Grace Design Studios · Module 2 of 12

The Economic Model

Project Finance, Part 1 — Companion Reference Guide

The waterfallThe metricsEffort vs. earned value The four archetypesOne week after Module 1

Module Home  ›  Quick Reference

Project Finance 1 — What You Need to Know

Every hour is a financial decision; every staffing call is a margin decision. Manage net revenue, staff to the rate, and watch earned value — not just the budget.

On a live project

✓ What to do
  • Manage net service revenue — not the headline fee.
  • Staff to the rate: match the cost of the person to the value of the task.
  • Treat every hour as the ~$110 hour (≈2.75× the wage).
  • Compare earned value to effort weekly; catch the Margin Gap early.
⚠ What to watch for
  • A green budget hiding a leaking margin.
  • Effort running ahead of earned value — margin is leaving.
  • Over-qualified people on routine tasks.
  • Optimistic percent-complete — ‘40% done’ that isn’t.
✕ What to avoid
  • Thinking in ‘$40 hours’ — there are none.
  • Refining past what the fee funded.
  • Staffing to the wage instead of the rate.
  • Using the budget report as your margin dashboard.

Grace process anchors

Measure

Effort vs. earned valuehours × ~$110 vs. %-complete × fee

The one question

“How much value have we truly earned?”Ask it weekly, not at closeout

When effort’s ahead

Name the decision that opened the gap — and close itopen question · staffing · absorbed scope

Archetype quick-tells

Competent CoordinatorWatches spend, not value → track earned value every week.
Obsessed DesignerHigh-cost staff on production → staff to the rate; stop at the earned-value line.
People PleaserAbsorbs the change → price it and offer a choice.
Accountable OwnerEvery hour a decision → staffs to the rate, watches earned value, prices change.

The numbers (locked model)

Per net dollar~30¢ direct labor · ~50¢ overhead · 15–20¢ profit
Overhead factor / cost multiplier1.75 → 2.75× the wage
The hour ($40 wage example)+$70 OH = ~$110 break-even → $129–$138 target
Oakhaven $1M phase, priced right$800k cost / $200k profit / 20%
At 60% complete$600k earned / $700k spent → $100k Margin Gap

Try the model — build the hour, then run the phase

Two calculators from the videos. Move the sliders to make the numbers your own.

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

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.

Quick drills — spot it

A phase is 40% complete and 40% of the fee is spent. Percent-complete is usually optimistic. Healthy?

Not enough information. ‘40% complete’ is only real if that work is truly finished. If it’s really 30% done, you have a hidden Margin Gap.

Same 10-hour task, two people: one loaded at $170, one at $110 — same budget line. Does the staffing choice matter?

Yes. $170 vs $110 across 10 hours is ~$600 more — straight out of the 15–20¢ profit slice. ‘Budget not blown’ and ‘margin protected’ are different things.