Set one decision boundary before comparing scenarios
Records and assumptions to align
- Choose one business, customer cohort or delivery team and one finite horizon. (not complete)
- Use one currency, indirect-tax treatment, time basis and contribution boundary throughout. (not complete)
- Separate observed records, contractual commitments and user-entered scenarios. (not complete)
- State which delivery, support, acquisition and overhead costs are included or excluded. (not complete)
- Hold unrelated inputs constant when testing a sensitivity; do not improve every assumption at once. (not complete)
- Write the evidence trigger and stop condition before selecting a preferred scenario. (not complete)
| Input or boundary | Unit | Evidence class | Required check |
|---|---|---|---|
| Consultation time | hours/cohort | Calendar or time record | Separate attended, cancelled and preparation time |
| Revision time | hours/project | Project record | Separate included scope from change requests |
| Loaded capacity cost | CU/hour | Service cost record | Include the declared labour and overhead boundary |
| Displaced paid work | hours × CU/hour | Capacity and demand scenario | Do not assume full displacement |
| Attributed outcomes | customers or projects/cohort | CRM and scope record | Attribution is not causation |
Build a reproducible economic view
included-work cost = included hours × loaded capacity cost per hour; scenario opportunity cost = displaced paid hours × retained contribution per paid hour
- included hours
- Consultation, preparation and revision hours inside the declared promise (hours/cohort or project) — time and project record
- loaded capacity cost per hour
- Included labour and overhead cost divided by productive capacity (CU/hour) — service cost record
- displaced paid hours
- Paid hours that the selected demand scenario cannot serve (hours/period) — explicit capacity scenario
- retained contribution per paid hour
- Revenue less included variable delivery cost per hour (CU/hour) — reconciled service record
Loaded capacity cost and foregone contribution are separate decision views of the same finite labour resource. Do not add them unless a reconciled record proves the loaded cost is incremental or avoidable and does not overlap the displaced-work contribution. Opportunity cost can be zero when spare capacity exists and positive when demand is constrained.
- Define what is included, for whom, and the trigger that ends the promise.
- Measure consultation, preparation and revision time separately.
- Calculate loaded capacity cost using the service-cost owner.
- Choose a lower, base and higher displacement case instead of assuming every hour displaces revenue.
- Reconcile attributed outcomes on one cohort and conversion window.
- Compare cap, qualification, paid-discovery and scoped-revision options.
- Set a review trigger based on recorded hours and project contribution.
Worked example: a monthly included-work policy
Invented scenario: 18 consultation hours and 22 revision hours, 55 CU loaded capacity cost per hour, and a base case where 12 hours displace paid work worth 70 CU contribution per hour.
| Step | Inputs and arithmetic | Result and interpretation |
|---|---|---|
| Included hours | 18 + 22 | 40 hours |
| Loaded capacity cost | 40 × 55 | 2,200 CU |
| Base opportunity cost | 12 × 70 | 840 CU |
| Decision presentation | Report 2,200 resource-cost view and 840 opportunity-cost view separately | Do not add the views without non-overlap evidence |
| Case | Changed input and arithmetic | Outcome | What to investigate |
|---|---|---|---|
| Spare-capacity case | 0 displaced hours × 70 | 0 CU opportunity cost; 2,200 CU resource-cost view remains separate | Check whether spare capacity truly exists in the same period |
| Base case | 12 displaced hours × 70 | 840 CU opportunity cost; do not add to the 2,200 CU resource-cost view | Test caps and qualification |
| Constrained case | 30 displaced hours × 70 | 2,100 CU opportunity cost; do not add to the 2,200 CU resource-cost view | Consider paid discovery or narrower inclusion |
Choose the next test, not a guaranteed answer
| Observed signal | Possible interpretation | Bounded next action |
|---|---|---|
| Consultations use time but produce little qualified work | Qualification or offer boundary may be weak | Test a booking gate or paid discovery |
| Revision hours cluster after unclear approvals | Scope and acceptance evidence may be incomplete | Add staged sign-off and change triggers |
| High attributed conversion but weak contribution | Acquisition volume may hide delivery burden | Reconcile downstream project contribution |
- Valuing free work at zero because no invoice is issued.
- Assuming every included hour displaces a paid hour.
- Counting attributed wins as caused by the consultation.
- Mixing included revisions with separately approved scope change.
- Adding a price uplift without making the service promise clear.
Questions to resolve before acting
- Is free work always uneconomic?
- No. It may be a deliberate acquisition or service choice. The decision needs a bounded promise, measured capacity cost and a comparable outcome record.
- Should every free hour be valued at the selling rate?
- No. Start with loaded cost. Add opportunity cost only for an explicit constrained-capacity scenario using retained contribution, not headline revenue.
- How many revisions should be included?
- Margin101 supplies no benchmark. Define the deliverable, feedback round, approver, timing and change trigger that fit the specific offer.
Sources and calculation owners
- Billable Utilisation methodology — Margin101: Finite capacity and non-billable-time boundary.
- Service Rate & Quote methodology — Margin101: Loaded rate and productive-capacity owner.
- Scope Creep Impact methodology — Margin101: Unrecovered added-hours calculation.
Run the next calculation
- Billable Utilisation Planner
Turn available time into realistic billable capacity
- Service Rate & Quote Planner
Set a viable rate and project quote
- Scope Creep Impact Planner
Measure unrecovered scope change