How to price fixed-fee projects confidently
Quoting a fixed-fee project is risky. If your team takes longer than expected, your profit margin shrinks—or disappears entirely. Accurately quoting requires understanding your direct labor costs, buffering for overhead and contingencies, and calculating margin correctly.
Direct Labor vs Adjusted Cost
The base of any quote is the sum of estimated hours multiplied by each team member's internal cost rate. This is your Direct Labor Cost. Projects rarely go exactly to plan, so a Delivery Contingency can account for scope risk, unplanned coordination, or client delays. If your internal rates are already fully burdened, avoid adding the same overhead here again.
Applying Target Margin
When turning your cost into a quote, apply a target margin, not a markup. To achieve a 35% profit margin, you don't add 35% to the cost. Instead, you divide the cost by (1 - 0.35). This ensures that when the project concludes, the remaining profit mathematically equals 35% of the total revenue.
TrueClock simplifies this lifecycle. After you set your project budget and assign staff, TrueClock tracks real-time progress against these estimates, alerting you if labor costs threaten to consume your target profit before the project is done.