Free tool
Managed margin calculator
Work out the price that earns your target margin after commission and overhead, or enter a quoted price to see what it really leaves. Gross, contribution and managed margin sit side by side, with a discount test. Your figures stay in your browser and are not sent to us.
Enter your figures to see the result.
Results use only the figures you enter and are an illustration, not financial or legal advice. Your figures stay in your browser and are not sent to us. The page address changes only if you press Copy link, which builds a link containing your inputs: share it only if you are happy to share those figures.
The three margins the calculator shows
The same project has a different margin depending on which costs you subtract. The calculator shows all three, so you can see where each cost lands.
| Layer | What is subtracted from the price |
|---|---|
| Gross delivery margin | Delivery cost: labor and other direct costs |
| Contribution | Gross margin minus costs that rise with the price, such as sales commission |
| Managed margin | Contribution minus the overhead share the project is asked to carry: the margin after all the costs the model manages |
Managed margin is a project view. It is not the firm’s net profit, which also depends on costs and taxes outside any single project.
How the price is calculated
Commission and an overhead share of the price grow when the price grows, so they sit in the divisor, not in the cost. Costs that do not depend on the price form the top of the fraction.
Price = costs not tied to the price ÷ (1 − commission − overhead share of price − target margin)
If overhead is a share of labor cost instead, it is added to the costs on top of the fraction and removed from the divisor. The calculator handles either, so choose the base your finance policy defines.
Worked example
A fixed-price project has USD 36,000 of labor and USD 4,000 of other direct costs. Commission is 5% of the price, overhead is 10% of the price and the target managed margin is 25%.
| Step | Calculation | Result |
|---|---|---|
| Price | 40,000 ÷ (1 − 0.05 − 0.10 − 0.25) = 40,000 ÷ 0.60 | USD 66,666.67 |
| Gross delivery margin | 66,666.67 − 40,000 | USD 26,666.67 (40%) |
| Contribution | 26,666.67 − 5% commission (3,333.33) | USD 23,333.33 (35%) |
| Managed margin | 23,333.33 − 10% overhead (6,666.67) | USD 16,666.67 (25%) |
Adding 25% to the USD 40,000 of cost instead gives a price of USD 50,000, and the managed margin is only 5%. That is the markup mistake the calculator is built to prevent.
Questions about this calculator.
Short answers, in plain words.
What is managed margin?
The margin left after all the costs a project model manages: delivery cost, costs that rise with the price (like commission) and the overhead share assigned to the project. It is a project measure, not company net profit.
Why not just add my target margin to the cost?
Margin is a share of the price, and markup is a share of the cost. Adding 25% to cost gives a lower margin, and commission and overhead that are a share of the price make the gap bigger. Dividing by one minus the shares gives the price that really earns the target.
What is the difference between gross, contribution and managed margin?
Gross subtracts delivery cost. Contribution also subtracts costs that rise with the price, such as commission. Managed margin also subtracts the overhead share.
Does it matter whether overhead is a share of the price or of labor?
Yes. A share of the price grows with the price and goes in the divisor. A share of labor cost is a fixed cost for the project and is added to the cost. Use the base your finance policy defines.
Does this tool store what I enter?
No. The calculation runs in your browser and your figures are not sent to us. The page address changes only if you press Copy link, which builds a link containing your inputs. The result uses only the figures you enter and is an illustration, not financial advice.
See the margin layers on a real project
Managed Margin calculates gross, contribution and managed margin from role hours and planning rates, keeps the approved plan as the baseline, and compares it with actuals during delivery.