Blended Workforce Margin
What's my true blended margin across a mixed workforce?
This is dollar-weighted, not an average of each group's margin. Your largest group has the most influence on the blend.
Why this comes up
Most agencies run more than one worker segment at once, light industrial, clerical, professional, each with its own margin profile. The temptation is to average the margin percentages across segments to get a "blended" figure. That's the wrong math, and it produces a number that doesn't actually describe your book.
How we calculated this
Total Billings = sum of each group's billings Total Direct Cost = sum of each group's direct cost Blended Margin = (Total Billings - Total Direct Cost) / Total Billings
Worked example: Light Industrial at $100,000 billings / $78,000 direct cost (22% margin), Clerical at $20,000 billings / $12,000 direct cost (40% margin).
Total Billings = 100,000 + 20,000 = $120,000 Total Direct Cost = 78,000 + 12,000 = $90,000 Blended Margin = (120,000 - 90,000) / 120,000 = 25.0%
A simple average of 22% and 40% would give 31%, six points higher than the actual dollar-weighted 25%, because it ignores that the lower-margin segment is five times the size of the higher-margin one.
What this means
- Blended margin is always pulled toward whichever segment carries more billings dollars, not toward whichever segment has the better margin percentage.
- A small, high-margin segment can make your blended number look better in a simple average than it actually is once weighted correctly; don't let a strong niche segment mask a weak core book.
- Use per-group margins (also shown by this engine) to see which segment is actually dragging the blend down, then decide whether to reprice, grow, or shrink that segment specifically.
Common mistakes
- Averaging margin percentages across segments instead of weighting by billings dollars, which distorts the true blended figure whenever segment sizes differ.
- Reporting a single blended margin without also showing per-segment margins, hiding which segment is actually underperforming.
- Comparing this quarter's blended margin to last quarter's without checking whether the segment mix itself shifted, since a mix shift alone can move blended margin even if every segment's own margin stayed flat.
Frequently asked questions
Why not just average the percentages, it's simpler?
Because a simple average treats every segment as equally important regardless of size. A segment with $500,000 in billings should influence the blend far more than one with $20,000; dollar-weighting is what actually reflects your real book.
How many worker groups can I add?
As many as you need to represent your actual segments; add a group for each distinct line of business you track separately.
Does this include program fees or funding cost?
No, this uses direct cost only. For a fuller picture including fees and funding, run individual segments through Assignment Profitability first, then blend the results here.
Limitations
Uses direct cost only, not program fees, funding cost, or servicing cost; for a full economic-contribution blend, compute each group's economic contribution first and enter that as the direct cost input.
Next decision
Learn more
Staffing Gross Margin Benchmarks by Segment — why margin varies structurally by segment in the first place.