Why Agencies Should Break Out Margin by Account, Service, and Role

Your blended margin is hiding your worst account.

If your margins look fine overall, don’t bother yourself with the details. Plenty of agencies run a healthy number at the top and never need to go further down.

But if you’re reviewing your financial performance and you’ve hit a plateau, or a ceiling, or something feels off, the blended number won’t give you the detail you need to see where to improve. It’s an average. It tells you how the whole agency did, and nothing about which accounts, services, or roles got it there.

Breaking it out by account, by service, and by role shows you which changes need to be made, so you can make them.

The crown jewel is usually the problem

When you dig into the numbers at this level, what you find is surprising. The large account that’s known as the crown jewel of your client portfolio is the one draining the team the most and running at your lowest effective hourly rate.

It makes sense once you see how it happens. The biggest client gets the most attention. Your senior people stay close to it because nobody wants to be the one who loses it, so they end up doing work a junior should be doing. Requests come in that blow way past the scope, and nobody wants to send a change order to the client paying the most. The price was set when the scope was smaller, and the work kept growing after it.

None of that shows up in a blended number. The revenue is big, so the account looks like a win. Divide that revenue by the hours the team puts into it and you get a very different picture.

Some services cost more than the team realizes

Same thing when you break margin down by service, by workflow, and by department. You may find your team is really efficient at one type of work, like content production. But when it comes to web page redesigns and updates, or publishing new page types from the content your team produces, that’s where you lose a lot of time and margin.

That second kind of loss is easy to miss because it lives in the handoffs. The content gets written on time and then waits on a designer or developer to fit it into a page that was never planned for it. Those hours land somewhere in your P&L, but nobody’s timesheet says “publishing the blog post.”

A faster first draft won’t fix a rework problem

I’ve seen this so many times. We look at the cost to deliver a service like content, and at a high level we can see something’s off. It’s taking way too long to produce. The first instinct is to use more AI and make it faster.

But when we dig into the data, what’s inflating the cost is the revisions and rework at the end. The draft goes to a strategist or an account manager, gets flagged, goes back to the writer for a rewrite, back to the account manager, then to the client, gets flagged for revisions there, goes back for more rewriting, back to the client, and maybe back again.

Count the people in that loop. A writer, a strategist or account manager, and the client, each touching the same piece three or four times. AI gets you to the first round of revisions sooner, and then the same loop runs on the same draft.

That’s a breakdown in strategic direction that should have been set at the very beginning. Most of the notes that come back at the end are direction calls. The angle is wrong, the audience is off, or the client wanted a different point made. Somebody could have made those decisions before the writer started.

I’m working through this now with multiple agencies. When we invest more in strategic direction up front for a deliverable or service, it cuts the revisions and rework at the end, and the net cost to deliver goes down. It feels slower at the start, because a strategist is spending time on a piece that hasn’t been written yet. That time comes back once the draft stops bouncing between people.

“We don’t track time well enough to do this”

This is the objection I hear most, and it’s fair. In a recent survey of agency owners, 25 of 76 said they don’t track time at all. Without hours, there’s nothing to divide the revenue by.

You don’t need perfect data to start. Get estimates from the people who have done each task a hundred times, add up the hours across everyone who touches the deliverable, and multiply by how many deliverables are in the scope. Do that for your three biggest accounts and your two or three main services. It won’t be precise. Even if it’s only 60% accurate, it’s better than the one blended number you have now.

Then run two weeks of time tracking on the accounts that look worst. That’s usually enough to tell you whether the estimate was close.

Having the levers is the point

If you’re preparing your agency for a future acquisition, or for long-term sustainability and growth, you need these levers at your disposal. Whether you choose to pull on them is a different story. You might keep the crown jewel exactly as it is because of what it does for your reputation or your referrals. That’s a fine call to make, as long as you’re making it with the number in front of you.

Having the option is a level of control a lot of agency owners don’t give themselves.