Analyze your agency's financial performance by calculating Agency Gross Income (AGI), Delivery Margins, and Net Profitability.
Agency Gross Income (AGI) = Total Revenue - Pass-Through Costs
Delivery Profit = AGI - Delivery Labor Costs
Delivery Margin (%) = (Delivery Profit / AGI) × 100%
Net Profit Margin (%) = ((AGI - Delivery Labor - Overhead) / Total Revenue) × 100%
Effective Labor Cost = Delivery Labor Costs / Total Actual Hours
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Running a profitable agency requires more than just bringing in revenue; it requires a deep understanding of your margins. The Advertising Agency Calculator is an essential financial tool designed for marketing agencies, digital consultancies, and creative firms. Unlike standard business profit calculators, this tool specifically addresses the nuances of the agency model, such as the critical distinction between "Revenue" and "Agency Gross Income" (AGI).
One of the most common mistakes agency owners make is looking at top-line revenue without stripping out "pass-through" costs. Pass-throughs—such as ad spend paid to Google/Facebook, printing costs, or external contractor fees—inflate revenue figures but contribute zero to your bottom line. Our Advertising Agency Calculator automatically handles this by focusing on AGI, which is the true revenue your agency keeps to cover staff, overhead, and profit. By focusing on AGI, you get a realistic picture of your operating capacity.
Furthermore, this tool calculates the "Delivery Margin," often considered the heartbeat of an agency. This metric tells you how efficiently your team turns labor into value. As noted by industry consultants and financial experts, a healthy agency typically aims for a delivery margin of 50-60%. If your margin is lower, the Advertising Agency Calculator helps you identify if the issue lies in pricing (charging too little) or efficiency (spending too many hours). For broader economic context on firm profitability, you can refer to Wikipedia's overview on Profit Margins or resources from the U.S. Small Business Administration regarding financial management.
Finally, the calculator breaks down the Net Profit Margin. This takes into account your fixed overheads—rent, software subscriptions, and administrative salaries. By inputting these figures, the Advertising Agency Calculator provides a holistic view of your business health, moving from the project-level efficiency (Delivery Margin) to the company-level viability (Net Profit).
Whether you are a freelancer scaling up or an established firm, using the Advertising Agency Calculator ensures you aren't just busy, but profitable.
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Revenue is the total amount you invoice the client. AGI (Agency Gross Income) is Revenue minus "Pass-Through Costs" (like ad spend or printing). AGI represents the actual money the agency keeps to pay for its own operations and staff.
Delivery Margin measures the profitability of your core work before overheads. A high delivery margin means your team is working efficiently and your pricing is correct. If this is low, you are losing money on the actual work being done, regardless of your rent or admin costs.
Pass-through costs are expenses billed to the client that you pay to a third party without markup (or with minimal markup). Examples include Google Ads media budgets, stock photo licenses, external contractor fees (sometimes), and physical production costs.
While it varies by niche, a healthy Net Profit Margin for a managed agency is typically between 15% and 25%. Anything above 25% is considered excellent performance.
Yes. If a freelancer is doing the work that generates the revenue (e.g., a freelance copywriter), their cost should be subtracted from AGI to calculate Delivery Profit, just like a full-time employee.