As a services business, your main product is time. Yet many companies lack real-time visibility into project profitability. Not all project phases or entire projects will always be profitable, but projects should never intentionally be planned at a loss. Mosaic addresses this by providing a clear, visual representation of the cost of time, making profitability per project and organization wide clear and transparent.
Bill Rates reflect the experience level of resources and are typically used for hourly work where fees are determined by hourly rates.
Mosaic uses a Cost Rate (also known as the Fully Burdened Rate) to clearly show remaining amounts, representing profit when managing project fees.
Cost Rate Calculation:
The overhead multiplier conceptually represents how much you must multiply a billable hour to cover costs:
Total Overhead Cost/hour = Overhead Rate × Pay RateFor example, if John’s pay rate (salary) is $50/hour, multiply by the Overhead Rate to cover all associated costs.
Overhead Rate = Total Overhead Cost ÷ Billable Project Labor CostBillable Project Labor Cost
Calculate using total payroll cost across the organization multiplied by the average utilization rate:
Billable Project Labor Cost = Organization Total Payroll Cost × Utilization RateUtilization rate refers to the percentage of billable hours across the organization (industry average typically around 59%). Mosaic’s Utilization Report (add help link) separates employees' billable and non-billable hours clearly.
Example:
Total Payroll Cost: $1,000,000
Utilization Rate: 59%
Billable Project Labor Cost: $590,000
Excluded from Total Overhead Costs
These pass-through reimbursable expenses are typically billed directly to clients.
Consultants
Reimbursables:
Shipping/courier/FedEx
Expediting/filing fees/permits
Printing costs
Material costs
Travel
Included in Total Overhead Costs
All non-billable operating expenses, such as:
Rent/mortgage
Utilities
Maintenance and repair
Furniture
Equipment (computers, printers, scanners, phones)
Supplies (paper, business cards, software)
Website costs
Insurance (general, professional, healthcare)
Unbilled travel
Taxes
Employee benefits (401k, social security)
Association fees, subscriptions
Marketing, advertising, business development
Bookkeeping/accounting
Plus non-billable labor salaries:
Administrative
Finance
Marketing
Business development
Bonuses may be included, though they are often taken out of profit. Where they are included is an organization preference.
Finally, you’ll need to include billable employees’ non-billable time and PTO. If utilization is 59%, non-billable and PTO would account for 41%.
Example:
Non-Billable Labor Cost = Total Payroll Cost × (1 - Utilization Rate)
$1,000,000 × 41% = $410,000
Total Overhead Calculation:
Total Overhead Cost = Operating Expenses + Non-Billable Labor
$1,000,000 + $410,000 = $1,410,000Final Overhead Rate:
Overhead Rate = Total Overhead Cost ÷ Billable Project Labor Cost
$1,410,000 ÷ $590,000 ≈ 2.39While overhead rates vary, they typically range between 150% and 300%.
Billing Rate Multiplier:
Your billing rate should factor in desired profit:
Billing Rate = Cost Rate × (1 + Profit Margin)If your cost rate is $100/hour and desired profit margin is 20%, the bill rate would be $120/hour.
This guide helps outline the overhead calculation process clearly. Due to the importance of accurately understanding your business's profitability, we recommend reviewing these calculations with your accountant for confirmation.
The Fee always remains constant, serving as a fixed amount, while the Budget functions as an adjustment factor to either frontload or backload the fees, independent of the actual phase fee structure.
In both Cost Rate and Bill Rate scenarios, the Fee and Budget should be the same numbers. The key difference lies in how profit is realized:
In the Cost Rate view, the remaining budget after the project is completed represents the profit. Alternately you can turn on the setting to have a different budget for Cost and Bill Rates, which would allow you to set up the project where the remaining budget is set to reach zero dollars ($0) or greater, at project completion for a profitable project.
In the Bill Rate view, the remaining budget is setup to reach zero dollars ($0) or greater, at project completion, the built-in profit margin within the Bill Rates is automatically realized.