Find your real margin per client in 30 minutes

What margin per client is (and what it isn't)

Margin per client is the share of a client's revenue left after paying for the work you do for them: the time your team spends, valued at what that time costs you, plus any costs you pay for that client alone. It tells you which clients fund the agency and which ones it subsidizes.

It isn't your agency's overall profit. Rent, software you use for everyone, sales time and your own admin aren't charged to any single client. Margin per client has to be high enough to cover those overheads and still leave profit, which is why you set a floor rather than aiming for "positive."

It isn't the same as revenue either. A large retainer at a thin margin can be worth less than a small one at a healthy margin, especially if the large one uses the capacity you'd need to take on a better client.

And it doesn't need precise time tracking. Honest estimates are enough to show the big differences, which are the ones that matter.

What you need before you start

• Last month's revenue per client (your invoices).
• Rough hours per client last month, by person. Time-tracking data is best; an estimate is fine for a first pass.
• What each person costs you per hour.
• Costs you pay for one client specifically: tools, freelancers, ad spend you don't pass through, stock media.

Step 1: Work out a loaded hourly cost per person

Take each person's monthly cost (salary or fee, plus payroll taxes and benefits if you pay them) and divide by the hours they spend on client work in a month. If someone costs you $6,000 a month and does about 120 hours of client work, their loaded cost is $50 an hour.

For yourself, use what it would cost to hire someone to do your client work. Using zero is the most common reason owners think their margins are better than they are. Employees and contractors are costed differently; if you're unsure which payroll costs belong in an employee's loaded rate, ask your accountant once and reuse the answer.

Step 2: Set up the spreadsheet

One row per client:

Column	What goes in it
A: Client	Name
B: Revenue	What they paid last month
C: Hours	Total hours across your team
D: Labor cost	Hours × loaded rate, summed across people
E: Direct costs	Tools, freelancers, media for this client only
F: Gross profit	=B2-D2-E2
G: Margin %	=F2/B2
H: Effective rate	=B2/C2 (revenue per hour worked)

If people with different rates work on a client, add a second tab with one row per person per client (Client, Person, Hours, Rate, Cost), then sum it back into column D:

=SUMIF(Labor!A:A, A2, Labor!E:E)

Format column G as a percentage and sort by it, lowest first.

Step 3: A worked example

These numbers are hypothetical round numbers, chosen to show how the math works. Labor cost assumes a single $50 loaded rate.

Client	Revenue	Hours	Labor cost	Direct costs	Gross profit	Margin	Effective rate
Client A	$8,000	110	$5,500	$500	$2,000	25%	$73/hr
Client B	$3,000	25	$1,250	$100	$1,650	55%	$120/hr
Client C	$5,000	85	$4,250	$300	$450	9%	$59/hr

Client A pays the most. Client B makes the most per hour. Client C pays well but takes almost as much time as Client A and earns very little after costs.

Step 4: Read the results

Margin below your floor. Your floor is the margin each client needs to leave so the agency can pay its overheads and still make a profit. Work it out from your own overheads; it varies a lot by service mix.

Effective rate. If you quote as if your time is worth $100 an hour and a client works out at $59, the gap is scope creep or underpricing.

Where the hours go. For low-margin clients, look at hours by person and task. Often it's the meetings, revisions, approvals and reporting around the work.

Step 5: Decide what to do

Action	When it fits
Reduce hours	The time goes to meetings, approvals or reporting you can batch or template
Change the scope	One deliverable takes far more time than it's priced for
Raise the price	The work is right but the rate is too low; use the effective rate to size the increase at renewal
Let them go	None of the above is realistic, and the client uses capacity a better client could fill

Steps you can take today

1. Export last month's invoices and write down revenue per client.
2. Ask your team for hours per client last month; estimates are fine.
3. Calculate a loaded hourly rate for everyone, including yourself.
4. Build the eight-column sheet above and sort by margin, lowest first.
5. For the bottom two clients, write one sentence on why their margin is low.
6. Put a reminder in your calendar to update the sheet on the first working day of each month.

FAQ

How do I calculate profit margin per client?

Subtract the client's labor cost and direct costs from their revenue to get gross profit, then divide gross profit by revenue. Labor cost is each person's hours on that client multiplied by their loaded hourly rate.

What is a loaded hourly rate?

It's what a person actually costs you per hour of client work: their full monthly cost, including taxes and benefits you pay, divided by the hours they spend on client work. It's higher than their wage because not every working hour is billable.

What if my agency doesn't track time?

Ask each person to estimate their hours per client for last month. The numbers won't be exact, but they'll show the big differences between clients, which is what you need for a first pass.

What is a good profit margin per client for an agency?

It depends on your overheads and service mix, so work out your own floor: the margin each client must leave to cover overheads and still make a profit. Clients well below that floor need attention.

What should I do about an unprofitable client?

First look at where the hours go, then reduce hours, change the scope or raise the price at renewal. If none of those is realistic, letting the client go can free capacity for a more profitable one.

How often should I review client profitability?

Update the sheet monthly and look at three months together before making big decisions. Single months can be distorted by launches or onboarding work.

Should I include my own time in the calculation?

Yes. Value it at what it would cost to hire someone to do your client work. Counting your time as free makes margins look better than they are.