How wide is the spread of project profitability?
№ 091 · Project margin distribution
Definition
MetricProject-level margin (project revenue minus direct delivery labor cost), plotted as a distribution across all projects
Unit% of project revenue
Histogram of margin % per closed project. Right tail means repeatable templates working; left tail means scope creep. Build by computing per-project margin (revenue minus direct labor minus subcontractors). Example: median 22%, top decile 42%, bottom decile -8% (loss-makers to investigate).
Benchmarks
| Bottom 30% | Median | Top 30% |
|---|---|---|
| 28% or below, with a visible loss-making tail under 0% | ~37% (2025 industry average 37.7%, up from 35.9% in 2024) | 45% or better per project; SPI top performers run project margins in the mid-50s |
Global professional services projects, SPI definition (project revenue minus direct labor cost of delivery), 2024-2025 fiscal data; T&M projects averaged 36.4% and fixed-price 37.2% in 2025 · SPI reports averages; the top30/bottom30 conversion is estimated from the 35% healthy threshold and the ~56% level reported for top-performing firms. Project margin excludes overhead and typically runs 5-10 points above gross margin including all labor. Do not compare with card 098, which uses the agency delivery-margin-on-AGI definition.
Category split omitted: The pricing-model split (T&M vs fixed-price) and vertical splits are published only by SPI, a single source, so no split meets the two-source rule.
When it looks bad
The histogram is wide and twin-peaked: a healthy cluster near 40% and a second cluster below 15% or under water, and the low cluster is the same client or service line every period.
Across 20 active projects: 8 above 40%, 7 between 10% and 25%, 5 negative; the bottom 5 erase roughly a third of the profit the top 8 generate.
What to do about it
- Run a quarterly kill-or-reprice review on the bottom decile of projects; SPI shows the share of firms hitting margin targets rose to 88.8% where project-level execution is actively managed.
- Feed estimate-vs-actual post-mortems back into rate cards and scoping templates so systematic underestimation stops repeating; the low cluster is usually a scoping pattern, not bad luck.
- Set budget-burn alerts at 70% of estimated hours with a forced re-scope conversation; firms with integrated project ERP see margin problems before close (SPI: 10.2% vs 8.6% EBITDA).
- Standardize delivery methodology for repeated project types; SPI links standardization to lower overrun, and overrun is the main mechanism dragging a project from the right peak to the left one.
Sources
- Deltek (SPI Research data) Project margins rose to 37.7% in 2025 from 35.9% in 2024; T&M margins 36.4%, fixed-price 37.2%; 88.8% of firms hit annual margin targets, up from 86.9% deltek.com ↗
- Rocketlane (SPI Research data) SPI healthy thresholds: project margin above 35%, overrun below 10%; margins at a five-year high in 2025 despite record-low utilization rocketlane.com ↗
- TimeLog (SPI Research data) Top-performing firms achieve project margins around 56%; execution discipline is the separator between them and the rest timelog.com ↗
- SPI Research (co-published with Kantata) 2024 data (n=403): project margins below the five-year average, overrun 11.3%, scope creep named as a direct profit drain get.kantata.com ↗
- knowledgelib.io Definitional warning: project margin includes only direct costs and runs 5-10 points above gross margin; comparing across firm types without adjusting is a common error knowledgelib.io ↗
- Parakeeto Agency-world equivalent: per-project delivery margin target 60-70% of AGI, a different basis (AGI, delivery cost incl. contractors) that must not be mixed with the SPI definition parakeeto.com ↗