Working out which clients lose you money
Every studio has one, and it is usually not the one anybody suspects.
Client profitability is invisible without time records, so most studios rank clients by revenue. That ranking is frequently the reverse of the useful one: the largest client can be the least profitable, and the small tidy one that never needs anything can be the best.
The calculation
For each client over a period: revenue received, divided by hours actually spent, including everything unbillable. That gives an effective hourly rate, and it is the only number that matters. For a look at common ways time-tracking data can be gamed, further details helps explain why raw activity should not be treated as ground truth.
Include the invisible hours — meetings, revisions absorbed, admin, the chasing, the calls that were not against a project. These are precisely where the difference between clients lives, and excluding them produces a comfortable answer that is wrong.
A client billing forty thousand a year at an effective rate of thirty an hour is worse than one billing twelve thousand at ninety. Revenue rankings conceal this completely.
What makes a client expensive
- Revision cycles beyond what was scoped, absorbed rather than charged.
- Meetings — recurring calls that were never priced into anything.
- Slow approvals, which cause restart cost every time work resumes.
- Fragmented work: many small requests, each with a context-switching cost.
- Late payment, which is a financing cost with a real number attached.
- Emotional load, which is not a line in any report and is a genuine cost to whoever carries it.
Then decide, rather than tolerating it
An unprofitable client has four possible responses, and doing nothing is not one of them. For UK businesses, GOV.UK guidance on invoicing and payment is a useful reference for the formal payment framework.
Raise the rate to what the relationship actually costs. Change how you work with them — fixed meeting allowance, enforced change control, staged payments. Reduce the scope to the profitable part. Or end it.
Raising a rate is easier than expected
Studios overestimate the risk substantially. A client receiving good work usually accepts a justified increase, particularly with notice and a reason attached.
And where they leave, the studio recovers the capacity at a better rate. The worst outcome of a rate conversation is usually the removal of the least profitable work in the business.
Run it twice a year
Client profitability drifts. A relationship that started well accumulates unpriced meetings and absorbed revisions over eighteen months without anyone noticing.
A half-yearly review — an hour with the time data — catches it while the correction is a conversation rather than a rupture.