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Margin is what you keep.
Revenue is what you charge the client. Cost is what the work costs you. The gap between them is the profit on the job.

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The two rates that make margin

Every hour someone tracks carries two numbers. Sarah Lin’s billable rate is 100/hour∗∗.Hercostrateis∗∗100/hour**. Her cost rate is **45/hour. So every hour Sarah works earns 100andcosts100 and costs 55 less than that – a margin of $55 an hour. See billable rates and cost rates.

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The canonical example

Sarah tracks 3 hours on “Homepage wireframes” for Bluebird Coffee – Website Redesign. That is the whole idea. Northwind bills Bluebird 300forthreehoursofSarah′stime,pays300 for three hours of Sarah's time, pays 135 for it, and keeps $165.

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Margin per person

Each person has their own margin, because each has their own pair of rates. Check the last row: 80 − 55 = 25, and 25 ÷ 80 = 0.3125 = 31.25%. Two things stand out:
  • The highest rate is not the best margin. Jonas bills $120 – the most of the three – but keeps a lower percentage than Sarah.
  • A contractor can be the thinnest margin. Ana bills 80andcosts80 and costs 55, so under a third of her rate is profit. Loading a project with contractors can quietly halve its margin.
Watch margin percentage, not margin per hour. A person who bills 200andcosts200 and costs 180 makes you $20 an hour – but only 10% – and one slipped estimate wipes it out.

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Margin on a whole project

A project’s margin is the sum of every person’s contribution, not an average of their percentages. Bluebird Coffee – Website Redesign. 250 hours of approved time. Project margin: 12,500÷12,500 ÷ 25,000 × 100 = 50%. Worth noticing: the three people’s individual margins are 55%, 50% and 31.25%. The project lands at 50% because Sarah did most of the hours. The mix of who works a project matters as much as the rates themselves.

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The figures TimeTracker shows

Gross profit is what you have made. Forecast margin is what you are on course to make.

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Effective hourly rate

The blended rate a project is actually earning. For the Website Redesign: 25,000÷250hours=∗∗25,000 ÷ 250 hours = **100.00 per hour** exactly. Compare that with your headline rates. If a project sold at Sarah’s 100rateisearninganeffective100 rate is earning an effective 82, cheaper people are doing more of the work than you assumed – or non-billable hours are diluting it.

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What margin does and does not include

Two consequences worth being clear about. Non-billable hours are pure cost. An hour Sarah spends on internal admin against a project costs $45 and earns nothing. It drags margin down. That is correct, and it is the point. Margin is a gross margin, not net profit. It is revenue minus the direct labour cost of delivering the work. It does not know about your office or your software bill.

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Who can see cost and margin

Revenue is broadly visible. Cost is not. A Project Manager can run a project, approve its time, set its budget and see its revenue, and still never see what the team costs. That is the cost firewall.
Cost fields are omitted, not blanked. The tile grid reflows and no placeholder hints at a hidden number. Nothing is sent to a screen that is not allowed to display it.

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Plans: the profitability half-gate

This is subtle and worth getting exactly right. profitability is a Pro feature. It gates exactly one thing: setting a cost rate. So Free does not hide margin. It stops margin being maintained – you cannot set a cost rate for a new hire, so their hours cost nothing and the margin drifts upward and becomes a lie. Setting a project budget is a separate Pro feature, budgets. The two gates are independent. And to be completely clear: who may see cost and margin is a capability question, decided by time.viewCost and rate.viewCost. It is never a plan question. A Free workspace’s Owner sees margin. A Pro workspace’s Project Manager does not. See plans and features.

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Where to find your margin

The reports firewall matches the app. The revenue measures are open; the cost and profit measures require time.viewCost.

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Common questions

It is gross margin – revenue minus the direct labour cost of the work. Net profit also subtracts overheads, which TimeTracker does not track.
The most common cause is missing cost rates. Someone with no cost rate contributes zero cost, so their hours look like pure profit. Check every person on the project has one.
Approving adds cost. Before approval that cost was excluded, so the margin was flattering. The post-approval figure is the true one.
Not the project margin figure, which is labour-based. A billable expense has its own margin – the gap between what you paid and the marked-up value you charge. See billable expenses.
Yes. They cost money and earn none. That is exactly what you want the number to tell you.
That depends on your business. Many service firms target 50% or better on gross project margin. Set your target as the Alert if margin falls below floor and let TimeTracker warn you.
No. Cost, revenue and margin already recorded stay readable. What you lose is the ability to set a new cost rate.

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Troubleshooting

Calculate project profitability

A full walkthrough on one project.

Cost rates

The number that makes margin possible.

Billable rates

The revenue side of the equation.

How budgets work

Where forecast margin comes from.

Budget alerts

The margin floor alert.

Plans and features

The profitability half-gate in context.