Most agency owners can tell you their total revenue without hesitation. Ask them which clients are actually profitable, and you'll get a much less confident answer.
This isn't a character flaw — it's a structural problem. Traditional bookkeeping gives you P&L statements, not client-level profitability. You see the forest, never the trees.
The result? Agencies pour resources into relationships that look good on paper but drain the team. Meanwhile, genuinely profitable clients get the same attention as everyone else.
Client profitability tracking changes this equation. By allocating costs to specific clients — labor, contractors, direct expenses — you get a clear picture of which relationships actually make money.
The insights can be surprising. That prestigious client you've been chasing for years? They might be costing you money. The smaller retainer you barely think about? Could be your most profitable relationship.
Here's how to get started:
1. Define your direct costs. What expenses can be directly attributed to client work? Typically: contractor hours, specific software subscriptions, direct expenses billed to clients.
2. Allocate labor costs. This is where most agencies struggle. You need some way to track time or estimate effort by client. Even rough estimates are better than nothing.
3. Calculate contribution margin. Revenue minus direct costs gives you contribution margin — the amount each client contributes to covering overhead and generating profit.
4. Review monthly. Client profitability isn't static. Scope creep, rate changes, and team changes all affect the numbers. Monthly review catches problems early.
At Laya, we build client profitability tracking into every monthly close. You don't need to set up complex systems or track time obsessively — we handle the allocation and give you clear, actionable reports.
The agencies that understand their client economics make better decisions. They know when to push for rate increases, when to add resources, and when to have hard conversations about scope.
Stop guessing. Start measuring.