The Margin Drain. Portfolio contribution margin slid from 59% to 47%, while the normal firm held near 66%. If nothing changes it slides to about 44%. Pulling the lever brings it back to 60%.
Illustrative. Juniper Ridge Advisory is a fictional firm with a full year of modeled data, analyzed the way we analyze yours.
How to calculate it
Client revenue minus the direct cost to serve that client. Direct cost is delivery hours times each person's fully loaded hourly cost (pay, payroll taxes and benefits), plus rework and out-of-scope hours, discounts and write-offs, and the cost of carrying their late payments. Then rank clients by margin per hour of your scarcest role, not by margin percentage.
A client paying $12,500 a month who uses 70 hours at a $62 average loaded cost contributes about $8,200, or 65%. The same fee with 150 hours of scope creep contributes about $3,200, or 26%.
Everyone has a feeling about which clients are "difficult," but nobody has the number.
In this order: reprice, rescope, move the work to the right level, and only then let the client go.
Relational equity, often the highest of any lever.
Allocated overhead. Rent and software don't leave when a client leaves, so judging clients on fully loaded profit can make good clients look bad. Use contribution margin, and only exit a client if you can refill the time with better work.