Chartered Financial Analyst with 15+ years experience in professional service firms and agency finance.
Find your marketing agency’s breakeven point. Enter any three variables—Monthly Fixed Costs, Avg. Retainer per Client, Variable Cost per Client, or Breakeven Clients—to solve for the fourth.
Marketing Agency Breakeven Calculator
Marketing Agency Breakeven Formula
The breakeven formula for an agency finds the total number of clients (Q) you must have each month for your total revenue to cover all fixed and variable costs.
Q = F / (P – V)
Solve for Monthly Fixed Costs (F):
F = Q * (P – V)
Solve for Avg. Retainer (P):
P = (F / Q) + V
Solve for Avg. Variable Cost (V):
V = P – (F / Q)
Variables Explained
- Monthly Fixed Costs (F): Your recurring overhead. This includes salaries, rent, general utilities, insurance, and agency-wide software.
- Avg. Retainer per Client (P): Your average monthly revenue from a single client.
- Avg. Variable Cost per Client (V): The costs tied to servicing one client. This includes client-specific software, ad spend (if not passed through), and freelance/contractor costs.
- Breakeven Clients (Q): The total number of clients you need to service each month to reach $0 in profit.
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What is a Marketing Agency’s Breakeven Point?
A **Marketing Agency’s Breakeven Point** is the exact number of clients (Q) you must retain each month to cover all your business expenses. It’s the minimum client load required to pay for your fixed “overhead” costs (like salaries and rent) and the variable “per-client” costs (like software seats or ad spend).
**Fixed Costs (F)** are your consistent monthly overhead, whether you have 0 clients or 50. This is primarily your team’s salaries, office rent, utilities, insurance, and general agency software (e.g., accounting, project management).
**Variable Costs (V)** are the costs incurred *only* when you service a specific client. This includes the cost of client-specific software (e.g., a subscription to an SEO tool only used for them), freelance or contractor fees for that account, and any ad spend or media buys that are included in your retainer (not billed directly to the client).
The **Contribution Margin** (P – V) is the profit from a single client that goes toward paying your fixed costs. If your average client retainer (P) is $5,000 and your variable costs (V) are $1,000, your contribution margin is $4,000. This calculator finds how many $4,000 “profit chunks” you need to cover your total fixed costs (salaries, rent, etc.).
How to Calculate Marketing Agency Breakeven (Example)
Let’s calculate the breakeven point for a small digital marketing agency.
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Identify Monthly Fixed Costs (F):
Your team salaries ($18,000), office rent ($3,000), and general software/utilities ($2,000) total $23,000.
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Identify Avg. Retainer per Client (P):
You have a mix of clients, but your average monthly retainer is $4,000.
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Identify Avg. Variable Cost per Client (V):
You calculate that the average client costs $500 in specific software subscriptions and $300 in fractional contractor support, for a total of $800.
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Apply the Formula: Q = F / (P – V)
First, calculate the contribution margin: $4,000 (P) – $800 (V) = $3,200.
Next, divide the fixed costs by this margin:
Q = $23,000 / $3,200 = 7.1875 -
Conclusion:
You must have 8 clients (rounding up) on retainer each month to cover all costs. Your 9th client is your first client that generates a true profit for the agency.
Frequently Asked Questions (FAQ)
This model is cleanest for retainer-only agencies. If you do project work, you can estimate your average monthly project revenue and treat it as a “client.” For example, if you do two $2,500 projects per month, you could add one “$5,000 client” to your (Q) with its associated (V).
Only if it’s included *in* your retainer (e.g., a $5,000 retainer that *includes* $1,500 in ad spend). If you bill ad spend *directly* to the client (a “pass-through” cost), then it is **not** part of this calculation. In that case, (P) is your management fee and (V) is only your software/freelance costs.
Take your total monthly recurring revenue (MRR) from all clients and divide it by the total number of clients. This gives you a reliable Average Retainer per Client (P).
Enter your (F) (e.g., $23,000), your (V) per client (e.g., $800), and a *target* number of clients (Q) you can realistically service (e.g., 10). The calculator will solve for (P), telling you the *minimum average retainer* (e.g., $3,100) you must charge to hit your goal.