Project Profitability Calculator

Freelance work is priced as an hourly rate × hours, but profitable freelance work is evaluated as revenue minus direct expenses minus an allocated share of overhead. A project that looks great at the rate can land at a terrible effective hourly once subcontractor costs and overhead are subtracted. This calculator makes the subtraction explicit so you can see actual profit and actual effective hourly, both for post-mortem analysis and for sanity-checking a price quote before you accept it.

Enter the project's total hours, your hourly rate, and the direct expenses specific to the project (subcontractor fees, travel, project-specific software, stock assets). Then set an overhead allocation as a percentage of project revenue. Overhead covers the general costs of running the practice: accounting, rent, insurance, subscriptions, marketing time, non-billable hours spent on sales or admin that still have to be paid for by billable work.

The output gives you project profit in dollars, margin as a percentage of revenue, and effective hourly (profit divided by hours), the number that tells you what the project actually paid you. Pair with the hourly to salary tool for rate-setting and the break-even day calculator for the monthly overhead side.

Revenue = hours × rate. Direct expenses are project-specific costs you attribute directly to this work (Schedule C line 17 for legal and professional services, line 22 for supplies, line 24 for travel, etc.). Overhead allocation = revenue × overhead_pct, a portion of the fixed cost of running your practice that this project should absorb. Profit = revenue − direct_expenses − overhead_allocated. Margin = profit / revenue. Effective hourly = profit / hours.

The overhead percentage is not a regulatory standard. It is a business-planning tool: you decide what fraction of your general costs each project should carry. The most rigorous approach is to compute it from your own books: take annual overhead (rent, insurance, software, accounting, non-billable time) divided by annual revenue. That ratio is your true overhead percentage. A stable solo practice with $30,000 of overhead on $150,000 of revenue has 20% overhead. A new or lumpy practice typically runs higher because non-billable time is a larger share until client flow stabilizes.

Use this during a post-project review to see what the work actually paid, before accepting a fixed-bid engagement to check whether the price covers real cost, or at month-end to tally profit across completed projects. Combine with the quarterly estimated taxes calculator to see what the project contributes to your tax bill. Do not use this for rate-setting from scratch; the hourly to salary tool is better for that because it reasons about annual income targets.