Agency Retainer Profit Calculator

What this number means

Gross profit per month is what the retainer leaves after delivery labor, tools, and overhead. With the defaults — $4,000 retainer, 30 hours at $60, $150 in tools, 20% overhead — that is $4,000 − $1,800 − $150 − $800 = $1,250/month, a 31.3% margin.

Effective hourly rate ($101.67 at defaults) is what each delivery hour truly earns after non-labor costs — compare it against your target rate before signing. Max hours before unprofitable (50.8 at defaults) is the ceiling: deliver more than that and the retainer loses money.

The formula

In plain English: every cost is converted to monthly dollars and subtracted from the retainer; the remainder is profit, and the profit divided by hours is your real rate.

• Delivery labor cost = Delivery hours x Fully-loaded hourly cost
• Overhead cost = Monthly retainer x Overhead %
• Total cost = Labor + Tool costs + Overhead
• Gross profit = Retainer − Total cost
• True margin = Gross profit / Retainer x 100
• Effective hourly rate = (Retainer − Tools − Overhead) / Delivery hours
• Max hours = (Retainer − Tools − Overhead) / Hourly cost

Worked example

A boutique agency signs a client at $4,000/month. Delivery takes 30 hours at a $60 fully-loaded cost ($1,800), allocated tools cost $150, and overhead runs 20% ($800). Total cost: $2,750. Gross profit: $1,250/month at a 31.3% margin.

The effective hourly rate is $101.67 — well above the $60 cost, so the retainer is healthy. But the ceiling is 50.8 hours: if scope creep pushes delivery to 55 hours, the same retainer starts losing money. That ceiling is the number to put in the contract's scope clause.

Assumptions and limitations

• Hourly cost must be fully loaded. Using raw salary instead of the true cost (benefits, taxes, non-billable time) understates cost and overstates profit.
• Overhead is an allocation, not a measurement. The 20% default is a planning figure — use your agency's real overhead ratio for decisions.
• Scope creep is the silent killer. This calculator is static; re-run it whenever delivery hours drift from the estimate.
• No taxes or payment risk modeled. Late payments, write-offs, and taxes are excluded from gross profit.
• All figures are planning estimates.