Overhead

The ongoing costs of running an agency that are not tied to delivering a specific project - rent, software, admin salaries and the like.

For example, an agency's overhead includes office rent, design and project tools, the bookkeeper and the office manager. These costs continue whether or not a particular project is running, and they sit between gross and net margin.

Why it matters to your firm: overhead is the gap between a healthy gross margin and a thin net margin - the cost of simply existing. Keeping it lean and proportional to revenue is what lets delivery profit actually reach the bottom line, which is why owners watch the overhead ratio closely.