Rank each client by true profit after the cost to serve — and see who's quietly draining the business.
A common pattern in service businesses: 20% of your clients deliver 80% of the profit, and at least 1–2 'big' clients are actually loss-making once you account for the hours, the rework, and the slow payments. You feel the drag but can't point to it.
The Client Profitability Scorecard works out each client's real contribution: revenue minus direct costs minus your hourly time minus payment-delay carrying cost. It outputs a per-client profit number and an A/B/C/D/F grade. The Z-grade clients are the ones you should consider re-pricing or letting go.
Per-client profit = annual revenue − direct costs − (hours per year × loaded hourly rate) − carrying cost of late payments. Carrying cost = average days past due × revenue × cost of capital ÷ 365. The grade is assigned by profit margin: A is 40%+, B is 25–40%, C is 10–25%, D is 0–10%, F is loss-making.
List your top 5–10 clients by revenue
For each, enter annual revenue, direct costs, hours per year, and average days late on invoices
Enter your loaded hourly rate (your salary + overhead spread across billable hours)
Read the per-client profit, margin, and grade
Use the F and D clients as candidates for re-pricing, renegotiation, or graceful exit
Your true cost-per-hour including overhead. If you take €60,000/year and your fixed business costs are another €30,000, and you work 1,800 billable hours, your loaded rate is €50/hour, not just your headline rate.
Three options: (1) raise their price to a profitable level, (2) renegotiate scope to fit the price they pay, (3) wind down the relationship. Doing nothing is the most expensive option — every hour you spend on them is an hour not earning elsewhere.
Gross margin per project ignores ongoing cost-to-serve: meetings, rework, late-payment carry, support requests. Client profitability rolls all that into an annual number per client, which is much more honest for service businesses.
It's included in Founding Lifetime Access (€99 one-time).
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