How to tell which of your agency projects are actually profitable

A full calendar doesn't mean a profitable year. Agencies often find that their busiest client is their least profitable one. Four numbers show where the money goes.

Revenue per project

Start with what each project has billed or will bill: the fixed fee, or the hours multiplied by the rate. Keep fixed-fee and hourly work apart, because they fail in different ways. A fixed fee loses money when the work grows. Hourly work loses money when hours go unbilled.

What your time costs

Margin needs a cost for each person's hour. Use what the person really costs you, such as salary and overheads divided by working hours, and update it when it changes. Without a cost rate, any margin figure is a guess, so it's better to show nothing than a made-up number.

Budget used, not hours logged

For each project, compare the hours or money spent with the budget, and with how much of the work is done. A project that has used 80 percent of its budget and is half finished needs a conversation now, not at the invoice.

Billable utilization

Utilization is the share of working hours that are billable. Look at it for each person and each role, not as one average. A low figure isn't always a problem: managers and senior people carry non-billable work that keeps the business running.

Unbilled time

Approved time that never reached an invoice is margin lost quietly. Check each month for time that is approved but not billed, and for work done outside the agreed scope that no one has priced.

Read the pattern across clients

Once you have margin per project, look at the clients behind them. A client with many small projects, constant revisions or late payment can cost more than their invoices suggest. Raise rates, set limits on revisions or stop taking that work, based on the numbers.

Where Hourcove will fit

Hourcove isn't built yet. It's planned to track time, approve timesheets, prepare invoices from approved time and show budget use and margin for each project, with the margin marked as unavailable where there are no cost rates. Join the early-access list to hear when it opens.