This $2.8M agency was busy and growing — but profitability told a different story. Despite healthy gross margins on paper, projects were consistently underbilled. What looked like growth was really leakage.
Before: Where They Started
- Revenue: $2.8M
- Gross Margin (GM): 40%
- Net Operating Income (NOI): 3%
- Service-Line Visibility: None (recurring, software resell, and projects lumped together)
- Billing: Projects frequently underbilled vs. rate card
Core insight: High-value project work was actually losing money because it wasn’t priced or enforced correctly.
Diagnosis (Week 1)
- No gross profit visibility by service line (recurring, resell, projects all blended).
- Project work underbilled compared to rate card; no consistent enforcement.
- No forward-looking model to show impact of price lifts.
Plays Implemented (30–60 Days)
Price & Packaging
- Doubled project pricing — shifted from “best effort” to enforced rate card.
- Built margin architecture: 49% GM target → supports 10% NOI.
Visibility & Control
- Built a Reach Reporting dashboard segmented by service line (recurring, resell, projects).
- Deployed rolling 12-month and 3-month trend views + a price-lift forecast model.
- Introduced billing QA tied directly to rate cards to eliminate leakage.
Outcomes (90 Days)
- Gross Margin: 40% → 49%
- NOI: 3% → 10%
- Run-Rate Impact: ~+7 pts NOI on $2.8M ≈ $196k/year improved profit
- Confidence unlocked: Pricing conversations backed by data, team aligned to service-line targets.
Decisions Unlocked
- Keep recurring + resell steady; scale projects at the new price floor.
- Tie all SOW changes to defined margin guardrails.
- Weekly review of service-line GP — raise prices or exit anything below target.
Reporting
- Service-line GP dashboard
- Rolling 12 + Rolling 3 GM/NOI trend views
- Price-lift forecast model for projects
Ready to Fix Your Agency Pricing?
We run 2 Agency Finance Health Checks per month.
In 90 minutes, you’ll get:
- Service-line GP benchmark
- 90-day price + margin plan
Book yours HERE.
About the Author
Michael Argento, CPA
Founder + Fractional CFO at Argento CPA
Michael helps ambitious Canadian business owners align compensation with performance. From creative agencies and SaaS startups to scaling construction trades businesses, he builds financial systems that reward results—without sacrificing sustainability.