We're busier than ever and the bank balance disagrees
Revenue grew and profit did not, which means the extra work arrived at a lower margin than the work you already had. Four causes account for most cases: underpriced job types, senior time on junior work, unbilled scope, and overhead added ahead of the revenue. Find yours before you sell another job at the same price.
Written for founders between £500k and £15M whose firms have grown and whose accounts no longer reward it. Growth makes every existing pricing error larger, which is why a busy year can end flatter than a quiet one.
First, separate profit from cash
These are two different problems with two different fixes. A firm can earn a good margin and still have no money in the bank because the cash is sitting in unbilled work and unpaid invoices. A firm can also collect promptly and earn nothing. Check which one you have before you change anything.
Look at the last three months. If your profit line is healthy and the bank is empty, the problem is the billing and collection cycle, covered in profitable on paper, broke in the bank. If the profit line has flattened while revenue rose, keep reading.
The four usual causes
| Cause | How to spot it | First move |
|---|---|---|
| A job type sold below cost | Group the last quarter's work into five or six types. Compare fee against delivered cost for each. One type usually sits well below the others. | Raise the rate for that type or stop selling it. One change, then measure. |
| Senior time on junior work | Look at who delivered the hours against the grade the job was priced at. Growth pulls seniors into delivery to keep quality up. | Price the grade the work needs, or move the work to the grade you priced. |
| Scope delivered and never billed | Ask each lead what they delivered last month that was not in the original agreement. The total is usually larger than the founder expects. | Name an owner for pricing changes, with a written limit on what may be absorbed. |
| Overhead added ahead of revenue | Compare overhead growth with fee income growth over eight quarters. Hires, space and software made in anticipation show as a widening gap. | Hold overhead flat for two quarters while revenue catches up, rather than cutting into delivery. |
Three of the four need delivered cost per job to diagnose, which most firms cannot produce. Building it is the same work as the weekly project margin view, and it answers all three at once.
Why growth magnifies the error
A pricing error on one job in ten is invisible. The same error on four jobs in ten, at twice the volume, is the difference between a good year and a flat one. Nothing got worse. You sold more of something that never earned what you assumed.
Two things change as a firm grows past its first plateau. Your seniors stop touching every job, so quality and scope drift where you cannot see them. And the founder stops pricing every quote personally, so the instinct that used to protect margin gets applied by people who were never told what it was protecting.
Both are structural, and both are fixed the same way: write down what a job should cost, measure what it did cost, and give one person the authority to act on the difference while the job is still running.
What the correction looks like
One agency growing its revenue found the growth was adding volume and taking margin.
Nobody grows into profitability by accident. Volume multiplies whatever your margin already was, including a negative one.David Schofield
The order to fix them in
Get cost onto jobs
Hours booked weekly, external spend coded to the job when committed. Two to three weeks before the numbers stabilise.
Find the worst job type
Compare fee against delivered cost across five or six types. Act on the worst one before touching anything else.
Price the work beyond scope
Total what your team delivered outside the agreement last month, give the number an owner, and set a limit on what may be absorbed.
Hold overhead for two quarters
Let revenue close the gap rather than cutting delivery capability, which costs more to rebuild than it saves.
Common questions
Our revenue is up 30% and profit is flat. Where do I look first?
Group the last quarter's work into five or six job types and compare fee against delivered cost for each. In most firms one type has been sold below cost for some time, and growth made it large enough to see. That single comparison identifies the cause faster than any review of overhead.
Is this the same as profitable but out of cash?
No. Profitable and out of cash is a timing problem in billing and collection, where the margin exists but the money sits in unbilled work and unpaid invoices. Busy and unprofitable is a pricing and delivery problem, where the margin was never earned. Check the profit line first, because the fixes share nothing.
Should I stop growing until this is fixed?
Stop selling the job type that loses money, and keep selling the rest. A blanket pause on growth costs you the work that does earn, and it does not address the reason the other work does not. The decision is per job type, not across the business.
How long does the correction take?
Three weeks to get reliable cost per job, one quarter to change the rate or the scope on the worst type, and two to three quarters before the effect is clear in the accounts. Firms that change one thing at a time can tell what worked, which matters more than moving quickly.
Related reading: Every quote is a guess · Project margin that arrives too late · Profitable on paper, broke in the bank · Financial Visibility
Find out which job type is doing it
Bring last quarter's revenue split by type of work and a rough sense of what each one costs to deliver. A single call will usually narrow four possible causes to one.
Book an Operational Clarity Call →