AGENCY PROFITABILITY TOOL

Agency Margin Calculator

Calculate your target gross margin, annual profit, and discover exactly how much revenue your agency is leaking due to undocumented billable hours.

$150
$75

Fully loaded cost per employee

32 hrs
10 people

Target Gross Margin

37.5%
Annual Profit: $936,000

The Profit Leakage

If your team forgets to log just 2 billable hours per week due to bad timesheets, you lose:

$156,000 / yr
Stop the leak with VeloTime

How to calculate agency margins

Gross margin is the ultimate indicator of your agency's financial health. It measures the profit remaining after deducting the direct costs associated with delivering your services (primarily the salaries and benefits of your billable team).

The Gross Margin Formula

Gross Margin % = ((Total Revenue - Cost of Delivery) / Total Revenue) * 100

A healthy digital agency should aim for a gross margin between 40% and 50%. If your margin is below 30%, you are likely either underpricing your services, overpaying for resources, or—most commonly—failing to capture all of your billable hours.

The hidden cost of unbillable time

The biggest threat to agency profitability isn't losing a client; it's the slow, silent leak of undocumented time. When employees use clunky, timer-based tracking software, they often forget to log small 15-minute tasks, quick client calls, or Slack consultations.

As the calculator above shows, if a team of 10 employees (billing at $150/hr) forgets to log just 2 hours per week each, the agency loses $156,000 in pure profit every year.

How to stop the profit leak

The solution is not to micromanage your team or install invasive screen-recording software. The solution is to remove the friction from data entry.

By switching to a lightning-fast, spreadsheet-style matrix like VeloTime, you enable your team to log their entire week in 10 seconds. When timesheets are frictionless, compliance hits 100%, and you capture every single billable hour.