Operator Math
profitability

Agency Retainer Profitability Calculator

Calculate whether a client retainer is profitable after labor, contractors, tools, overhead, and extra scope.

Question answered

Is this monthly retainer profitable after labor, contractors, tools, overhead, and extra scope?

Numbers needed

Monthly retainer, Strategist hours, Fulfillment hours, Account management hours, Hourly internal cost, Contractor cost, Software cost allocated, Overhead allocation, Desired profit margin, Extra scope hours

Inputs

Show guidance for Monthly retainer

Enter contracted recurring revenue for the client before pass-through expenses.

$
Show guidance for Strategist hours

Enter monthly strategic or senior planning hours allocated to the account.

Show guidance for Fulfillment hours

Enter monthly production, delivery, or implementation hours.

Show guidance for Account management hours

Enter monthly account management and communication hours.

Show guidance for Hourly internal cost

Enter fully loaded internal labor cost per hour, not bill rate.

$
Show guidance for Contractor cost

Enter monthly outside contractor or freelancer delivery cost.

$
Show guidance for Software cost allocated

Enter monthly tool cost allocated to this client.

$
Show guidance for Overhead allocation

Enter monthly overhead assigned to the retainer.

$
Show guidance for Desired profit margin

Enter target net profit margin for this client.

%
Show guidance for Extra scope hours

Enter unbilled extra hours beyond the planned scope.

Outputs

Good

Primary outputs

Net profit$5,425.00

Retainer profit after delivery costs and overhead allocation.

Actual profit margin36.2%

Net profit as a percent of retainer revenue.

Supporting outputs

Total labor cost$6,375.00

Fully loaded labor cost for planned and extra hours.

Total delivery cost$9,575.00

All delivery costs before overhead, including labor, contractors, and tools.

Gross profit$7,125.00

Retainer revenue left after delivery costs.

Target profit$4,500.00

Profit required to hit the desired margin.

Margin gap$925.00

Dollar gap between actual profit and target profit.

Effective hourly revenue$176.47

Retainer revenue divided by delivery hours, useful for scope and staffing decisions.

Max hours at target margin97.33

Maximum internal hours supportable while preserving target margin.

Scope creep cost$0.00

Cost of unbilled extra hours.

Recommended next move

Good

Retainer meets the target margin

Net profit is $925.00 above the target profit.

Labor is the largest delivery cost

Labor accounts for $6,375.00 of this retainer's delivery cost.

Protect the margin profile

Keep scope and allocated costs inside this operating range before adding new deliverables.

Retainer and hours sensitivity

Compare how the result changes when a key assumption moves.

ScenarioMonthly retainerInternal hoursTotal delivery costNet profitActual profit margin
Base retainer, base hours$15,000.0085$9,575.00$5,425.0036.2%
Base retainer, hours -10%$15,000.0076.5$8,937.50$6,062.5040.4%
Base retainer, hours +10%$15,000.0093.5$10,212.50$4,787.5031.9%
Target-margin retainer, base hours$13,678.5785$9,575.00$4,103.5730%
Target-margin retainer, hours -10%$13,678.5776.5$8,937.50$4,741.0734.7%
Target-margin retainer, hours +10%$13,678.5793.5$10,212.50$3,466.0725.3%
Retainer +10%, base hours$16,500.0085$9,575.00$6,925.0042%
Retainer +10%, hours -10%$16,500.0076.5$8,937.50$7,562.5045.8%
Retainer +10%, hours +10%$16,500.0093.5$10,212.50$6,287.5038.1%

Operator context

Use this when

  • Use before accepting or renewing a retainer.
  • Use when scope creep is consuming margin.
  • Use to decide whether to reprice, reduce scope, or change delivery staffing.

Interpretation rules

Margin below targetWarning

If actual margin trails target margin, act on price, scope, staffing mix, or overhead before renewal.

Scope creep has a costWarning

Unbilled hours should be converted into a scope decision, not absorbed as invisible labor.

Operator notes

  • Use fully loaded labor cost so margin is not overstated.
  • Review effective hourly revenue against the agency's required blended rate.

Watch for

  • Ignoring account management time makes retainers appear healthier than they are.
  • Allocating no overhead to clients hides the cost of running the agency.

References

Follow-on calculators