May 31, 2018
How can you hit 40% net margins? What should retainer and project profitability be in order to reach that margin? There are 3 things you can do in order to hit that mark.
Brandon asked "One thing I don't see talked about enough is profit margin per project. I know we should aim for 40% net proft, what should we make per client?
For example, on at $10,000 per month retainer, how much do I need to keep?"
In the example above of a $10,000 retainer, you'd automatically think you should be keeping $4,000 to be at 40%. That leaves $6,000 to run the account - but what you're forgetting about a few assumptions on other factors. There's 3 factors that roll into this, and those are:
1. Sales - assume 20%
2. Marketing - assume 10%
3. Operations (outside of managing the account/project) - assume 10%
What that really means is, on that $10,000 retainer example, you should not be spending over $2,000.
Some projects or retainers are not going hit that mark, and some are going to be more front loaded and perform even better. The key is to have your average net at 40%.
So, where's your profit margin? What do you need to start doing differently in order to improve profitability? Comment below and share your agency stories.
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JASON SWENK IS AN AGENCY ADVISOR THAT GUIDES MARKETING AGENCIES THROUGH A PROVEN FRAMEWORK FOR GROWING THEIR AGENCY FASTER & EASIER.
Fresh out of college Jason was off to work for Arthur Anderson, one of the big 5 consulting firms. He quickly realized that he could never work for anyone other than himself. He decided to change direction, launch a digital agency that quickly grew to a multi-million dollar operation working with brands such as AT&T, Hitachi and Lotus Cars.
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