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Client Profitability illustration

Marketing · Income

Client Profitability

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Use client profitability to see what an account really earns after the labor and overhead it consumes, so you know which clients are worth keeping.

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Interactive workbench

Retainer account

Revenue−Labor Cost−Overhead

$12,000 of revenue less $6,000 labor and $2,000 overhead leaves $4,000 of profit.

Step 1 of 4

Variables and units

  • Revenue

    Revenue billed to the client.

    currency

  • Labor Cost

    Staff time spent on the client.

    currency

  • Overhead

    Allocated overhead for the client.

    currency

Common mistakes

  • Ignoring unbilled hours.
  • Leaving overhead unallocated.

Step-by-step example

Retainer account

  1. 1. Start with the example inputs

    • Revenue$12,000
    • Labor Cost$6,000
    • Overhead$2,000

  2. 2. Apply the formula

    Revenue−Labor Cost−Overhead

  3. 3. Run the numbers

    $4,000.00

    $12,000 of revenue less $6,000 labor and $2,000 overhead leaves $4,000 of profit.

What this result means

Client profitability of $4,000.00 is what this account leaves behind after the labor hours and overhead it consumes. Revenue alone flatters big accounts — heavy service demands can make a large client less profitable than a small one. Negative results mark accounts to reprice, restructure, or release.