Controlling working hours in an agency: how to protect the profitability of retainer projects?

How a lack of control over working hours destroys retainer profitability

A retainer project can look stable for many months. The invoice is issued regularly, the client continues the cooperation, and the team delivers one task after another. Revenue alone, however, does not tell you whether the contract is still profitable.

The scope grows, but the fee stays the same

Ongoing cooperation naturally develops. The client gets to know the agency’s capabilities better and therefore starts commissioning more activities. New communication channels appear, along with additional formats, more frequent meetings and more people taking part in the approval process.

If the agency does not control how time is used, the scope is extended without a formal business decision.

As a result the original retainer starts to cover:

• more publications and materials,
• additional campaigns,
• more frequent reporting,
• more operational meetings,
• new graphic formats,
• further rounds of revisions,
• tasks carried out urgently.

The client sees continuity of service. The agency sees a growing workload but often cannot yet present its financial scale.

Small tasks add up to dozens of unpaid hours

The biggest threat is not always a single large out-of-scope order. Much more often, profitability is lowered by small tasks that the team carries out without any additional quote.

Fifteen minutes to reply, half an hour for a revision, an hour-long meeting and preparing another version of a report may seem insignificant. If such activities repeat throughout the month and involve several people, their combined cost becomes significant.

Retainer work rarely loses profitability because of a single decision. The margin disappears through hundreds of small activities that nobody has set against the value of the contract.

The agency counts hours but does not know their real cost

The number of hours alone is not enough to assess profitability.

Twenty hours of a junior specialist’s work and twenty hours of a strategist’s or senior developer’s work are two different levels of cost. The Project Manager’s time, internal meetings, quality control and the work of people who are not directly visible to the client also matter.

The real cost of service should include:

• the cost rate of each specialist,
• salaries and the costs of B2B cooperation,
• project management time,
• internal and external meetings,
• revisions and administrative activities,
• tools and licences assigned to the client,
• subcontractor costs.

Without such a conversion, the agency may see that a client has used 40 hours, but still not know whether the cost of those hours was 3,000 PLN or 8,000 PLN.

The problem comes to light too late

In many agencies the analysis happens only when the team starts to signal overload or the owner notices a drop in the margin of the whole company.

By that stage the problem has usually been going on for several months.

The agency has already done the extra work, the client has got used to a wider scope, and a conversation about a price increase becomes harder. There is also a lack of well-organised data that would show how the team’s involvement has changed.

That is why control should work continuously, not only during a quarterly or annual review.

How to control working hours effectively in retainer projects

Good control is not about holding employees to account for every minute. Its purpose is to protect the budget, manage the scope deliberately and give the team realistic conditions to do the work.

1. Set a monthly hours budget for each client

Every retainer should have a defined limit or planned level of team involvement. Even if the client is buying an outcome, not hours, the agency must know internally how much time it can devote to delivery.

It is worth splitting the budget by skill, for example:

• strategy and consulting,
• client service,
• copywriting,
• graphic design,
• running campaigns,
• reporting,
• project management.

This way you can spot not only the overall overrun, but also the area where the biggest deviation arises.

2. Convert time into real labour cost

Every reported hour should automatically increase the cost of serving the client according to that person’s cost rate.

The basic model is simple:

Specialist labour cost = number of hours × real cost rate

Then add the other expenses assigned to the contract:

• media and tool costs,
• subcontractor invoices,
• production of materials,
• purchase of licences,
• other direct costs.

Only a comparison of the full cost with the value of the retainer shows the real margin on the client.

3. Set warning thresholds during the month

You should not wait until the last day of the billing period.

It is worth setting checkpoints, for example:

• using 50% of the hours before the middle of the month,
• using 70% of the budget without delivering most of the planned scope,
• exceeding 85% before the key tasks are finished,
• using the full budget while tasks remain open.

Once a threshold is crossed, the Project Manager should check:

• which tasks used the most time,
• whether they were part of the agreed scope,
• whether the problem resulted from a wrong estimate,
• how much work remains until the end of the month,
• whether a conversation with the client is necessary.

4. Separate the retainer scope from additional work

The team should know exactly what the fixed fee covers. Without that knowledge, every client request can be treated as a standard part of the cooperation.

It is worth setting up a simple procedure:

• 1. The request goes to the person responsible for the project.
• 2. The Project Manager checks whether the task falls within the scope.
• 3. If it does not, they determine the time and cost needed.
• 4. The client receives information about the impact of the task on the budget, or a separate quote.
• 5. The work starts after approval.

This is not about blocking small requests. It is about making sure that doing them is a deliberate decision, not an automatic cost to the agency.