{"id":8571,"date":"2022-07-19T13:00:00","date_gmt":"2022-07-19T11:00:00","guid":{"rendered":"https:\/\/beebole.com\/blog\/?p=8571"},"modified":"2025-12-17T11:11:10","modified_gmt":"2025-12-17T10:11:10","slug":"how-to-calculate-project-profitability","status":"publish","type":"post","link":"https:\/\/beebole.com\/blog\/how-to-calculate-project-profitability","title":{"rendered":"How to calculate project profitability using time tracking data: Everything you need to know [Excel tutorial]"},"content":{"rendered":"\n

If you bill clients based on the time you spend, here\u2019s a pop quiz: which projects make the most money? Or even more importantly: which projects aren\u2019t <\/em>profitable? If you don\u2019t know the answer to these questions, it\u2019s time to start thinking about project profitability<\/strong>, a measurement of revenue billed versus time and cost expended.<\/p>\n\n\n\n

Note that you’ll find additional tutorials, webinars, and more on Beebole’s video resource page<\/a>.<\/p>\n\n\n\n

In addition to this written tutorial, you can also watch the recorded screencast on YouTube<\/a>. <\/p>\n\n\n\n

In this tutorial, you\u2019ll learn how to calculate project profitability<\/strong> in Excel, using time tracking data from your employees. That means that you\u2019ll synthesize three key pieces of information – the time spent, the costs of delivering the product, and the revenue you bill – to understand your profitability.<\/p>\n\n\n\n

\"Using<\/figure>\n\n\n\n

After you follow this tutorial, you\u2019ll have an easy-to-analyze model to analyze project profitability in Microsoft Excel. With your finished project model, you can ensure that every project is profitable – and optimize your rates if they aren\u2019t.<\/p>\n\n\n\n

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It certainly allows us to quickly assess company performance, typically on a weekly basis. This helps us make timely operational decisions at the project level, such as adjusting teams assignments to boost profitability or bringing in more qualified (and perhaps more expensive) team members when the budget allows. It’s an excellent tool for managing our resource mix.<\/span><\/div>\n
\n Dmitri Savitski , \n Solutions expert at InDataLabs\t <\/span>\n <\/div>\n <\/div>\n <\/div>\n\n\n\n

What is project profitability analysis? <\/h2>\n\n\n\n

Let’s have a look at project profitability analysis<\/strong> and how it’s related to project cost management.<\/p>\n\n\n\n

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What is project profitability analysis?<\/h2>\n <\/div>\n
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Project profitability analysis<\/strong>\u00a0is an evaluation of the anticipated or actual profits generated from a project. It involves examining revenues, costs, and other factors to determine whether the project delivers adequate financial returns.<\/p>\n <\/div>\n <\/div>\n<\/div>\n\n\n

Project profitability analysis and project cost management are closely intertwined in project management, as they both directly impact a project’s financial health.<\/p>\n\n\n\n

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What is project cost management?<\/h2>\n <\/div>\n
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Project cost management<\/strong> involves planning, estimating, budgeting, and controlling costs so that the project can be completed within an approved budget. It focuses on effective allocation and control of resources to avoid cost overruns<\/a> and ensure that every dollar spent contributes to the project’s objectives. It also involves budget vs actuals analysis<\/a> to track cost performance, identify variances, and implement corrective actions to keep costs within budget.<\/p>\n <\/div>\n <\/div>\n<\/div>\n\n\n

The relationship between these two is that successful cost management can lead to better profitability<\/strong>. By effectively estimating and controlling project costs<\/a>, managers can minimize unnecessary expenditures, reducing the cost base against which profitability is measured.<\/p>\n\n\n\n

On the other hand, profitability analysis can inform cost management<\/strong>. By understanding which activities generate the most profit, project managers can make informed decisions on where to allocate or cut resources. Thus, combining robust cost management practices with insightful profitability analysis can lead to better financial performance and more successful projects.<\/p>\n\n\n\n\n \n \n <\/svg>\n\n \n \n <\/svg>\n\n

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If you\u2019re not tracking profitability like Rancho BioSciences, you\u2019re probably losing money.<\/strong> By ditching spreadsheets, they gained real-time visibility into 100+ active projects\u2014tracking hours, costs, and margins with total accuracy.<\/p>\n

With Beebole, they:
\n\ud83d\ude80Catch overruns before profits disappear
\n\ud83d\udccaInstantly compare actual vs. budgeted costs
\n\u2705Eliminate invoice disputes with airtight data
\n\ud83d\udd0eGive leadership the clarity to protect margins<\/p>\n <\/div>\n\n \n Read the case study\n \n \n \n <\/svg>\n <\/a>\n <\/div>\n<\/div>\n\n\n

What are the 4 measures of project profitability?<\/h2>\n\n\n\n

Project profitability is often<\/em> evaluated using four primary measures:<\/p>\n\n\n\n

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  1. Net profit margin<\/strong>: This is the percentage of profit a project makes after all costs and expenses are subtracted from the revenue. It gives a clear idea of the overall profitability of the project after accounting for all costs, including direct and indirect costs, overheads, taxes, and more.<\/li>\n\n\n\n
  2. Return on investment (ROI)<\/strong>: This metric evaluates the profitability of a project in relation to its total cost. It’s calculated by subtracting the cost of the project from the net profit, then dividing the result by the cost of the project. A higher ROI implies a more profitable project.<\/li>\n\n\n\n
  3. Payback period<\/strong>: This refers to the time it takes for the project to recoup its initial investment. It’s a critical measure for cash-flow sensitive businesses or projects with high upfront costs.<\/li>\n\n\n\n
  4. Net present value (NPV)<\/strong>: NPV is a measure that evaluates a project’s profitability by considering the time value of money. It compares the present value of cash inflows with the present value of cash outflows. If the NPV is positive, the project is considered profitable as the present value of its benefits exceeds the present value of its costs.<\/li>\n<\/ol>\n\n\n\n

    All these measures provide valuable insights into a project’s profitability, but none should be used in isolation. A combination of these measures can give a holistic view of a project’s financial viability.<\/p>\n\n\n

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    Simplify Project Profitability Analysis<\/h4>\n

    Better than sheets and Excel: Run effortless project profitability analysis with Beebole.<\/p>\n

    \n Book a Call<\/a>\n <\/div>\n <\/div>\n<\/div>\n\n\n

    Project profitability analysis: The resources you need<\/h2>\n\n\n\n

    Before we jump in, make sure to download the finished project profitability dashboard to help you better follow each step below.<\/p>\n\n\n

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    \n\t\t\t\t\n\t\t\t<\/div>\n\t\t\t
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    FREE EXCEL DASHBOARD<\/div><\/div>\n\t\t\t\t
    Get the finished project profitability dashboard here, and follow the tutorial below.<\/div>\n \t\t\t\t\t\t\t\t\t
    \n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\tGet my copy! <\/a>\n <\/div>\n\t\t\t\t\t\t\t<\/div>\n\t\t<\/div>\n <\/div>\n<\/div>\n\n\n

    The fastest alternative: Choose a tool that does it for you<\/h2>\n\n\n\n

    While knowing how to calculate project profitability in Excel is great, it’s even better when a tool is automated to do all of the heavy lifting for you. With Beebole’s incredibly easy-to-customize settings, all you need to do is define your billing rates<\/a> and costs in order to run your very own project profitability report,<\/svg><\/span><\/a> like the one shown below. No spreadsheets necessary. Of course, if you’d like to amp things up and analyze your timesheet data in Excel, our Excel add-in<\/a> makes that an absolute breeze, too.<\/p>\n\n\n\n
    \"Beebole<\/a>

    Beebole’s powerful reporting functionality in action.<\/svg><\/span><\/a><\/figcaption><\/figure>\n\n\n\n

    Capture your time tracking data<\/h2>\n\n\n\n

    If you’re not using a time management suite like Beebole<\/svg><\/span><\/a>, you’ll need to rely on spreadsheets to gather and organize this vital information. The first data we need to consider is project time tracking<\/svg><\/span><\/a> data. Remember, with Beebole you can automatically capture and organize this information right inside the tool itself. We\u2019ll use time data for two main purposes:<\/p>\n\n\n\n