Are Your Projects Actually Profitable?

Here's a scenario that plays out at agencies and consultancies every day: you close a project, the client pays the invoice, and the number on the check looks great. But when you account for the actual hours your team spent — including the senior developer who was pulled in for two weeks of unplanned debugging — you barely broke even. Or worse, you lost money.

Most teams don't have visibility into this until it's too late. They track revenue (invoiced amounts) but not cost (what they pay their team for those hours). The gap between these two numbers is your actual profit margin, and without tracking both sides, you're flying blind.

TRCR's profitability system is built to give you this visibility in real time. Here's how it works.

The Two-Rate System

At the core of profitability tracking are two rates:

• Client rate — what you charge the client per hour. This is the number that appears on invoices.
• Worker rate — what it costs you per hour for a team member to work. This is your internal cost, based on salary, benefits, overhead, or subcontractor rates.

These rates can be set at three levels, each overriding the one above:

1. Organization level — a default worker rate and client rate for each team member, set in the member management settings.
2. Project level — per-member rates specific to a project. When a senior developer works on a premium project, their client rate might be higher than the org default.
3. Time entry level — an hourly rate override on individual entries, for exceptions.

This hierarchy gives you the flexibility to handle real-world pricing: different rates for different clients, different rates for different team members, and the ability to make one-off adjustments without changing defaults.

A Concrete Example

Let's say you run a 5-person agency. Here's a simplified view of your team and rates:

Team Member     Worker Rate    Client Rate
─────────────   ───────────    ───────────
Sarah (Senior)    $85/hr         $175/hr
Mike (Mid)        $55/hr         $140/hr
Lisa (Junior)     $35/hr         $100/hr
Tom (Designer)    $65/hr         $150/hr
Anna (PM)         $60/hr         $120/hr

Now imagine Project Alpha for Acme Corp. Over the course of a month, your team logs the following:

Team Member     Hours    Revenue         Cost
─────────────   ─────    ───────────     ──────────
Sarah            40      $7,000          $3,400
Mike             80      $11,200         $4,400
Lisa             60      $6,000          $2,100
Tom              20      $3,000          $1,300
Anna             15      $1,800          $900
─────────────   ─────    ───────────     ──────────
Total           215      $29,000         $12,100

Gross Margin: $16,900 (58.3%)

That 58.3% margin looks healthy. But now look at Project Beta for StartupXYZ, where scope creep pulled in your senior developer for twice the estimated hours:

Team Member     Hours    Revenue         Cost
─────────────   ─────    ───────────     ──────────
Sarah            80      $14,000         $6,800
Mike             20      $2,800          $1,100
Lisa             10      $1,000          $350
─────────────   ─────    ───────────     ──────────
Total           110      $17,800         $8,250

Gross Margin: $9,550 (53.7%)

Still profitable — but notice that Sarah logged 80 hours (twice the planned 40). If this project had been scoped with mostly junior and mid-level work, the margin would have been much higher. The heavy senior involvement cut the margin by nearly 10 percentage points.

Without the two-rate system, you'd see $17,800 in revenue and call it a win. With it, you see that you paid $8,250 in labor — and you can identify why the margin was lower than expected.

The Profitability Report

TRCR's Profitability report aggregates this data automatically. It shows:

• Revenue by project — total client-rate hours
• Cost by project — total worker-rate hours
• Gross margin — revenue minus cost, as both absolute and percentage
• Per-member breakdown — who contributed what to each project

You can filter by date range, client, project, and team member. This lets you answer questions like:

• Which clients are most profitable? Which are margin traps?
• Which team members generate the highest margin? (Hint: it's not always the most expensive ones)
• How has our margin trended over the last 6 months?
• Are fixed-price projects more or less profitable than hourly ones?

Common Patterns We See

The “Discount Client” Trap

Agencies often discount their rates for early clients or long-term relationships. “We charge Acme only $100/hr instead of our usual $150 — but they give us steady work.” The profitability report often reveals that these discounted clients have margins in the 20-30% range, while full-rate clients are at 55-60%. The “steady work” is actually occupying capacity that could be used for higher-margin projects.

Senior Developer Creep

Projects get scoped assuming mid-level engineers, but technical challenges pull in senior (expensive) team members. The project still looks profitable because the client rate is high — but the worker cost has doubled. The profitability report catches this instantly because it tracks cost at the individual member level.

PM Overhead Blindness

Project managers, account managers, and designers often log small amounts of time across many projects. Each project only sees 5-10 hours of PM time, so it seems negligible. But when you aggregate it, PM overhead might represent 15-20% of your total cost. The profitability report makes this visible.

Setting Up Rates in TRCR

Here's the practical setup, which takes about 5 minutes:

1. Organization settings → Members. Set a default worker rate and client rate for each team member. These are your “base” rates.
2. Project settings → Members. Override rates for specific projects where the pricing differs. For example, a premium client might pay $200/hr for your senior developer instead of the default $175.
3. Track time as usual. The rates cascade automatically: time entry rate > project member rate > org member rate.
4. Check the Profitability report. Instantly see margin by project, client, and team member.

Beyond Project-Level: Client Profitability

The report also aggregates at the client level. A client might have some projects at 60% margin and others at 30%. The client-level view gives you the blended number, which is what matters for relationship decisions: should we raise rates with this client? Should we invest more in this relationship or shift focus elsewhere?

Making It Actionable

Data without action is just noise. Here's how we recommend using profitability data:

• Monthly review. Check the profitability report at the end of each month. Identify any project below your target margin and investigate why.
• Pricing adjustments. If a client's blended margin is consistently below target, it's time for a rate conversation.
• Staffing decisions. If senior developers are being pulled into work that juniors could handle, the profitability report will show it. Invest in mentoring so you can staff projects more efficiently.
• Scope discipline. When you see that unplanned hours killed a project's margin, it strengthens the case for change orders and scope management.

Start Tracking Both Sides

If you're currently only tracking revenue (client billing), you're seeing half the picture. Set up worker rates in TRCR, let the data accumulate for a month, and then look at your profitability report. We guarantee you'll be surprised by at least one project.