When should you calculate your costs?
Revenue alone does not tell you what each activity brings in.
- Revenue is up, margin is not
You are working more without the bottom line following.
- Your prices are not based on your costs
You set your prices without knowing what each service costs you.
- An activity raises questions
A service or project takes a lot of time: you want to know what it really brings in.
How we calculate your costs and profitability.
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Define the scope
Service, project or activity: we agree with you on what will be analyzed.
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Identify the costs
The time, resources and expenses the activity requires, directly or indirectly.
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Allocate explicitly
The choices for allocating indirect costs are written down, so that comparisons remain useful.
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Read the margins
Costs and revenue side by side: which activities weigh on the margin, which deserve your attention.
What the analysis gives you, and its limits.
You get
- The cost of your services or projects
- Their margin, activity by activity
- The costs that weigh most on your results
- Benchmarks to think about your prices and priorities
Good to know
- The analysis informs the price without setting it: your offering and your market matter too.
- The results depend on the chosen scope and allocation.
Questions about cost and profitability
What is cost?
Cost represents the costs attributed to a service, a product or a project, according to the chosen scope of analysis. It helps you understand the resources needed to deliver it.
How is cost calculated?
You add up the direct costs of a service or project, such as time spent, materials or subcontracting, then a share of indirect costs allocated according to a chosen, written allocation key. The result depends on the chosen scope.
What is the break-even point?
It is the level of revenue at which income covers all costs, both fixed and variable. It is calculated by dividing fixed costs by the contribution margin ratio.
Why analyze profitability if revenue is growing?
Growing revenue can come with more time spent, more resources used or more expenses. Revenue alone is not enough to explain margins.
Does this analysis automatically set my prices?
It provides a cost and margin benchmark. Choosing a price also takes into account your offering and your market. The analysis informs this decision without determining, on its own, the price to set.
Go further with your numbers.
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