Gross margins in tech-enabled services are one of the best indicators of revenue quality. When clients see real value in your services, they’re willing to pay more, and that premium will show up in your margins.
Improving gross margins (GMs) has a direct impact on EBITDA margins. All else being equal, each percentage point increase in GM translates directly into EBITDA margin improvement.
Beyond raising billing rates or reducing costs, optimizing team utilization also boosts GMs in Time & Materials (T&M) contracts.
For example, if a team has a fixed cost of $50,000 per period, correctly billing additional hours generates operating leverage—growing revenue and improving margins. In T&M contracts, proper project allocation is the first step in any margin optimization initiative.
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