The agency benchmarks report

1. Agency net margins are quietly compressing - the industry average held at 13% in 2025, down from a long-run 15%, with growth at 7.5% rebounding from a weak 2024.
2. Smaller is more profitable. Studios under 10 people run 19% net margin; agencies with 50+ people average just 8% - the inverse of what most owners assume.
3. Retainer agencies retain dramatically better than project shops - 18% annual churn against 42% - and the gap widens as agencies grow. Retainers are now used by 78% of digital agencies, up from 64% in 2023.
4. Revenue per employee is the under-watched profitability signal: healthy marketing agencies sit at $150-200K; specialists hit $250K+. Below $120K, the math doesn't work.
5. The single biggest gross-margin lever is scope discipline: UK agency gross margin has dropped to a record-low 39% median, with only ~24% of agencies hitting the 50% healthy target.

The single most common mistake: confusing the two. Gross (delivery) margin is what's left of the fee after the direct cost of doing the work - that's the ~50% target, and what our calculators show. Net margin is what's left after everything else too - overhead, sales, admin, tax - and it averages just ~13%. A 50% gross margin and a 13% net margin can be the same healthy agency.