The ONE Mistake That's Quietly Destroying Your Agency Profits

Here’s what happened to a marketing agency owner I know.

He finished a SEO project, logged his team’s time, and sent an invoice for $3,200 based on what he tracked.

A month later, he was confused why his profit margins looked terrible despite landing several projects that month.

When he dug into the numbers (the man was also a finance expert), he found the problem.

He was only tracking about half the work his team actually did.

The discovery calls, revision rounds, client coordination, file organization, NONE of it made it into his time logs.

So while he thought he was charging $85 per hour, he was actually earning closer to $40 per hour.

This is the invisible work that’s killing agencies.

And most owners have no idea it’s happening.

The Work That Disappears Into Thin Air

Most agencies track time like this:

“Design: 12 hours”
“Development: 18 hours”
“Copywriting: 4 hours”

Total billable: 34 hours.

Sounds great doesn’t it? 34 hours billed and paid!

But here’s a BIG LIST of things agencies burn time on, but don’t track.

The initial discovery call where the client spent an hour explaining their vision for a “revolutionary” website that’s exactly like their competitor’s site.
The follow-up emails trying to understand what they actually meant when they said “make the logo pop.”
The internal team meeting to figure out how to execute requirements outside the contract.
The three rounds of revisions because they decided midway through that they want to “target a Gen-Z audience.”
The client check-in calls where they ask for status updates on things that were clearly explained in your last email.
The time spent organizing files because they sent you assets through email, Dropbox, Google Drive, and a random link in a text message.

When you add all this up, that 34-hour project actually took like 58 hours of your team’s time.

Suddenly, your $85/hour rate becomes a $55/hour rate.

And that’s assuming you didn’t throw in any “quick extras” to keep the client happy.

Why This Problem Gets Worse Over Time

Let me tell you a story about a camel and a tent.

A man is in the desert with his camel. It gets dark. He sets up the tent. But it’s cold. So the camel asks if he can put his nose in the tent for warmth.

Man decides to be nice and say: ‘sure’.

Couple nights go by and the camel is now in the tent and the man is sleeping outside.

Moral of the story: if you start compromising you may find yourself being unable to stop,

And it applies for EVERY scenario in business and in life.

Now, replace the camel with “hours you don’t track”, and here’s what happens.

Your estimates become unreliable. You send future quotes on incomplete data, so you keep repeating the same mistake.
Your team starts feeling overworked. They’re putting in more effort than what gets counted or compensated, which means they’ll either give out poor work, or find another job
Your pricing loses credibility. You can’t justify rate increases when you don’t even know your true costs.
Your cash flow becomes unpredictable. You think you understand your margins, but you’re missing huge chunks of the real picture.

The agencies that break through to serious profitability and scale figured out how to see and charge for all the work, not just the pretty parts.

The Real Solution: Track Everything That Matters

The fix isn’t tracking EVERY single minute of your day.

It’s understanding EVERYTHING that goes into delivering projects.

Here’s a step by step guide to track your all billable hours and increase your agency’s profits.

1. Map Out What Really Happens

Take your last three projects and work backwards.

What actually happened from start to finish?

Most marketing agencies discover their workflow once they sign a client looks something like this:

Onboarding: Initial calls, info gathering, team briefing, tool setup.

Production work: The actual deliverable creation that everyone tracks.

Management work: Client communication, team coordination, progress updates.

Quality control: Internal reviews, testing, final checks.

Revision cycles: Feedback, client communication, doing the revision itself.

Project closing: Final delivery, training, documentation, invoicing.

When you map this out honestly, you’ll probably find that hands-on production work is only 40-50% of the total effort.

Which means the rest of the time goes into hours you’re making ZERO, but still giving your clients value.

We’re running a business here – not a charity.

2. Track by Activity, Not Just Project

Once you map out how work moves, you now have to get VERY SPECIFIC on WHAT YOU DO

Instead of logging “worked on “Client ABC” project for 3 hours” ,

break it down:

“ABC project – client feedback call: 45 minutes”
“ABC project – design revisions: 2 hours”
“ABC project – file organization: 15 minutes”

This shows you exactly where time goes and what’s eating your profit margins.

3. Count the Small Stuff

Let’s say you have 10 clients, and you do “small” work for each client every day, that takes you 15 minutes per client, but no one tracks.

Those 15-minute tasks add up faster than you think.

15 x 10 = 150 hours a day, that’s about 2.5 hours.

2.5 x 20 = 50 hours a month that no one knows where it went

50 HOURS!

That’s an ENTIRE PROJECT in itself!

These are things like email responses, file uploads, quick client questions, status updates. All looks like “quick work”,

Since you’re running a business, you need to keep the next quote in your mind.

if it’s required for project delivery, it counts as project time.

Stop treating this as “overhead” and start seeing it as direct project cost.

4. Separate Your Revision Tracking

The reason why I ask you to do this is simple.

Some clients don’t ask for a lot of revisions.

Some…ask for it like they’re at happy hour at their dive bar.

Which means, you need to make sure revisions aren’t eating up a lot of time.

You may say “it’s just revisions”, but I have a SCARY reason why you shouldn’t say that.

It’s scary, because ONE CLIENT’s endless revision requests may grind your team to a halt and prevent you from servicing ALL OTHERS.

Which means you don’t hide revision time inside the original deliverable hours. Track each round separately.

Like,

“ABC project – initial design: 8 hours”
“ABC project – revision round 1: 2 hours”
“ABC project – revision round 2: 3 hours”

This shows you which clients create more work and helps you price accordingly.

Account for Context Switching

Every time someone switches between projects, there’s a mental reset cost. It takes time to remember where you left off and get back into productive work, which means there’s a natural productivity loss which you must account for

Though I can’t give you an “exact” formula to calculate this extra, what I would recommend is to add a safety margin to your pricing.

Alright now.

Your next step is to build a system to manage your time.

We’ve written an article that will guide you through that.

Read – How To Build An Agency Time Tracking System In 5 Minutes

P.S. If you want more insights like this on building a profitable agency,

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