Teams & projects
Project budget calculator
Enter the estimated hours, your blended hourly rate, direct expenses and a contingency buffer to build a project budget and a price at the margin you want.
A blended rate is one average rate across everyone on the project; contingency is a buffer for scope and estimate risk.
How the budget is built
A project budget starts from effort. Multiply the estimated hours by a blended hourly rate, a single average across everyone who will work on it, to get the labour cost: 200 hours at $85 is $17,000. Add direct expenses such as software, travel or subcontractors, say $2,000, for a base cost of $19,000. Then add a contingency buffer as a percentage of that base: 15% is $2,850, giving a total planned cost of $21,850.
Cost is what the work consumes; price is what you charge. To price at a target margin, divide the cost by one minus the margin, because margin is a share of the price, not the cost: $21,850 ÷ (1 − 0.20) = $27,313. That leaves $5,463 of profit, exactly 20% of the price. Marking the cost up by 20% instead would undershoot, since 20% of cost is smaller than 20% of price.
| Item | Amount |
|---|---|
| Labour (200 h × $85) | $17,000 |
| Direct expenses | $2,000 |
| Subtotal | $19,000 |
| Contingency (15%) | $2,850 |
| Total cost | $21,850 |
Setting the buffer and the price
Contingency covers estimate error and small scope changes, not a licence to pad. For well-understood work a 10–15% buffer is common; for vague or research-heavy projects, 25% or more is honest rather than pessimistic. Keep contingency visible as its own line so clients and sponsors can see it is a deliberate risk allowance, not hidden slack, and so you can track how much of it you actually use across projects.
The blended rate hides a lot, so make sure it reflects the real mix of senior and junior time for this project, not a company-wide average. Remember the target-margin price is a floor set by your costs; the market, the client's budget and the value delivered may support more. If the numbers only work at a thin margin, revisit the hours estimate before discounting the rate, because optimistic hours are the most common reason projects run over budget.
Frequently asked questions
What is a blended hourly rate?
It is one average rate charged across every role on a project instead of billing each person's rate separately. It simplifies quoting, but it must reflect the actual mix of senior and junior hours the project needs.
How much contingency should a project have?
Around 10–15% for well-scoped work and 20–30% for uncertain or research-heavy projects. Keep it as a visible line so it reads as a planned risk allowance rather than hidden padding.
Why divide by one minus the margin to set the price?
Because margin is measured against the price, not the cost. Dividing cost by (1 − margin) gives a price where the profit is exactly that margin; simply adding the margin to cost falls short.