Agency owners between $2–$10M in revenue: two of your services probably generate 80% of your profit — and a few are quietly draining it.
You can find out which is which in under by analyzing your profit by service.
Why “Profit by Service” Is the Hidden Lever
When we analyze agencies between $2M and $10M in revenue, the same pattern appears every time:
- Two or three services drive more than 80% of total profit.
- One or two consume capacity without producing margin.
- No one looks at service-level P&L data.
Seeing those numbers changes how you lead.
| Service | Revenue | Direct Costs | Gross Margin | Rev/FTE | Decision |
| Paid Ads | $1.2M | $240K | 80% | $280K | Productize |
| SEO | $900K | $315K | 65% | $180K | Fix |
| Content | $1.1M | $450K | 59% | $160K | Fix or Cut |
Step 1: Productize the Winners
Productize any service showing 70–80%+ gross profit and Revenue per FTE above $250K.
Those numbers signal that the service is profitable, predictable, and scalable.
Productizing means creating a standardized, fixed-scope offer:
- Defined deliverables and timelines
- Fixed pricing and clear SOW
- Change orders for anything out of scope
Example: your Paid Ads service produces an 80% margin on $1.2M in revenue. Package it as:
- $7,500/month retainer
- Defined deliverables (strategy, creative, reporting)
- One process, one tool stack, one set of rules
Why this works: “Simple scales, fancy fails.” Repeatable work grows profitably; custom work breaks systems.
Next step:
List every service with ≥70% GP. Turn them into standard packages with fixed deliverables and a visible floor price.
Step 2: Fix Before You Cut
Don’t prune every 50%-margin service on sight. Fix them first.
Small pricing, scope, and term changes can 2–3x profit without adding volume.
Launch a 30-day Fix or Cut Sprint for any service with gross margin between 50–69%.
The 30-Day Fix or Cut Sprint
1. Raise prices on new deals (+10–20%) and hold the line.
Price to make the most money, not the most “yeses.” Track close rate × ARPU.
2. Switch those services to 28-day billing (13 cycles/year).
That single change adds roughly +8.3% revenue with no extra fulfillment. Start with new clients now; schedule a migration date for existing ones.
3. Set a hard floor price (target ≥80% GP).
If the budget doesn’t fit, down scope—don’t discount. Remove freebies.
4. Productize the scope.
Define fixed deliverables, clear timelines, and change orders for out-of-scope requests.
Run this sprint for 30 days and monitor margins weekly.
Binary Decision Rule (after 30 days)
- If GP improves to ≥70–80% and delivery runs smoothly → keep it, scale it, or bundle it with your winners.
- If GP stays below 70% or it consumes scarce capacity that could serve higher-margin work → prune or reposition it.
Why this works:
- Modest price lifts and term changes double net profit if sales volume holds.
- 28-day billing adds a cycle of cash flow per year without more effort.
- Higher prices and standardized scope increase both perceived value and actual margin.
Next step:
Run the Fix or Cut Sprint this month on any 50–60% GP service.
If it can’t cross 70% quickly—and it blocks your best people—cut it and reallocate that capacity.
Step 3: Bundle Strategically
Once you’ve fixed or confirmed your profitable services, bundle them.
Lead with your highest-margin service and add complementary ones that increase perceived value, not workload.
Examples:
- Growth Accelerator: Paid Ads + Landing Page + Analytics Dashboard
- SEO Plus: Technical SEO + Content Strategy + Monthly Reporting
Set package minimums, avoid custom builds, and protect at least 80% GP.
Next step:
Create two core bundles around your best-margin services.
Add smaller versions only by reducing scope, never price.
Step 4: Protect Your Floor
Underpricing is the fastest way to destroy margin.
Every agency should have a floor price—the minimum fee required to maintain an 80% margin.
Formula:
Floor = (Direct Labor + Contractors ÷ (1 − Target GP%)
Example:
If direct labor and contractors total $2,000/month and you want 80% GP, your floor price is:
$2,000 ÷ (1 − 0.8) = $10,000/month.
Once set, train your team to never quote below the floor.
If a client’s budget doesn’t fit, reduce deliverables. Never discount.
Next step:
Calculate and publish your floor price internally.
Add it to your pricing sheet today.
Step 5: Streamline Delivery
Even profitable services can bleed margin through inefficiency.
Audit every step of your workflow:
- Eliminate custom reports clients don’t read.
- Limit revision rounds.
- Automate onboarding and reporting.
Aim for:
- Revenue per FTE ≥ $250K
- Utilization ≥ 70%
Small process changes often add 3–5 margin points within one quarter.
Next step:
Hold a one-hour team “Process Audit.”
Kill or automate anything that doesn’t add client value.
Two Pricing Plays That Lift Profit Immediately
- Bill every 28 days (13 cycles/year)
Creates an 8.3% revenue lift at the same conversion rate. - Add annual increases (5–12%)
Protects margin as wages and software costs rise.
Implement both and you’ll see margin growth without adding clients.
Do This Now Checklist
- Tag services:
- ≥80% GP → productize
- 70–79% → fix and scale
- 50–69% → run the 30-day Fix or Cut Sprint
- <50% and unfixable → prune
- Set floor prices and package minimums.
- Switch to 28-day billing on all new clients.
- Book your free Agency Profit Benchmark session.
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Next page: book your 45-minute Agency Profit Diagnostic — valuation snapshot and 30-day plan to add 3–15% margin.
About the Author
Michael Argento, CPA, is the founder of Argento CPA, a remote accounting and fractional CFO firm helping marketing agencies scale profitably. Michael specializes in helping owners understand their numbers, increase cash flow, and grow with clarity.