Retainer Profitability Calculator
Calculate retainer profit, margin, labor cost, effective hourly revenue, and included-hour variance from a monthly fee and delivery costs.
What this tool can do
Calculate monthly retainer profit and margin. Include labor and direct costs. Show effective hourly revenue. Identify included-hour overages or unused hours.
Formula and methodology
Retainer profit = monthly fee − direct costs − (hours used × internal hourly cost).
Worked example
A €5,000 retainer using 46 hours at €55 with €300 direct costs produces €2,170 profit, a 43.4% margin, and six hours above a 40-hour allowance.
Use actual hours used
Included hours describe the commercial allowance; hours used determine the delivery cost. Track both so unused scope and over-servicing remain visible.
Include the full delivery cost
Use the internal cost of employee or contractor time and add direct software, media, production, or fulfilment costs that belong to the retainer.
Separate margin from collection
A profitable contract can still create cash pressure when invoices are late or unpaid. Review payment status separately from the operating margin.
Review the pattern, not one month
Scope and hours fluctuate. Compare several months before changing the fee, allowance, staffing, or service promise.
Privacy
Calculations and draft documents run in your browser. Entered values are not included in FollowIncome analytics events.
Next step
Use the result as a planning aid, then track actual invoices, payments, expenses and projects in FollowIncome.
Frequently asked questions
How do I calculate retainer profitability?
Subtract direct costs and the internal cost of hours used from the monthly retainer fee, then divide profit by the fee to calculate margin.
What happens when used hours exceed included hours?
The hours variance becomes negative. Review the agreement to decide whether excess work is billable, requires a scope change, or reflects inefficient delivery.
Should unused hours carry forward?
That depends on the agreement. This calculator shows the variance but does not decide rollover, expiration, or billing terms.
Is effective hourly revenue the same as profit?
No. Effective hourly revenue divides the fee by hours used; profit also subtracts labor and direct costs.
Related guides and tools
Project costs and profitability
Plan revenue and delivery costs, then compare the estimate with recorded project results.
- Project profitability calculator
- Client profitability calculator
- Profitability toolkit
- Project profitability guide
- Task cost tracking
- Project profitability software
Agency capacity, clients, and retainers
Connect billable capacity with the profitability of client relationships and recurring retainers.
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