What is Profitability and Margin?
This feature is designed to help you understand the Gross Margin of your AGI (Agency Gross Income) to understand if you're setting yourself up for success on your newest project scope.
It allows you to set hourly cost rates for your services and model how those costs will stack up against your fees, calculating your Costs, Profits and Margin %
How to Use Profit & Margin
Understanding Cost Rates:
In order to see your profit margin, you'll need to have a cost rate associated to the services in your estimate. These cost rates are calculated as a cost-per-hour for that service.
If you've selected comparable projects that have cost data associated to them, you should see a cost rate automatically calculated on your services. These will be a factor of the hourly cost rates associated to each employee that logged time against that service in Harvest during that project.
If no cost data is included on your comparable projects, you'll see your cost rate set to $0.
Cost rates in the overview table:
Cost rates on Service Cards:
Adding & Modifying Cost-Rates
If you'd like to add or change the cost rate associated to a service card, simply click on the cost rate at the bottom of the service card to expose the input menu.
To modify the cost rate, click on the "unlink" button which will allow you to override the value that was pulled from your Harvest data.
Then simply input the value you'd like to set your cost rate to:
This will set the cost rate for that service to the new value and re-calculate your margin automatically going forward as you adjust the number of hours for that service.
Updating Cost Rates in Harvest
If you're not currently using cost rates in Harvest, you can use this feature by navigating to Team > Edit > Basic Info > Cost Rate
It's important to note that adding or editing cost-rates in Harvest will not automatically update the cost rates on past projects in Harvest. For old projects that don't contain any cost-rates, you'll have to manually input those values in Parakeeto, or contact Harvest Support for help getting your historical data modified.
What is a Good Margin Target?
Our rule of thumb is to aim for a Gross Margin of 50-70% or more on your client projects.
You can read our full article on project and agency profitability here.