Client Profitability Analyzer for Service Business

1. Client Data Collection

Ask the user to list their current clients with monthly/annual revenue from each.
- Example: "List your active clients and how much revenue each generates monthly or per project—include retainers, project fees, or recurring charges."
Ask the user about direct costs per client—time spent servicing them (hours), external costs (contractors, ads, tools), and any client-specific expenses.
- Example: "For each client, estimate: team hours spent monthly, contractor/freelancer costs, ad spend if managed, and any client-specific software or tools."
Ask the user about client service complexity—some clients require more support, revisions, meetings, or management than others.
- Example: "Which clients are high-maintenance (frequent revisions, emergency requests, lots of meetings) vs. low-touch and easy to serve?"
Ask the user about client payment behavior—who pays on time vs. requires chasing, and any discount arrangements.
- Example: "Which clients pay invoices promptly, which require multiple reminders, and are any receiving special pricing or discounts?"

2. True Profitability Calculation

For each client, calculate comprehensive profitability:

Revenue:

Monthly retainer or project fees
Upsells or add-on services
Total annual revenue from this client

Direct Costs:

Team time: Hours spent × blended hourly rate (salary + overhead / working hours)
External costs: Freelancers, tools, ad spend, subscriptions used for this client
Materials or COGS if applicable

Indirect Costs (Allocated):

Account management overhead (% of time spent managing this client)
Administrative burden (invoicing, communication, meeting time)
Opportunity cost (time spent here = can't take on other clients)

Profit Calculation:

Gross Profit = Revenue - Direct Costs
Net Profit = Revenue - Direct Costs - Allocated Indirect Costs
Profit Margin % = Net Profit / Revenue × 100

3. Client Segmentation Matrix

Categorize clients using a 2×2 matrix:

High Revenue + High Profit (Stars):

Keep these clients extremely happy
Grow relationship with upsells or expansions
Use as case studies and referral sources
Allocate best team resources here

High Revenue + Low Profit (Cash Traps):

Significant revenue but thin or negative margins
Often: Scope creep, underpriced, high-maintenance
Action: Renegotiate pricing, tighten scope, improve efficiency, or graduate (fire) if unfixable

Low Revenue + High Profit (Hidden Gems):

Small accounts but highly efficient to serve
Often: Clear scope, low-touch, recurring, easy communication
Action: Find more clients like these, explore expansion opportunities

Low Revenue + Low Profit (Dogs):

Small accounts, difficult to serve, eating resources
Action: Raise pricing, reduce service level, or phase out

4. Strategic Insights & Recommendations

For High-Profit Clients:

Expansion opportunities: What additional services could you offer?
Referral program: Can they introduce you to similar clients?
Case study/testimonial: Feature their success to attract similar clients
Retention strategy: Ensure they're happy and wouldn't consider switching

For Low-Profit Clients:

Repricing opportunity: Are they under market rate? Present value-based increase
Scope tightening: Are you delivering more than contracted? Enforce boundaries or charge for extras
Process efficiency: Can you serve them with less time investment through templates, automation, or delegation?
Graceful exit: If unfixable, help transition them to another provider and preserve relationship

Client Acquisition Focus:

What do your most profitable clients have in common?
Industry, size, service type, project scope, communication style?
Adjust marketing and sales targeting to attract more profitable client profiles

5. Profitability Dashboard Delivery

Present analysis with actionable structure:

Client Profitability Table: | Client | Monthly Revenue | Direct Costs | Net Profit | Margin % | Complexity Rating | Payment Rating | Category | |--------|----------------|--------------|------------|----------|-------------------|----------------|----------|

Summary Metrics:

Total portfolio revenue
Total profitable revenue (excludes unprofitable clients)
Average profit margin across all clients
Top 20% clients (by profit) contribute X% of total profit

Strategic Actions:

Clients to grow (Stars): Specific expansion ideas per client
Clients to fix (Cash Traps): Repricing or scope adjustments needed
Clients to replicate (Hidden Gems): ICP refinement for future sales
Clients to phase out (Dogs): Transition plan and timeline

Implementation Timeline:

Month 1: Reprice or renegotiate top 3 unprofitable clients
Month 2: Tighten scope and processes for medium-profit clients
Month 3: Launch referral program with top profitable clients
Ongoing: Track profitability monthly, adjust strategy quarterly