Agency Profitability Calculator

Target 65-75% utilization. Below 60% means you have capacity issues, either too many staff or not enough work. Above 80% leads to burnout, quality problems, and no capacity for new business pitches. The sweet spot gives you productive output while maintaining quality and leaving room for business development, training, and internal projects.

Take your annual net profit (after all costs including overheads) and divide by total headcount, including non-billable roles like admin and management. A healthy agency achieves GBP 15,000-25,000 per head. Below GBP 10,000 suggests pricing or efficiency problems. Top performers hit GBP 30,000-50,000 per head through premium positioning and lean operations.

Common causes include: underpricing (not charging what you're worth), scope creep (doing work you're not billing for), low utilization (bench time eating into margins), high overheads relative to team size, and unprofitable clients you haven't exited. Most agencies could increase profit 20-30% by addressing just one of these.

Utilization has a massive impact because your salary costs are fixed but revenue is variable. A 10-person agency increasing utilization from 60% to 70% at GBP 85/hour adds roughly GBP 120,000 in annual revenue with zero extra cost. That goes straight to profit. It's often the fastest lever to improve profitability without changing prices or headcount.

Both matter for different reasons. Gross margin (revenue minus staff costs) shows your delivery efficiency. Target 50-60%. Net margin (revenue minus all costs) shows true profitability. Target 10-20%. Track gross margin for project-level decisions and net margin for business health. If gross margin is strong but net margin is weak, your overheads are too high.