The percentage of revenue remaining after subtracting costs — expressed as gross margin (direct costs only) or net margin (all costs including overhead).
Revenue isn't profit. An agency billing €50,000/month with €48,000 in total costs is worse off than one billing €30,000 with €20,000 in costs. Margin is what matters, and there are two kinds worth tracking.
Gross margin = (Revenue - Direct costs) / Revenue. Direct costs are the people working on the project — their salaries, freelancer invoices, any project-specific expenses. If a project bills €15,000 and the team cost is €9,000, gross margin is 40%.
Net margin = (Revenue - All costs) / Revenue. This includes overhead — rent, tooling, admin staff, everything. That same project, once you allocate a fair share of €4,000 in overhead, drops to a net margin of just 13%. Big difference.
Most agencies only look at gross margin because it's easier to calculate. That's how you end up "profitable" on paper and cash-strapped in reality.
Industry benchmarks put healthy agency net margins between 15-30%. Below 10% and you're one bad month away from trouble — a client pauses a project, a key developer leaves, and suddenly you're in the red. Above 30% is excellent but rare unless you're running a lean operation with high utilization rates.
WrkSched calculates margin per project using actual allocations, day-by-day hourly rates on both the billing and cost side, and company fixed costs. The profitability dashboard shows which projects are pulling their weight and which are dragging the average down. When margins shift — say someone's overallocated and burning overtime — you see it in real time through the profitability forecast, not three months later in a spreadsheet.
Put these concepts into practice with WrkSched — drag-and-drop scheduling and capacity planning.
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