The two videos followed a single dollar, then a project’s margin. This lesson lays the model out flat so you can use it: what a dollar really is, what an hour really costs, and how margin leaks out of a project that still looks green. It’s the same job from Module 1 — Outcome #4, Sustained Financial Health — now measured in money.
Where this fitsBehavior Control Advancement · Protect IntegrityOutcome 4 · Sustained Financial HealthLifecycle Spans execution
Recall — before you begin
From Module 1, the PM owns the result. Measured in money, which of the five outcomes is that — the one these two finance videos zoom into?
Outcome #4 — Sustained Financial Health. Finance isn’t a new subject; it’s the same job, measured in dollars.
1
Finance is Outcome #4, up close
Module 1 named five outcomes. Module 2 doesn’t add a sixth — it zooms in on number four. Every outcome you protect has a cost; every decision consumes hours, and hours become dollars. Protect the outcomes and you create money — and that money is the firm’s capacity to hire, invest, and do great work.
2
What a dollar really is
A big fee isn’t the money. A lot of it was never yours.
Stage
What it is
Fee
The headline number the client pays.
Pass-through
Consultants, travel, printing — money that runs through the firm but it never earns. Strip it out.
Net Service Revenue
What Grace earns with its own people. This is the number you manage — not the headline fee.
Where the net dollar goes
Slice
Share
What it covers
Direct labor
~30¢
The people doing billable work — design, drawings, engineering.
Overhead
~50¢
Everything with no client invoice — proposals, reviews, management, rent, software, insurance.
Profit
15–20¢
What survives — the entire reward for the risk of running the project, and the first thing to disappear.
VisualWhere the net dollar goes
After pass-through is stripped out, every dollar Grace actually earns splits roughly three ways. Profit is the thin slice that survives — and the first to disappear.
3
What an hour really costs
Shrink the model to one hour, because that’s where you live. An hour isn’t just a wage — it carries its share of all that overhead.
Step
Figure
Wage (example architect)
$40 / hr
+ Overhead (× 1.75)
+ ~$70
= Break-even hour
~$110 — about 2.75× the wage
Target billing rate
$129–$138
ToolBuild the hour — what an hour really costs
The script’s “$110 hour” isn’t a Grace number — it’s the model. Move the wage and overhead and watch the burdened cost and billing rate move with it.
Overhead / hr
$70
Break-even hour
$110
Cost multiplier
2.75×
Target billing rate
$138
Core idea
There are no forty-dollar hours. Every hour costs about 2.75× the wage — the $110 hour. Spend it on rework or the wrong person, and that 15–20¢ of profit is what you burn.
4
Effort vs earned value — the Margin Gap
Two numbers, held side by side, all the time. Effort = hours charged × the cost of an hour. Earned value = the percent of the work truly finished × the fee. Margin is the gap between them.
When effort runs ahead of earned value, margin is leaving the project — and the budget report won’t show it, because spent and earned are two different numbers. That gap has a name: the Margin Gap.
?Green, or leaking?
A phase is 60% complete and 55% of the fee is spent — on schedule, client happy. Healthy?
You can’t tell from spend alone. If the team has truly earned 60% for that 55% spent, it’s healthy. If effort has outrun earned value, that gap is margin leaving now. Use the tool below to see it.
From Module 1
The Margin Gap isn’t slow work or bad pricing. It opens when work keeps advancing while a decision stays open — a failed Control Advancement, now measured in dollars.
Worked example — Oakhaven, one $1M phase
Moment
The numbers
Priced right
$800k cost / $200k profit / 20%
At 60% complete
$600k earned / $700k spent
Margin Gap, live
$100k
Caught early — at a $20k gap, not $100k — the phase lands back near 20%. Left alone, it limps in at a sliver of profit and a burned-out team, on a project that never once showed red.
ToolRun the phase — find the Margin Gap
Illustrate the Oakhaven $1M phase from the video. Set how far along the work truly is and how much has been spent, and watch effort race ahead of earned value.
Earned value (% complete × fee)$600k
Effort spent$700k
Margin Gap
$100k
Projected end margin
–17%
Effort is ahead of earned value — margin is leaving the project.
Projected end margin assumes the current pace holds. Caught early — at a small gap — the phase can still land on target.
Where this lives in BST
The video gave you the model. Here it is on the screen your team actually opens — the BST11 Project and Resource Management dashboard, with its Project Scorecard across the top. Every number is keyed below to a word from this lesson. The one to watch is Variance ④: it sets what you’ve earned next to what you’ve spent and prints the gap — the Margin Gap, finally a column you can see.
Mock BST11 Project & Resource Management dashboard — illustrative sample data, for training only. Layout, columns and figures mirror the live BST11 Project Scorecard. Each column is keyed to the lesson: Budget Effort ① = Planned Value = the fee; Revenue ② = Earned Value = the fee you’ve actually earned; Effort ③ = Actual Cost = cost to date; Variance ④ = Revenue − Effort = your live margin (negative = the Margin Gap); NLM ⑤ = net labor multiplier; Profit ⑥ = revenue minus real cost; Receivable / Unbilled Days ⑦ = the basis for the billing- and collection-realization targets. Term mapping follows Grace’s BST11 Common Language card and BST Global’s Earned Value Management framework (Planned Value / Earned Value / Actual Cost).
5
The four patterns in finance
The Competent Coordinator
Tendency
Tracks the budget report faithfully, every month.
Blind spot
Watches spend, never earned value — sees green while margin leaks.
Preferred behavior
Compare earned value to effort every week, not the budget alone.
The Obsessed Designer
Tendency
Wants the best people and the best design on the work.
Blind spot
Keeps a high-cost principal on production and refines past the fee — collapses the realized rate.
Preferred behavior
Staff to the rate; stop at the earned-value line.
The People Pleaser
Tendency
Keeps the client comfortable.
Blind spot
Absorbs scope changes to avoid friction — gives away the profit slice.
Preferred behavior
Name the change, price it, offer a clear choice.
The Accountable Owner
Stance
Treats every hour as a financial decision and every staffing call as a margin decision.
Watch-out
A green budget is not a healthy margin — never confuse the two.
The standard
Staffs to the rate, watches earned value, prices what changes.
6
Put it to work
On your throughline project
Estimate effort to date (hours charged × about $110) and earned value (the percent truly complete × the fee).
Is effort ahead of earned value, or behind? If it’s ahead, you’ve found the Margin Gap while you can still close it.
Name the decision that created it — the open question, the staffing choice, the absorbed scope — and act this week.
Challenge — from memory
?Challenge — from memory.
What does an hour cost relative to the wage, and what exactly is the Margin Gap?
An hour costs about 2.75× the wage — the $110 hour on a $40 wage. The Margin Gap is the distance by which effort (spent) runs ahead of earned value — margin leaving a project the budget report still shows as green.
Then do
“The budget tells you what you’ve spent. It never tells you what you’ve earned — and your margin lives in the gap between them.” Watch the module videos →
PM Excellence Academy
Module 2 of 12 · Project Finance