Gross margin
also known as gross profit margin
The share of revenue left after the direct cost of delivering the work (mostly billable staff time). The clearest measure of whether projects are profitable.
For example, if a $20,000 project costs $11,000 in delivery time, the gross profit is $9,000 and the gross margin is 45%. Watching margin per project quickly reveals which work and which clients are actually worth taking on.
Why it matters to your firm: gross margin is where an agency's profit is really decided - long before overheads. Thin margins usually trace back to under-pricing, scope creep or low utilisation, so tracking it by project and client shows exactly where to fix pricing or delivery.
Healthy agency delivery gross margins run roughly 50-65%; consistently below 40% usually signals under-pricing or low utilisation.
Gross margin = (revenue - cost of delivery) ÷ revenue × 100
Cost of delivery is mainly billable staff time on the work.
Gross margin calculator
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