how is
Client Profitability Calculated?
it Important?
By now, we’ve covered why it’s important to undergo a client profitability analysis, but you may be wondering how, exactly, the analysis works. What items are taken into consideration?
The analysis generally takes into account the following items:
Time and/or billable hours for each client
Data from payroll, including benefits given and cost allocations
Direct costs to your company (including salaries for your employees)
Overhead costs (including most forms of business development costs)
Calculations are typically kept track of in a spreadsheet system. Anyone conducting the analysis should allot plenty of time to obtain needed records prior to beginning. Although one can, in theory, perform the analysis on his own, it is highly recommended that you bring in the help of a professional to ensure that nothing is overlooked. Making mistakes during the analysis can cost your firm, and will make it harder to get an accurate read of your clients’ profitability.
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