Price a project from hours, costs and target margin
Fixed-price quotes go wrong in two places: the estimate is too low, or the profit is added the wrong way. This calculator builds a cost base from your hours and expenses, adds a contingency for scope risk, then sets a price that leaves your chosen gross margin — measured against the price, the way margin is normally reported.
Result
- Labour (40 h)$1,200.00
- Expenses$300.00
- Contingency 10%$150.00
- Cost base$1,650.00
- 1 − 40% margin0.6
- Price to quote$2,750.00
Gross profit $1,100.00. That works out to $68.75 per estimated hour, a 66.67% markup on cost.
Formula and assumptions
Cost base = hours × cost/hour + expenses + contingency. Price = cost base ÷ (1 − target margin)
- Contingency is a percentage of labour plus direct expenses.
- Margin is gross margin on the selling price, not markup on cost.
- Prices are before any sales tax or VAT you may need to add.
Worked example
A small studio estimates a website at 40 hours. An hour of team time costs them 30 (wages plus a share of overhead). The project needs 300 of stock assets and plugins. They add 10% contingency and want a 40% gross margin.
- Labour: 40 × 30 = 1,200
- Labour plus expenses: 1,200 + 300 = 1,500
- Contingency: 1,500 × 10% = 150, so the cost base is 1,650
- Price: 1,650 ÷ (1 − 0.40) = 1,650 ÷ 0.60 = 2,750
They quote 2,750. Gross profit is 1,100, which is exactly 40% of the price. Spread over 40 hours, that is 68.75 an hour.
The example uses round numbers in no particular currency. They are the values the calculator loads with.
What the inputs mean
- Internal cost per hour
- What one hour of work costs the business — not the rate you bill. For a solo freelancer this can be your required hourly rate without the profit part; for an agency it is wages plus a share of overhead.
- Contingency
- A percentage added to cover underestimates, extra revisions and small scope changes. 10–20% is common for well-understood work; less familiar work may need more.
- Gross margin
- Profit as a share of the selling price. A 40% margin means 40 of every 100 the client pays is profit after project costs.
Common mistakes
- Adding 40% to cost and calling it a 40% margin. Cost × 1.4 gives a 28.6% margin; to earn 40% margin you divide by 0.6.
- Quoting with no contingency on work you haven't done before.
- Forgetting expenses you will pay for this project only, such as fonts, stock images or a subcontractor.
Limitations
- The price is only as good as the hour estimate. Track actual hours on past projects to improve it.
- Contingency is applied to labour and expenses together.
- Prices are before any sales tax or VAT.
Results are estimates based on the numbers you enter. They are not tax, legal or accounting advice. Read the disclaimer.
Questions
Why can't the margin be 100%?
A 100% margin would mean the project costs nothing. Mathematically the formula divides by (1 − margin), which becomes zero, so no finite price works. As the margin gets close to 100% the price rises extremely quickly.
What margin should I aim for?
It varies by industry and how much of your cost is already in the hourly cost figure. Look at what past projects actually earned, and use the margin vs markup calculator to compare.
Should I show the client this breakdown?
Usually not line by line. It is a tool for you to set a price you are confident in. Clients generally care about the deliverable and the total.