The 40 unbilled hours that turn a 25% project margin into 10%

The short answer

An unpaid change adds cost while leaving revenue fixed. A project can remain busy and apparently healthy while its original profit disappears. Count the additional delivery, review and coordination work before deciding whether the request is small enough to absorb.

Start from the original project

Take an illustrative 24,000 fixed-price engagement with an 18,000 delivery cost. Original gross profit is 6,000, or a 25% margin. The client asks for work requiring another 40 hours at a loaded internal cost of 75 per hour, plus 500 of direct expense.

Additional cost is 40 × 75 + 500 = 3,500. If the seller absorbs it, total cost rises to 21,500 and gross profit falls to 2,500. The new project margin is 2,500 ÷ 24,000 ≈ 10.4%. The change consumes 58.3% of original profit.

Price the incremental work

At a 25% target margin on the change, the fee is 3,500 ÷ 0.75 ≈ 4,666.67. Combined revenue becomes 28,666.67 and combined cost is 21,500. Because the original job also had a 25% margin, the combined margin remains 25% before display rounding. Try it in the scope-creep and change-fee calculator.

If the original project had a lower margin, a correctly priced change would not automatically restore it. For example, original revenue of 20,000 and cost of 18,000 give a 10% margin. Add the same 4,666.67 fee and 3,500 cost and combined margin is about 12.8%, not 25%. Keep incremental and whole-project claims distinct.

Estimate the whole effect of the change

Implementation hours may be only part of the work. Check regression tests, documentation, coordination, revised acceptance evidence and rework to completed tasks. A change can also delay dependent tasks or extend overhead. If those effects are uncertain, record ranges and run the revised project model rather than presenting one deterministic change fee as a confidence guarantee.

The uncertainty-aware change-request guide explains how the original and revised distributions can differ. The simple calculator isolates the incremental cost for an initial discussion.

Make a deliberate choice about absorbing work

There may be a commercial reason to absorb a request. The estimate should make its cost visible so the decision is intentional. Record who approved the concession, which scope version it covers, and whether it changes the delivery promise. A hidden assumption that all future requests receive the same treatment creates another source of uncertainty.

Prevent the next ambiguous request

Use the proposal checklist to define deliverables, review rounds, client inputs and how changes are estimated. After delivery, compare the additional hours with the estimate. That record can improve the next quote without claiming that every extra request has the same cost or severity.

Prepared with AI assistance. These are illustrative calculations checked against the calculator code, not client case studies or market benchmarks.