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The math is simple: strong profit margins are essential for sustainable growth. But our latest industry report shows that, while 57% of firms have a defined profit margin target for projects, only 20% hit it almost every time.
The disconnect isn’t necessarily in the planning. Successful firms are setting targets based on what they know. They are a result of sound financial principles, a good understanding of market conditions, and years of running their businesses. The real gap seems firmly grounded in execution, where the day-to-day reality of running a service business collides with carefully crafted projections to create a real ongoing balance act.
So why are some firms still missing their targets, and what can leaders do to close this profitability gap?
The Hidden Culprits Behind Missed Targets
Scope Creep: The Silent Profit Killer
Every project starts with a clear scope and budget. But scope creep—those "small additions" and "quick changes"—accumulates invisibly until suddenly a profitable project becomes a break-even effort. Without real-time visibility into how time is being spent against the original estimate, these margin killers go undetected until it's too late to course correct.
High Utilization ≠ High Profitability
Many firms track utilization rates as a proxy for profitability, celebrating when teams hit 85% or 90% billable time. But understanding utilization without context tells only part of the story. High utilization on low-margin work, or billable hours on projects that are already over budget, can actually mask declining profitability. Firms that are hitting their targets are going a level deeper than just tracking utilization—they're tracking profitable utilization.
Spreadsheets Alone Can't Handle Your Growing Team
When resource allocation decisions are made based on outdated information or gut instinct, even the best project plans can derail profitability with things like overallocated teams and deadline misses. Our report found that 47% of firms struggle with accurately assessing team capacity, making team capacity planning nearly impossible and threatening the resource efficiency that profitable projects require.
Time Tracking Becomes an Administrative Burden
Many firms treat time tracking as a necessary evil for client billing rather than a strategic tool for profitability management. When time entry is delayed, incomplete, or inaccurate, real problems are getting missed while they continue to compound. Projects that should be flagged as unprofitable continue consuming resources while profitable opportunities get deprioritized.
The Visibility Gap: Why Good Intentions Aren't Enough
Successful companies that consistently hit their profit targets share one critical advantage: they have complete visibility into the relationship between time, capacity, and profitability. They don't just track these metrics in isolation—they understand how they interconnect with each other.
Monitoring Profitability in Real Time
Leading firms can see at a glance which projects are on track financially and which are trending toward trouble. Rather than discovering problems weeks later in financial reports, they spot margin erosion while there's still time to address it. This allows for proactive adjustments instead of damage control.
Tools like Harvest's profitability reporting help you track revenue, costs, and profit.
Matching Talent to Value, Not Just Availability
Instead of assigning work based on availability alone, successful firms optimize for profitability. They ensure their most expensive resources are working on their highest-value activities, and they can quickly identify when team members are ready to take on more complex work—reducing costs while developing talent.
When You Know the Numbers, You Make Better Calls
When every hour is tracked and every project's profitability is transparent, business decisions become more strategic. Firms can confidently turn down low-margin work, identify their most profitable client types, and invest in the capabilities that drive the highest returns.
Uncover what's driving profit with Harvest.
Build Your Path to Consistent Profitability
Make Every Hour Count (Literally)
The foundation of profit visibility is knowing exactly how time is being spent. But time tracking only works when it's easy, immediate, and tied directly to project profitability. Teams need to understand that their time data isn't just for billing—it's the key to sustainable growth and better project outcomes.
Turn Hours Into Profit Intelligence
Every hour your team logs should instantly reveal whether you're making or losing money. Instead of drowning in timesheet data, successful firms get immediate answers to the questions that matter: Is this project still profitable? Are we burning through budget faster than expected? Which activities are actually driving returns?
When leaders can see profit impact in real-time rather than discovering problems weeks later in financial reports, time tracking becomes your competitive edge. You’re now looking at strategic data points that guide smarter decisions about resource allocation, project scope, and client relationships.
Stop Playing Resource Roulette
Profitable firms don't cross their fingers and hope the right people are available when big projects land. They see exactly what’s free, when capacity opens up, and what’s coming down the pipeline—weeks or even months ahead—thanks to proactive team capacity planning.
Instead of the usual scramble around availability, firms that understand true allocation can instantly spot conflicts, shift resources on the fly, and optimize team assignments in real-time.
While other firms are stuck in reactive mode, smart firms are already three moves ahead. They know exactly when to say yes to new opportunities and when to push back, because they can see their true capacity at a glance.
When Everyone Owns the Bottom Line
Profit isn't made in boardrooms—it's built or destroyed in hundreds of daily decisions across your firm. The smartest firms don't treat profitability as a finance department secret. They make everyone a stakeholder in success.
When teams can see which projects are winning and which are struggling, everything changes. Problems surface faster, resources flow more intelligently, and your entire organization starts thinking like owners.
Closing The Gap
Professional service firms don't miss their profit targets because they lack talent or ambition. They miss them because they're making critical decisions without seeing how time, capacity, and profitability connect in real-time.
The firms that have this visibility are the ones positioned to thrive. The rest will keep wondering why their carefully crafted profit targets remain frustratingly out of reach.
In an industry where margins determine who grows and who just survives, the ability to see problems before they become expensive mistakes is essential.
Ready to transform your profitability visibility? Harvest's time tracking combined with its Profitability Reporting gives you complete visibility into the relationship between time, capacity, and margins. See how connected insights help you identify opportunities and address challenges before they impact your bottom line.
