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client profitability calculator

Client profitability calculator

Most agencies discover their loss-making clients at renewal - far too late. Enter the annual fee, the hours your team delivers and your blended cost - this shows the real gross margin on that client, the effective hourly rate, and what to do if the number is bad.

gross margin45.8%
gross profit / year$27,500
effective hourly rate$120/hr
Healthy-ish (30-55%). Room to raise price or cut delivery hours.
See profitability per client - live, every week.
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the method

How profitability is calculated

cost of delivery = hours × cost/hour + pass-throughs
gross profit = annual fee - cost of delivery
gross margin % = gross profit ÷ annual fee × 100

This is the number to watch monthly. A retainer that booked at 55% margin can drift to 30% within a year if scope creeps or the team takes more time than scoped. The agencies that catch the slide early re-price or re-scope; the ones that don't find out at renewal and have a much harder conversation.

how to use it

Four inputs, real numbers

  1. Enter the annual fee from this client (retainer × 12, plus any project fees).
  2. Enter the hours your team delivered against them in the year - from your time tracking.
  3. Enter your team's blended fully-loaded cost per hour.
  4. Add any pass-through costs (media spend, software bills) you absorb.
  5. Read the gross margin, gross profit and effective rate - plus a verdict and what to do about it.
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questions

Frequently asked questions

What is client profitability?

The gross margin a single client generates - their annual fee minus the fully-loaded cost of delivering for them, as a percentage. It's the most under-watched number in an agency, and the one that decides which clients are worth keeping.

What's a healthy gross margin per client?

50%+ gross margin per client is healthy for services agencies. Below 30% is fragile - either re-scope, raise the fee, or have the renegotiation conversation now. Above 60% is a top client worth modelling more like.

What blended cost per hour should I use?

Your team's fully-loaded average cost - typically the team's annual salaries × 1.3-1.5 (for taxes, benefits, software) divided by billable hours. If your senior costs $140k fully loaded and bills 1500 hours a year, that's about $93/hr.

Should I include pass-through costs?

Yes, if you absorb them - media spend, software subscriptions, contractor fees you eat. If you invoice them separately, leave them out. Pass-throughs over 30% of the fee inflate revenue without margin and distort the picture.

How is this different from the pricing calculator?

The pricing calculator is forward-looking (will this quote earn margin?). The client profitability calculator is backward-looking (did this client earn margin last year?). Use this on existing clients to find the loss-makers; use the pricing calculator before quoting the next one.

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Spot loss-making clients before renewal.

Forge builds branded time-tracking and client portals for your agency - no code, no servers, no setup.

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