Service Margin Worksheet
Set the margin your firm has to earn, price every salaried hour against it, then scope proposals that still hold that margin after the work is delivered.
Set the margin your firm has to earn, price every salaried hour against it, then scope proposals that still hold that margin after the work is delivered.
Both numbers are yours to set. Gross margin sets your prices in step 3. Net margin is the test of whether that gross target still leaves profit once overhead is paid. Fill in all four cells and the sheet reconciles them.
Click any figure to load it into the cell above. These are typical operating ranges for owner-managed firms rather than audited survey data, so override them with your own association or peer-group benchmarks whenever you have them.
Use accrual, not cash. Accrual books each cost in the month it was incurred, so twelve months of it reflect your true run rate. On cash basis, a year of insurance prepaid in January lands in a single month and the annual total swings with when you happened to pay bills, which is no basis for setting a price. QuickBooks may be set to cash by default, so change it in the toggle at the top of the report, or under Customize › General › Accounting method.
What each person costs per hour you can actually sell, and the rate you must bill to clear the gross target from step 1. Utilization moves this number more than salary does.
| Name / role | Salary | Benefits /yr | Other /yr | PTO days | Util. | Loaded cost | Billable hrs | Cost /hr | Bill rate | |
|---|---|---|---|---|---|---|---|---|---|---|
| Roster totals | $0 | $0 | $0 | $0 | 0 | $0 | $0 |
Other /yr is the employer cost of keeping someone working: laptop and phone, software seats, vehicle, tools, training, licenses. Util. is the share of available hours that lands on client work, with the rest going to admin, sales, rework and idle time. Paid time off is priced in by spreading the full annual cost across billable hours only.
Add total hours for the engagement and the direct costs. Reimbursed expenses go in their own block and stay out of the margin maths. The panel returns the price that clears both targets from step 1.
Work in whichever unit you scope in. The sheet always shows you both.Cost is total hours multiplied by loaded rate, and it does not change whether those hours run over three weeks or three months, so duration never enters the price. Duration is what turns hours into a workload you can staff. Set the project length above, then enter either the total hours a person will spend on the engagement or the hours a week they will give it, and the other figure fills itself in. Under each weekly figure is the share of that person's sellable capacity it consumes, which is their scheduled hours multiplied by their utilization. Anyone at 90 percent or more is on this job almost full time and can carry very little else, so check what else you have already promised them. Anyone above 100 percent cannot deliver the scope in the time you have quoted, and that gap is what quietly turns a profitable job into overtime, subcontractors and a late delivery.
Costs on a % of price basis rise as the price rises, which covers merchant fees, sales commission and referral splits, so the sheet solves for price instead of marking up a fixed number. Overhead does not belong here, because step 1 already carries it.
Travel, lodging, mileage, permits, freight and rebilled equipment belong here when the client reimburses them.Money that arrives and leaves at cost is neither revenue you earned nor cost you carried, so it stays out of the fee and out of the margin percentage. Leave it in and it quietly drags your reported margin down on travel-heavy jobs. Only the markup you add counts as profit. Two cases are worth watching. If the client will not reimburse an expense, it is a real cost, so move it up to 3b. If you quote one all-in number that includes travel, that fee is revenue and the travel is a cost, so it belongs in 3b as well.