Managed margin is the share of a project’s revenue left after the costs included in its configured project model, including its overhead share. It is this product’s configured management metric, not a standardized accounting term. Managed Margin is also project margin management software for consulting and professional-services teams: it prices work to a target managed margin, keeps the agreed baseline, and compares actual and forecast margin during delivery.
In plain words
Managed margin is the share of a project’s revenue left after the costs your project model includes, including a share of overhead. It is not profit for the firm: it is a consistent way to compare projects and to set a target when you price them.
Who this helps: Project managers, finance analysts and sales managers who use Managed Margin or want a clear margin definition.
Questions this guide answers:
- What is managed margin?
- How is managed margin different from gross margin?
- What is project margin management software?
Margin words: gross, contribution, managed margin, budget, forecast and the roles named here are defined once in the margin vocabulary.
What does Managed Margin do?
It follows the work in the order a services firm experiences it:
- Set up. Finance records resource profiles with hourly planning rates by designation, seniority, specialization and location, plus the cost rules and margin definitions every estimate uses. Profiles can be imported from a spreadsheet.
- Price. A project holds one or more service orders, each fixed price or time and materials. Pre-sales either plans the work stage by stage and works the price out from a target Managed Margin (an estimation strategy), or checks the margin a known price leaves (a pricing strategy). It compares the options and finalizes one as the approved pricing baseline, with its planning rates kept as a snapshot. See pricing to a target margin.
- Hand over. Once the work is won, handover records the client’s purchase order, signed agreement or an approved exception, and delivery accepts it.
- Deliver and review. Delivery fills the planned seats with named people, records weekly timesheets and expenses, and applies approved change requests without overwriting the baseline. Project financials show the margin as the work runs.
See how it works, project pricing software and project margin tracking software for each step.
Follow one fee through the model, step by step
A fixed-price service order is sold for USD 80,000. The people and direct costs needed to deliver it come to USD 48,000. The firm also pays sales commission of 4% of the fee and assigns each project an overhead share of 10% of the fee.
| Step | Calculation | Amount | Margin % |
|---|---|---|---|
| Fee | USD 80,000 | ||
| Gross delivery margin | 80,000 − 48,000 | USD 32,000 | 40% |
| Contribution | 32,000 − commission (4% × 80,000 = 3,200) | USD 28,800 | 36% |
| Managed margin | 28,800 − overhead share (10% × 80,000 = 8,000) | USD 20,800 | 26% |
Managed margin is the last line: the margin after all the costs the project model manages, including the overhead share. It is not the firm's net profit, which also depends on costs and taxes outside any single project. When someone quotes a margin, ask which line they mean.
Which margin figures does Managed Margin report?
A margin amount is money left after the included costs; margin percentage is that amount divided by revenue, multiplied by 100. Cost & Margin Rules defines the project categories included in each layer. The labels below describe this example’s configuration, not a universal accounting classification.
Margin amounts and percentages
Gross delivery margin amount = revenue − labor − direct delivery costs.
Contribution amount in this configuration = gross delivery margin amount − the additional project costs assigned to that layer.
Managed Margin amount = contribution amount − the configured organization overhead share.
Each margin percentage = its margin amount / revenue × 100, for positive revenue.
Markup percentage = Managed Margin amount / total included cost × 100, for positive total cost.
Markup divides by cost rather than revenue, so it can be negative while a margin that leaves out some costs is still positive. Net or operating margin is not calculated: it needs company-wide costs such as depreciation, interest and tax, which are not recorded at project level. For the general definitions, see gross vs contribution vs net margin.
Try the free managed margin calculator
Enter your costs, commission and overhead, and the managed margin calculator shows the price that earns your target margin, the gross, contribution and managed margin side by side, and what a discount does to them. Your figures stay in your browser.
Worked example: one pricing strategy, three margins
Assume a fixed-price service order quoted at USD 200,000. Planned labor at the planning rates is USD 100,000 and direct delivery costs are USD 10,000. The workspace applies 5% sales commission and a USD 12,000 overhead share. All figures are illustrative.
| Layer | Calculation | Amount | % of revenue |
|---|---|---|---|
| Revenue | Quoted price | USD 200,000 | 100.00% |
| Gross delivery margin | 200,000 - 100,000 - 10,000 | USD 90,000 | 45.00% |
| Contribution margin | 90,000 - 10,000 commission | USD 80,000 | 40.00% |
| Managed Margin (after all costs) | 80,000 - 12,000 overhead share | USD 68,000 | 34.00% |
| Markup | 68,000 / 132,000 total cost | 51.52% of cost |
The eleven-point gap between 45% and 34% comes entirely from which costs each layer includes, not from delivery performance. Always quote the layer with the percentage.
What should a manager conclude from the three-margin example?
The example’s USD 90,000 gross delivery contribution funds the variable costs and overhead still to be deducted. It is not the amount the firm can treat as profit after all its expenses. Contribution of USD 80,000 reflects the added commission; Managed Margin of USD 68,000 also includes the stated overhead share. The layers let a reviewer locate the difference instead of treating three percentages as competing answers.
A higher gross margin can still leave a weak Managed Margin if variable project costs or overhead are substantial. Conversely, two projects with the same after-cost percentage may consume different scarce skills or create different delivery risk. Use the financial result alongside the resource plan and acceptance evidence.
If the USD 200,000 fee falls to USD 180,000 with labor and direct cost unchanged, commission becomes USD 9,000 under the 5% rule. Keeping the USD 12,000 fixed overhead amount, Managed Margin is 180,000 − 100,000 − 10,000 − 9,000 − 12,000 = USD 49,000, or 27.22%. The after-cost margin falls from 34% even though the work is unchanged. The fixed overhead assumption must remain explicit; a revenue-based allocation would produce another result.
How can you reproduce and use the calculation?
Create the fixed-price service order and a strategy with USD 200,000 quoted fee. Build the stage and role plan that produces the USD 100,000 labor total using approved planning rates. Add the USD 10,000 direct-cost category, 5% revenue commission and USD 12,000 overhead under their correct bases. Confirm that Cost & Margin Rules includes the intended categories in each margin definition.
The result should reconcile to 45% gross delivery margin, 40% contribution and 34% Managed Margin in this illustrative configuration. Create another quoted-price strategy at USD 180,000 to compare the concession. Once the offer and staffing basis are approved, finalize one option, complete handover and compare delivery with the frozen baseline.
During delivery, actual-to-date and forecast-at-completion views require their own inputs. Approved time, applicable personal cost, posted expenses, recognized fixed-price revenue and remaining allocations affect those views. A forecast is arithmetic on recorded and planned work, not a promise that the project will finish at that margin. Investigate missing or stale inputs before acting on the difference.
The configured project model does not necessarily contain every company expense. Finance still needs a full accounting reconciliation for net profit and statutory reporting. This is why a project Managed Margin and company net margin should remain distinct educational concepts.
Baseline, actual to date and forecast at completion
During delivery, project financials show the same margin three ways for each service order. The baseline is what was sold, frozen when the strategy was finalized. Actual to date uses approved time, posted costs and, for fixed price, the revenue finance has recognized. The forecast at completion adds the remaining allocations at each person’s cost and the expected costs still to come. Variance is shown in points, with the drivers in money.
Who sees which figures follows role permissions: planning figures, project financials and individual employee cost are controlled separately. Results roll up by project and business unit; see project margin rollups.
What Managed Margin is not
It is not an accounting, invoicing or payroll system. It does not track cash, receivables or invoices, calculate net or operating margin, or import timesheets; people and pay can be synced from BambooHR, and programs can use API keys. The forecast is a calculation from recorded data and the remaining plan, not an AI prediction, and it is only as good as those inputs.
It also does not set how contract revenue is recognized for statutory reporting. IFRS 15, where applicable, governs that; fixed-price recognized revenue in Managed Margin is entered by finance for internal project control.
For the broader operating context, start with the professional-services project margin guide. For the base calculation, see how to calculate project margin.
- Project Margin Management Software: How to Evaluate It
- How a Discount Affects Project Margin: Formula and Example
- Replace a Project Margin Spreadsheet: When and How
- How to Share Project Margin With Sales Without Showing Salaries
At the office: Olivia explains three margins
An illustrative story with invented figures, to show how the idea works in a real office.
Olivia, a finance analyst, explains a USD 100,000 project. Direct delivery cost is USD 62,000, so gross margin is USD 38,000, which is 38%. After a 12% overhead share the managed margin is 26%.
A manager asks which one is real. Olivia says each answers a different question. Gross margin shows how efficiently the team delivered. Managed margin shows what is left after the costs the firm decided to manage on the project.
She writes both next to each other in the report, with the cost list, so the manager can see what is in each.
Who sets and uses managed margin?
| Stage | Owner | Checkpoint |
|---|---|---|
| Set the cost rules | Finance | Which costs are in each margin layer is written down and dated |
| Price | Presales | The target is set on managed margin, not gross margin |
| Review | Project manager and finance | Gross, contribution and managed margin are shown side by side and labelled |
| Report | Leadership | Managed margin is not presented as net profit |
Frequently asked questions
How does managed margin differ from gross margin?
It also includes the overhead share and other managed costs, so it is lower than gross when those exist.
Is managed margin the same as net profit?
No. It is a project-level management view based on a configured cost model.
What does managed margin mean?
Managed margin is the margin left after all the costs your project model manages: delivery cost, costs that rise with the deal (like commission) and the share of overhead the firm assigns to the project. It is a project view, not company net profit.
Continue the sequence: guides to read next
- Project Margin Management: What It Is and How to Do It: the project margin management cycle from price to review
- Contribution Margin vs Net Margin vs Gross Margin: how it relates to other margins
- How to Price a Project to a Target Margin: Formula and Example: pricing to a target managed margin
- Project Margin Rollups: Formula & Example: rolling it up
- Planned vs Actual Project Margin: tracking it through delivery
- How to Calculate Project Margin (Formula + Example): the project margin calculation, step by step
Sources and methodology
- IFRS Foundation, IFRS 15 Revenue from Contracts with Customers. Used only to distinguish internal project margin from statutory revenue recognition.
- UK Infrastructure and Projects Authority, Cost Estimating Guidance. Used for transparent assumptions, exclusions, ownership, and consistent breakdowns.
- The workflow, margin layers and delivery figures were reviewed against the current Managed Margin application on 12 October 2026. The example is synthetic.