Many companies confuse revenue with profitability. A fully utilized team sounds like success. But at the end of the year, the balance sheet shows: The margin isn't right. Projects ran over budget, resources were misallocated and profitable customers were neglected, while unprofitable orders took up time and capacities.
Strategic profitability means thinking beyond short-term project completion. It is about systematically understanding which projects, customers and employees generate real income and how resources are managed in such a way as to generate long-term, profitable growth. For project-based companies in IT, consulting, engineering or agencies, this is the decisive lever for competitiveness.
What does strategic profitability mean?
Strategic profitability describes the ability of a company to make sustainable profitable business decisions. In contrast to the short-term profitability of individual projects, it looks at the interaction of projects, customers and employees over longer periods of time.
Definition and differentiation from short-term profitability
Short-term profitability is focused on Margin of a single project: Revenue minus costs. This is not enough as a control instrument. A project can be formally profitable but strategically damaging if it ties up resources that are missing in more lucrative assignments, or if it overburdens the team with unrealistic deadlines and jeopardizes the quality of future projects.
Strategic profitability broadens this perspective. She asks: Which customer relationships are valuable in the long term? Which Project types Do you reliably generate high margins? How must resources be distributed so that the company's overall profitability increases?
The connection between projects, customers and employees
Die Three Dimensions Are mutually dependent. A profitable project is not created in a vacuum. It requires the right employees with appropriate skill levels, realistic timelines and a customer who values quality and pays fairly. If resources are allocated incorrectly, profitability decreases across all projects.
An example:
When senior developers routinely take on tasks with hourly rates of 140 euros that junior workers could do for 75 euros, the company burns margin.
Strategic profitability actively manages this balance. It creates transparency about which resources are used where, which customers generate which margins and how decisions affect the overall result.
Significance for long-term growth
Companies with strategic profitability management are growing more stably. They can invest specifically in profitable business areas, identify unprofitable customers and build up capacity where demand is most lucrative. This reduces financial risks and increases planning security. If you understand where real income is generated, you can make well-founded decisions about pricing models, team structure, and customer acquisition.
Profitability in a Project: Where Margins Really Arise
The Project Margin is the Central Indicator of Project Profitability. However, many companies record them too late or incompletely. Margins are created through the precise interplay of several factors.
Influencing factors: hourly rates, workload, project duration
Three levers determine the profitability of a project:
Hourly rates: The billable hourly rate must cover the employee's actual costs plus overhead costs and target margin. In practice, the break-even hourly rate is often 50 to 70 percent higher than the pure salary.
Utilization: High utilization alone does not guarantee profitability. The billable workload is decisive. An employee can be busy at 90 percent, but when 30 percent of that time goes into internal reconciliations or non-billable activities, the margin drops drastically.
Project duration: Short, intensive projects often have higher margins than long-term contracts with low daily rates. At the same time, they entail higher planning risks. The optimal balance depends on the corporate strategy.
Calculate project margin
The basic formula is:
Project margin (%) = (revenue — project costs) /revenue × 100
An example: An IT project is invoiced at 80,000 euros. The actual costs are:
- Personnel costs: 45,000 euros
- External service providers: 12,000 euros
- Overheads (per rata): 8,000 euros
Total costs: 65,000 euros
Project margin: (80,000 - 65,000) /80,000 × 100 = 18.75%
That sounds solid. The question is: Is this calculation correct? Have all hours been recorded? Is rework included? Have resources been blocked that would have achieved higher margins elsewhere? Only a systematic answer to these questions Project margin analysis.
Margin analysis as a management tool
An effective margin analysis in the project is carried out continuously, not just after the project has been completed. modernism Project Controlling Systems Enable real-time monitoring of actual costs versus budget. As soon as deviations become apparent, countermeasures can be initiated: reallocate resources, negotiate scope changes with the customer or optimize internal processes.
Comparing across projects is important. Which project types achieve consistently high margins? Which customers regularly have renegotiations or scope creep, which eats up the margin? These findings flow directly into strategic planning.
Comparing customer profitability and employee profitability
Not all customers are equally profitable. Not all employees contribute equally to earnings. Measuring both is fundamental for strategic profitability.
Which projects and customers are really lucrative?
Customer profitability results from the sum of all projects with this customer, minus the total cost of support. This includes not only project costs, but also sales expenses, account management, rework and support services.
A typical pattern: Customers with small, frequent inquiries and tight budgets can be unprofitable for years, even if each individual project formally concludes positively. However, the administrative burden and fragmentation of resources negate the apparent profit.
Conversely, long-standing customers with stable framework agreements and clear requirements can be among the most profitable. Low acquisition costs, well-rehearsed workflow and little rework result in high margins.
How Staff Utilization and Skill Alignment Influence Profitability
Employee profitability measures how much contribution margin an individual employee generates. The formula:
Contribution margin per employee = invoiced turnover - direct personnel costs
Skill alignment is crucial here. A junior consultant who is invoiced for 90 euros per hour can be more profitable than a senior expert with an hourly rate of 180 euros if the latter is permanently underwhelmed or is employed in projects that do not require his high level of expertise.
The most common profitability killers when employing employees:
- Overqualification: Expensive Experts Take on Routine Tasks
- Underutilization: Employees sit between projects with no billable activity
- Bad Onboarding: New Employees Take Too Long to Become Productive
- Lack of continuing education: Teams cannot take on lucrative projects because skills are lacking
Example: Contribution margin per customer and employee
Let's look at two customers over a fiscal year:
Customer A: 12 small projects, total turnover 120,000 euros, personnel costs 85,000 euros, administrative expenses 18,000 euros. Contribution margin: 17,000 euros (14% margin)
Customer B: 3 large projects, total turnover 200,000 euros, personnel costs 110,000 euros, administrative expenses 12,000 euros. Contribution margin: 78,000 euros (39% margin)
The figures show that customer B is more than four times as profitable as customer A, although both deliver “positive” margins. Strategic profitability means knowing these differences and directing capacities specifically to high-margin customer relationships.
Capacity planning and use of resources as levers of profitability
Strategic profitability is impossible without precise capacity planning in project management. Resource bottlenecks lead to expensive overload or external FreelancersWhile other employees are underutilized at the same time.
Identify and avoid resource bottlenecks
Bottlenecks occur when demand for specific skills exceeds available capacity. The problem: They are often recognized too late. A project is confirmed, then it turns out that the only available specialist is already booked out. The result: delays, overburdened employees or expensive external help.
Early detection requires transparency about current and planned workload. Which employees are involved in which projects? Which skills will be needed in upcoming projects? Where is there a risk of overloads? It must be possible to answer these questions continuously.
Capacity planning tools and methods
Effective capacity planning is based on three elements:
- Skill matrix: An overview of which employees master which competencies at which level. This enables flexible use of resources and identifies training needs.
- Real-Time Resource Utilization: Dashboards show who is currently working on which projects, where capacities are available and where overload is imminent. Without this transparency, precise Project planning impossible.
- Scenario planning: What happens when a major project comes in? Which resources would need to be redeployed? Can smaller projects be postponed? Scenario planning prepares for various workload situations.
Increasing efficiency through transparent resource utilization
Optimizing transparency in the use of resources means minimizing idle times and making optimal use of employees. A practical example: A consulting agency with 45 employees increased its billable workload from 62 to 73 percent by resource planning systematized. This corresponds to an additional sales potential of over 400,000 euros per year, without new staff.
The key was the combination of time recording, project planning and resource dashboard. Project managers could see who was available, which skills were needed, and how project commitments affected overall workload.
Multi-project management: Strategic management across all projects
Individual project controlling falls short. Real strategic profitability is achieved in Multi-project managementwhen all projects are considered as a portfolio.
Why individual project controlling often falls short
Managing each project in isolation ignores the reality of project-based companies: resources are shared, priorities shift, and decisions in a project influence others. A profitable individual project can reduce overall profitability if it ties up critical resources and thus prevents more lucrative contracts.
Multi-project management provides an overview. Which projects are running in parallel? Where do resource conflicts arise? Which projects are currently delivering the highest margins? Prioritizations can only be made on a well-founded basis with this overall view.
Prioritize profitable projects
Not every project request should be accepted. The strategic question is: Does this project fit into our portfolio? Does it contribute to overall profitability? Or does it tie up capacities that would be better used elsewhere?
Prioritization criteria can be:
- Expected project margin
- Strategic importance of the customer
- Availability of suitable resources
- Impact on other projects
- Long-term customer relationship potential
A data-based scoring system helps to objectively evaluate these factors and avoid emotional decisions.
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Balancing workload, quality and margin
The biggest challenge in multi-project management: Maximize workload without jeopardizing quality or margin. High workload sounds good, but leads to overload when there are no buffers left for unexpected tasks, illnesses, or quality assurance.
Best practice is a target workload of 75 to 80 percent of billable time. The remaining 20 to 25 percent is not waste, but necessary space for internal development, rework and strategic planning. Companies that target 90 percent capacity utilization are paying the price in terms of declining quality, increasing fluctuation and ultimately lower profitability.
Transparency in project controlling as a success factor
Strategic profitability requires data. Without transparency in Project controlling Decisions remain gut feeling.
Real-time data and dashboards for margin monitoring
Historical data doesn't help when a project is just getting out of control. Real-time data shows where projects are before it's too late. Modern dashboards visualize actual costs versus budget, resource utilization, milestone progress and margin development.
This enables proactive management. Project managers can immediately see when a project is running over budget and can react. Management can monitor overall profitability and set strategic course before financial problems arise.
Early warning systems for budget overruns
An effective early warning system is based on thresholds. examples:
- Warning if 80 percent budget consumption and project progress is less than 60 percent
- Alert when billable hours are below schedule
- Notification when planned resource capacities are exceeded
Such systems prevent projects from quietly becoming unprofitable. They create the database for timely corrective measures.
Practical example: How transparency improves project efficiency
A IT service provider with 30 employees struggled with fluctuating margins. Projects were often over budget, but no one knew exactly why. After the introduction of an integrated system for time recording and project controlling, the reality became visible:
- 40 percent of projects had hidden rework that wasn't invoiced
- Senior developers spent 25 percent of their time on tasks that were junior level
- Three customers generated 60 percent of sales but only 30 percent of the margin
With this transparency, the company was able to take targeted action: rework was reduced, the use of resources optimized and unprofitable customer relationships were renegotiated. The result: margin increase from 14 to 22 percent within 18 months.
Actively shaping strategic profitability — best practices
Strategic profitability doesn't happen by chance. It is the result of systematic management.
Establish profitability as a management KPI
The first step: Profitability must be anchored in management as a central KPI. The goal is not sales growth alone, but profitable sales. That means:
- Regular reviews of project and customer profitability
- Profitability goals for project managers and teams
- Transparent communication about margins and their significance
- Incentive systems that reward profitable projects
Cross-functional management of sales, project management and controlling
Profitability is not just a controlling task. It is created through the interaction of sales, project management and controlling:
Sales must understand which project types and customers are profitable. Unrealistic promises for prestigious projects do more harm than good.
project management needs the freedom and data to actively manage projects. This includes difficult discussions with customers about scope changes and budgets.
controlling provides transparency and analyses patterns. Which factors influence profitability? Where do problems arise systematically?
Strategic profitability can only be achieved when these three functions work closely together.
Software solutions and automation in project controlling
Manual Excel lists don't scale. From a certain company size or project complexity, integrated systems are needed. PSA software combines time recording, project planning, resource management and controlling in one platform.
The benefits:
- Automated data collection reduces errors and effort
- Real-time data enables proactive control
- Integrated dashboards create transparency for all levels
- Historical data allows well-founded forecasts
The investment in such systems pays off quickly. A medium-sized company with 50 employees typically saves several hours of administrative work per week and at the same time increases profitability through better decisions.
How ZEP supports strategic profitability
ZEP connects as an integrated PSA solution all relevant data for strategic Project controlling in one platform. Die time recording provides precise actual data on project expenses, while Project planning module enables target/actual comparisons in real time. resource planning shows transparently which capacities are available and where bottlenecks are imminent.
Particularly valuable: The seamless integration with DATEV and Lexware ensures that project data is synchronized directly with accounting. This eliminates media breaks and creates the data basis for well-founded profitability analyses at project, customer and employee levels. Companies can thus systematically control which projects generate real income and where there is potential for optimization.
conclusion
Strategic profitability is not a coincidence. It occurs when companies consistently focus data, resources and decisions on one goal: to improve sustainable project efficiency.
The way to achieve this is through precise project controlling, transparent capacity planning and the willingness to recognize uncomfortable truths about customer and employee profitability. Companies that take this path create a decisive competitive advantage: They not only grow faster, but also grow more profitably and sustainably.
The three central levers are clear: First, create transparency through continuous data collection and real-time monitoring. Second, optimize resource use through systematic capacity planning and skill management. Third, make data-based decisions through integrated multi-project management and cross-functional collaboration.
The tools for this exist. The question is whether companies are ready to move from reactive project management to strategic profitability management. The figures speak for themselves: Companies with systematic project controlling achieve margins on average 8 to 12 percentage points higher than the competition. That is the difference between survival and sustainable success.
FAQs
What does strategic profitability mean and how can you measure it?
Strategic profitability describes the ability to make sustainable profitable business decisions across all projects. It is measured through the systematic analysis of project margins, customer profitability and resource efficiency over longer periods of time. Central KPIs are: Contribution margin per project, customer profitability across the entire business relationship, billable workload of employees and discrepancies between target and actual costs. In contrast to short-term profitability, strategic profitability looks at the interplay of all factors and their long-term effects on corporate success.
How do I calculate the project margin in service companies?
Calculate the project margin using the formula: (revenue minus project costs) divided by revenue multiplied by 100. Project costs include personnel costs, external service providers and proportionate overhead costs. Important: Record all actual hours, including rework and internal reconciliations.
An example: With 80,000 euros in turnover and 65,000 euros in total costs, this results in a project margin of 18.75 percent. For meaningful analyses, you should not only carry out this calculation after the project has been completed, but should monitor it continuously during the project period.
Which factors influence profitability in project management?
The three main factors are hourly rates, billable workload, and resource use. The hourly rate must cover salary, overhead costs, and target margin. The billable workload often differs significantly from the total workload, as internal activities tie up time. The use of resources has a massive impact on profitability: If senior employees are used for junior tasks, the margin is burned. Other critical factors include project duration, scope creep, rework and administrative costs per customer. transparent Project Controlling Makes these factors measurable and controllable.
How can you analyze customer profitability in projects?
Analyze customer profitability by recording all sales and costs across the entire customer relationship. This includes not only project costs, but also sales expenses, account management, rework and support. Calculate the cumulative contribution margin: total revenue minus all direct and indirect costs. Then compare different customers: It is often found that 20 percent of customers generate 80 percent of the margin, while others are unprofitable in the long term despite a positive individual project result. These insights enable targeted decisions about customer acquisition, pricing, and resource allocation.
What role does capacity planning play for project margins?
Capacity planning in project management is crucial for project margins because it prevents overload and underload. Resource bottlenecks result in expensive freelancers or overtime, while underworking other employees costs money. Effective capacity planning creates transparency about available skills, current workload and upcoming requirements. This enables optimal use of resources: The right employees with the appropriate skill level work on the most profitable projects. Companies with systematic capacity planning typically achieve 10 to 15 percentage points higher billable utilization while improving Work-life balance.
How do I optimize the use of resources in multi-project management?
Optimizing the use of resources in multi-project management requires three steps: First, create transparency through a skill matrix and real-time utilization overview of all employees across all projects. Second, prioritize projects based on profitability and strategic importance, not the order of requests. Third, plan with realistic utilization goals of 75 to 80 percent billable time to have buffers for quality assurance and unexpected tasks. Avoid overqualification through precise skill matching and use scenario planning to be prepared for peak workloads.
