost. The profit margin layer ensures the project generates returns beyond just compensating for hours worked. It also provides a buffer for projects that take longer than estimated.
Effective Hourly Rate
The effective hourly rate divides the total project price by estimated hours. When expenses and profit margin are included, the effective rate is always higher than the base hourly rate. This metric helps compare project-based pricing to hourly billing and evaluate whether a fixed-price project is worthwhile.
Estimating Hours
Accurate hour estimates are critical for project pricing. A common practice is to estimate the most likely hours, then add a 10% to 25% buffer for unexpected complexity, revisions, and communication overhead. Underestimating hours on a fixed-price project directly reduces the effective hourly rate and can eliminate profit entirely.
Worked Example
A freelance developer quotes a website project. The hourly rate is $100, and the project is estimated at 40 hours of work. Direct expenses include $300 for a premium theme and $200 for stock photography, totaling $500. The target profit margin is 20%. Labor cost = $100 x 40 = $4,000. Total cost = $4,000 + $500 = $4,500. Profit = $4,500 x 0.20 = $900. Project price = $4,500 + $900 = $5,400. Effective hourly rate = $5,400 / 40 = $135.00 per hour, which is $35 above the base rate and accounts for expenses and profit.