--Jason A.

A: It seems so wrong, but sometimes our favorite clients are not our most profitable ones as designers. If we can find clients that we enjoy working with, let us do great work, AND allow us to make a decent profit, well, those are the true keepers. So, to your question, here's how to figure out the profitability part: Math. Also known as doing a Project Profit and Loss Statement (or P&L) on each job, then reviewing your findings by client to see where you stand.

When a project is completed, pull together your numbers: your estimate to the client and any change orders for the project (this is what you expect your compensation to be), as well as your time sheets and list of expenses (this is what it cost you in time and materials to do the work). Look at the difference. This will allow you to review the project from a financial standpoint to determine if it was a profitable one (or not).

Here's a basic formula to create a Project P&L:

1. Look at Fees (Estimates versus Actuals):

Estimated Fee

- Actual Labor (yours/your employees rate x total number of hours)

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= Profit on Labor

Change Order(s) Fee (if applicable)

- Actual Labor (yours/your employees rate x total number of hours)

-----------------------------------------------------------------------------------

= Profit on Change Ordered Labor

2. Look at Expenses:

Total Actual Expenses = _______________________________________

Markup on Expenses (adding 15% - 25% is standard)= _______________

-----------------------------------------------------------------------------------

= Profit on Expenses

3. Total It Up:

Total Profit on Labor

Total Profit on Change Ordered Labor

+Profit on Expenses

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= Profit on Project

Do a P&L for each project. Just reviewing these simple facts on a continual basis will keep you on top of your financial picture. Revealing the discrepancies between what you anticipated and what actually occurred helps you be a better manager of your projects. These P&Ls also begin to create an outline of client relationships, your/your employee(s) productivity, and your project estimating acumen. When you do Project P&Ls over time, you can see trends appear and root out clients that are not a good fit for your firm (even if you love them).

Disclaimer: The general information in this column is not a substitute for personalized advice from an attorney, an insurance agent or an accountant. If you have questions regarding legal, financial or risk management issues, you should seek the services of an appropriate professional.

The Design Bitch is Terry Lee Stone, a Los Angeles-based creative manager and writer. She teaches the business of design at Art Center College of Design. The author of several books on design, her recent series is called, Managing The Design Process, published by Rockport Publishers.