What is a project margin?

This metric is widely used across industries to assess the efficiency and viability of individual projects. By understanding the project margin, businesses can make informed decisions about pricing, resource allocation, and overall project management strategies.

A project margin in project management is important because it directly reflects its profitability and financial success. This metric helps businesses determine whether a project is worth pursuing and provides insights into areas where costs can be reduced or efficiency improved. Project margin analysis provides the following benefits to a business:

• Improved financial planning
• Better resource management
• Highlighted trends in project performance

The prime goal of the project margin metrics is to ensure projects contribute positively to the organization's bottom line. The signals this metric provides allow managers to adjust strategies for future projects. Ultimately, understanding project margin ensures that businesses stay competitive while focusing on delivering value.

A good project margin depends on the industry, the type of project, and the organization's financial goals. A good project margin in software development, for example, typically ranges between 30-60%. Factors that affect project margin include:

• Project complexity
• Team expertise
• Pricing model used
• Competitive landscape

Higher margins are often achievable in custom software projects or subscription-based software as a service (SaaS) models, where economies of scale and recurring revenue play a role. For consulting or development firms, margins may lean toward the lower end if projects involve significant labor costs or highly specialized expertise. Maintaining a healthy project margin ensures profitability while allowing for investment in innovation and team development.

A project's margin can be calculated as either a monetary amount or a percentage. To calculate it as a percentage, use the formula:  

For example, if a project generates $100,000 in revenue and incurs $70,000 in costs, the margin is:

[(100,000 - 70,000) / 100,000] × 100 = 30%

This calculation provides insight into how much revenue is retained as profit after covering all project expenses, helping businesses assess financial performance effectively.

Enji collects data from across project activities, including time from worklogs, commits, merge and pull requests, cycle times, etc., to accurately calculate a project's margin. The data comes in real time to reflect how changes to a project's resources and other factors can affect the margin. Thanks to Enji, leaders and managers can adjust workflows and processes to improve the margin as the project progresses. Likewise, Enji provides a transparent view of the project that allows for efficient resource management and allocation to ensure healthy project margins.