Enter your assumptions
Formula and units
Labor cost = delivery hours × internal hourly cost. Direct cost = labor cost + external costs + other direct costs. Contribution = project revenue − direct cost. Contribution margin = contribution / revenue × 100.
Worked example
At $20,000 of revenue, 180 hours at an internal cost of $50 per hour create $9,000 of labor cost. Add $3,000 of external costs for $12,000 of total direct cost. Contribution is $8,000 and contribution margin is 40%. General overhead is not included unless you deliberately incorporate it in an entered cost.
How to use the result
A negative contribution means entered direct costs exceed revenue. Compare planned and actual hours, purchased inputs, and scope changes before choosing a response. A margin percentage alone does not explain whether the cause was pricing, estimation, rework, or delivery efficiency.
Assumptions and limits
Use a consistent revenue and cost basis with finance. An employee’s billing rate is not an internal labor cost. Include owner delivery time if you want a replacement-cost view, and avoid duplicating costs in both the hourly rate and other fields. Zero revenue has no defined margin percentage.
Turn the estimate into an operating decision
Use source records where possible and label estimates you cannot yet verify. Save the result with the planning period and the person responsible for checking assumptions. After a real operating cycle, compare the estimate with what happened and update the underlying process before treating the model as reliable.
Related implementation resources
Discuss the operating problem
Elixir consulting starts at $5,000 per month, with final pricing based on scope. Bring a recent example, the current workflow, and the person who owns the result to define the appropriate implementation scope.