How do you calculate margin for a service?

Answer 1

Generally, it's the price of the service minus the cost of the workers that deliver that service. For example, my company charges $65 per hour for graphic design. My graphic designers get an average of $27 per hour, so my margin is $38.

Sometimes you will want to focus on larger averages. For example, you're going to charge $50,000 per month for a customer service phone bank. Your total payroll may be $25,000 monthly, $5000 for rent and utilities, and $5000 for equipment leasing. Your margin would then be $15,000 above the cost of providing service.

Margin is usually expressed in percentages. So in the last example, your margin would be 30% ($15,000 divided by $50,000).