Who this is for
Agency owners and account leads working out whether a specific retainer is worth what it takes to service, usually before a renewal or a scope conversation.
The formulas
total hours = delivery + coordination
total cost = total hours × hourly cost + direct costs
contribution = retainer − total cost
gross margin = contribution ÷ retainer × 100
effective rate = retainer ÷ total hours
max hours = (retainer × (1 − target margin) − direct costs) ÷ hourly cost
Coordination time is usually the answer
When an agency says a client “feels” unprofitable while the numbers look fine, the gap is almost always here. Delivery hours are estimated carefully during a pitch because they are visible and easy to describe. The calls, the chasing, the third round of feedback that contradicts the first, the re-brief after a stakeholder joins late, none of that appears in a scope document, and all of it is paid for out of margin.
The coordination share in the results is there to be looked at rather than acted on immediately. If it is a third of the account, that is the conversation to have at renewal, not whether the fee is right.
What other people have measured
These are other people’s numbers, shown here as context. None of them is used in the calculator above, every figure it produces comes from what you typed.
13%
Average after-tax net margin reported by digital agencies for 2025. Agencies that narrowed their service mix reported 30%.
Useful as a reality check on the scale of agency margins, not as a target. This is net margin across whole agencies; the calculator above computes gross margin on a single retainer, which will always be the larger number. A 31-person US agency also carries a different cost base from a small Indian one.
How to use the result
- Run your real hours first, including the coordination you would rather not count. A flattering input produces a flattering margin and no useful decision.
- Compare the effective hourly rate against what you would charge a new client for the same work. If the retainer pays less per hour than your rate card, you have found the problem.
- Use the maximum-hours figure as a scope boundary rather than a target. It is the point at which this retainer stops hitting the margin you chose.
- Change one input at a time. Moving both the fee and the hours tells you the margin moved but not which decision moved it.
Where Poststack fits
Poststack is a social media operations platform built for Indian agencies, with a workspace per client for scheduling and client approvals. We are not going to tell you it changes your margin. This calculator contains no Poststack assumption and no product-attributed saving; the numbers are yours and the arithmetic is printed above. If you want to model a different way of working, change the coordination hours yourself and compare the two scenarios.
Frequently asked questions
Is this net profit?
No, and the difference matters. This is gross margin on one retainer, the fee minus the direct cost of servicing it. Your rent, the salaries of people not on this account, your own software, and tax all sit outside it. An agency with 50% gross margin on every account can still be unprofitable overall.
What should my target margin be?
That is your decision and depends on your overhead, your growth plans and your market. For scale: Promethean Research reported a 13% average after-tax net margin across 119 mostly US agencies in 2025, but net and gross are different measures, and a North American cost base is not an Indian one.
Why does coordination time get its own field?
Because it is usually where the margin goes and it almost never appears in a scope document. Delivery hours get estimated carefully during a pitch; the calls, chasing and re-briefing that surround them get absorbed. Separating them shows what share of the account is spent on work nobody scoped.
Should I include ad spend in the retainer fee?
No. If you pass ad spend through to the client, it is not your revenue and including it inflates your apparent margin badly. Enter your management fee only.
What is the effective rate telling me?
What the retainer actually pays for each hour of real work, including coordination. Most agencies know the rate they intended to charge and are surprised by this one, because it is the intended rate divided by all the hours that really went in.