Path to Profitability

If you are a Services business with 10-50 staff members, mostly engaged in the delivery of your service (say, Digital Marketing), you may be facing one or more of the following:

  • Client and Employee churn
  • Clients that pay differently and demand varying levels of service
  • Employees with varying levels of CTC, experience levels and skills

In such a scenario, it may be difficult for you to determine whether or not you are on the Path to Profitability.

Of course, at a macro level, if you are making more per month than you are spending, you are doing more-or-less ok. But that approach may miss out on hidden elements, and it doesn’t help you compute the cost of each service.

Start with identifying your Top 3-5 service outputs (eg. Email Campaign or Instagram Reels). Then, map out which resources typically work on it, and for how long (per resource) to complete that task. Make sure you include core as well as non-core time spent (like iterations, team management, etc.).

Then, list down your major overhead costs like Office Rent & Infrastructure, Support Staff, etc. and apportion those across all your employees. Once you add that to the CTC of the resources involved (in proportion of their time spent), you will have a pretty good idea of what it “costs” to deliver said output.

You can then benchmark it with the market, and figure out how much you can add as your profit margin. Rinse and repeat for all your key service deliveries. Focus on the ones that are high in profit, and tweak (or drop) the ones that are pulling you down.