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3 min 21 sec
0:00
Did it make money?
0:22
Direct costs
0:42
Costing Maya's time
1:14
Overheads
1:37
Two projects compared
2:03
Project profit in Beeswax
2:33
Recap and quiz
Accounting 101
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Costs and timing
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Episode 14
Did the Project Make Money?
(Direct costs, overheads, and the honest answer.)
The Fern and Fold brand refresh is done and paid, but did it make money? Add up direct costs and Maya's time at cost, and see why busy isn't always profitable.
project profit
direct costs
overheads
cost rates
Transcript
0:00
The Fern and Fold brand refresh is done. Launched. Invoiced. Paid. The client loves it. Maya loves it. Her mum has it as her phone background.
0:12
But there's one question left, and it's the one that actually matters. Did the project make any money?
0:22
Start with the costs that only exist because of this project. Accountants call them direct costs.
0:28
A freelance illustrator, nine hundred. Stock photos, three hundred. That's twelve hundred of expenses on the job.
0:36
And the big one, which people forget. Maya's own time. Eighty hours.
0:42
To cost her time, Maya uses a cost rate. Not what she charges a client. What an hour of her time costs the business. She's set hers at forty-five an hour.
0:53
Eighty hours at forty-five is three thousand six hundred.
0:57
So. Eight thousand invoiced. Less twelve hundred of expenses. Less three thousand six hundred of time. Project profit: three thousand two hundred. That's a forty percent margin. Respectable. Maya does a slightly bigger dance this time.
1:14
Now, what about rent, software and insurance? Those are overheads. They exist whether or not Fern and Fold ever called.
1:22
They don't belong to any one project. Instead, every project's profit is a contribution towards them. Maya's overheads are fifteen hundred a month. So the projects, between them, need to cover that first, before the business makes a penny.
1:37
Here's why this matters. Same month, the Corner Cafe menu. Twenty-two hundred invoiced. Forty hours of Maya's time. Three hundred of printing.
1:47
Twenty-two hundred, less three hundred, less eighteen hundred of time. Profit: one hundred. For a whole week's work.
1:56
It was busy. It was cheerful. And it was almost entirely pointless. Busy is not the same as profitable.
2:03
In Beeswax, every project has its own profit and loss. Approved quotes on one side, finalised invoices on the other.
2:12
Then it takes off the expenses on the project, and the time logged, at each person's cost rate. From payroll, a rate you set, or a product's cost.
2:22
And at the bottom, the answer. Net profit. Or, if things went badly, net loss, in red. Pulsing slightly. It's trying to tell you something.
2:33
So. Direct costs belong to the project, including your time. Overheads belong to the business. Project profit is what each job contributes. And busy isn't profitable, unless the numbers say so.
2:47
Quick one. A project invoices five thousand. Expenses, six hundred. Fifty hours of time, at a cost rate of forty. What's the project profit?
2:57
Have a think.
3:01
Two thousand four hundred. Five thousand, less six hundred, less two thousand of time. A forty-eight percent margin.
3:10
Maya would take that. With a small dance.
3:13
Next time: the stock photos Maya bought for a client. And how to make sure the client pays for them, not her.