Gross margin (agency)

The percentage of project or client revenue remaining after subtracting the direct cost of delivering the work (primarily staff time), before overhead and other business expenses.

Example

A project bills $30,000 and costs $18,000 in delivery labor, for a gross margin of 40% ($12,000 ÷ $30,000). If 15 hours of unbilled scope creep pushes labor cost to $20,250, margin drops to 32.5%.

Why it matters for agencies

Gross margin is the number scope creep most directly damages, because unbilled extra work adds cost without adding matching revenue. Tracking gross margin per project, not just in aggregate, is what makes it possible to see which specific clients or project types are being quietly eroded by unmanaged scope.