What is the profit margin for each client?

Profit margin by client calculates the profitability of each client relationship by comparing revenue earned to the fully loaded costs of serving that client, expressed as a percentage. Some clients are profitable. Some are not. For professional service firm owners, client-level profitability analysis reveals which relationships to grow and which to restructure or exit.

Key characteristics

• Revenue minus cost per client

• Expressed as a percentage

• Reveals profitable clients

• Identifies money losers

• Supports pricing decisions

• Quarterly or annual analysis

Why it matters for professional service firms

Not all revenue is good revenue. A client paying $200,000 annually who demands constant attention from your most expensive staff might be less profitable than an $80,000 client with efficient delivery. Without client-level analysis, you are flying blind. The squeaky wheel might be costing you money.

Real-world example

Kevin analyzed his top 10 clients by margin. Revenue ranged from $95,000 to $280,000 annually. But margins told a different story. His largest client ($280,000) had 18% margin due to heavy partner involvement and scope creep. His fourth largest ($150,000) had 42% margin with efficient junior staff delivery. He restructured the large client relationship to improve staffing leverage. Margin improved to 28%.