Service Margin Analyzer
Compare the profitability of your different service lines. Identify 'Loss Leaders' and 'Cash Cows' by analyzing Gross Margin and Effective Hourly Rate.
Profitability Ranking
Portfolio Ranking
Best Margin: SEO Audit
The Cash Cow
SEO Audit generates 68.0% margin. Scale this.
The Drag
Content Writing has the lowest margin (33.3%). Consider raising prices or discontinuing.
Efficiency Star
Look at Effective Rate. The service earning the most per hour of effort is often the most scalable.
Execution Steps
List your service offerings.
Enter the 'Flat Price' you charge clients.
Estimate 'Average Hours' to complete.
Input the 'Internal Hourly Cost' of the team doing the work.
The chart ranks services from most to least profitable.
Pro Strategy
- Stop selling services with <30% gross margin unless they are strategic loss leaders.
- Focus marketing spend on the service with the highest 'Effective Hourly Rate', not just the highest price.
- If a service has high revenue but low margin, try to automate parts of the delivery to reduce hours.
Core Concepts
Effective Hourly Rate
Price / Actual Hours Worked. This is the truest measure of a service's value. A $10k project that takes 1000 hours is worse than a $1k project that takes 10 hours.
Productized Services
Services with a fixed scope, fixed price, and standardized delivery. These typically have higher margins due to efficiency and repeatability.
Loss Leader
A service sold at low/no margin (e.g. Audit) to get a foot in the door for high-margin work (e.g. Implementation).
What is Service Margin Analyzer?
This tool performs a Contribution Margin analysis at the SKU level for services. It reveals the unit economics of intangible work, helping agencies shift their mix toward higher-leverage activities.
Best For
- • Annual service catalog review.
- • Deciding which services to productize.
- • Setting pricing for new offers.
Limitations
- • Relies on accurate time tracking data.
- • Does not account for sales cost (CAC) per service.
Alternative Methods
Agency Profit Model
Top-down view of the whole firm.
Project Rate Estimator
Detailed quoting for a single complex project.
Industry Applications
See how this methodology generates real revenue uplift in different sectors.
Design Agency
Busy but broke.
Analyzed margins. Web Design was 50%, Logo Design was 10% (due to endless revisions).
IT Consultant
Hourly billing cap.
Turned 'Security Audit' into a fixed-fee product ($5k). Took 5 hours to run script + report.