Case Study: Improving Profitability in a Creative Studio

Boosting profitability by 32.7% by rethinking how a digital agency worked.

12 min read

When profit declines year-over-year, it erodes trust in leadership, undermines job satisfaction, and tanks engagement. If compensation is tied to profitability, the effects are even more severe. Left unchecked, declining profit threatens a company's financial viability.

At an 18-person digital services agency, I faced this challenge head-on. Over two years, I led the team in reversing our trajectory—increasing net profit margin from 0.3% to 33%, a 32.7% improvement.

Net Profit Margin year-over-year

Where we started a decrease of 9.7%. After one year an increase of 17.7%. After two years an additional increase of 15%.

The Situation

Our twice-a-year profit-sharing bonuses used to make up 10—20% of total compensation. Over time, they disappeared entirely.

I watched morale and trust in leadership decline alongside profits. I raised concerns with my peers, but many felt external forces were to blame. If we wanted to improve profitability, they said, we needed more work.

I disagreed. Our team was already stretched. Adding more work would only scale costs alongside revenue. Profit margins wouldn't change—and might get worse.

We were already hiring contractors to handle overflow. Team members were being shifted between projects to hit deadlines, which left other projects short-handed. The pattern repeated.

I suspected we were consistently running over budget. Until we fixed our delivery model, chasing more work would be a waste of time.

Leadership was divided. We lacked useful data. Without it, we couldn't move past opinions. I stepped in to break the stalemate.

My Role

I raised the flag, secured buy-in, and launched the initial audit. I took full ownership of identifying and fixing the bottlenecks holding us back.

My contributions included leading cross-functional research and analysis, mentoring managers and coaching peers, developing workflows while closing gaps in our tech stack, and designing tools, training, and systems to support sustainable change.

Taking Action

Partnering with the Operations Manager, we took an evidence-based approach. I ran audits to determine how often projects went over budget and how much production time we were actually using.

We identified missing data, ran interviews and surveys, and used strategic analysis to build a clear picture.

Finding the problem & cost

Large projects ($100K+) of project portfolio Run at a loss of large projects lost money Highest single opportunity cost for one project Total opportunity cost which would more than double our revenue

Even capturing 20% of that would make it one of our most profitable years ever. This data realigned leadership and mobilized the team. Project overages became our top priority.

Empowering the team

I facilitated honest conversations to uncover skill gaps, process flaws, and broken assumptions. I brought in guest speakers, offered mentorship, shared tools, and researched where support was lacking.

We built and executed plans across business areas, implemented performance metrics, and tied objectives to measurable outcomes.

Estimation and project management

Our estimation process was broken. We weren't accounting for real project management needs. The belief was that PMs only needed a couple hours per week—but projects kept running over.

We updated our estimation templates to include project management time, began billing for that time, and trained the team on best practices to improve the accuracy and consistency of our estimates.

Estimated revenue loss at capacity

Unbilled project management time per year Revenue loss per manager

Previously unbilled project management time amounted to thousands of dollars per manager each year. Once we began billing for that time, it directly contributed to improved profit margins—a result that demonstrated how even small process changes could significantly impact our bottom line.

Tools and Technology

I designed features for our internal tools and collaborated with the team to implement and train on them effectively. These enhancements enabled real-time project health monitoring, automated reporting, and quicker, more efficient audits. We also trained managers to respond to data quality trends and built onboarding programs that connected time tracking practices directly to personal and business outcomes.

Planning and Resourcing

I introduced the team to better planning tools, facilitated knowledge-sharing, and iterated on workflows until we had predictable, stable scheduling.

As part of this effort, I designed internal capacity management tools that gave everyone on the team a clear view of their own and others' availability. These tools improved data transparency and accuracy, helping us make smarter resourcing decisions and eliminate the overbooking and idle time issues that had previously disrupted our cashflow.

We aligned production planning with business development and filled scheduling gaps with right-sized internal projects. I also partnered with Operations to develop processes for managing scope changes mid-project. This ensured we stayed on track without blowing up the budget.

"We essentially eliminated scope creep due to this initiative, we empowered PMs to push back, and provided training, tools, and approaches to better manage clients and shift scope."

The Results

Year 1

Net profit margin from 0.3% to 18%. Projects run at a loss from 37.5% to 13.3%. Large projects at a loss from 83.4% to 14.3% Large projects in portfolio from 24% to 47% Large project overages down from 7

Large project overages represented only 6% of the project portfolio, down 19 percentage points from 25%. We made more, lost less, and built systems to keep it that way.

Year 2

Net profit margin another 15%, reaching 33%

The Operations Manager carried the momentum forward, refining the systems we built. The team continued to improve.

The data we collected allowed us to focus on managing complex projects more effectively. We built tools, systems, and processes that pinpointed areas of opportunity and improved alignment between our estimates and what was happening during production.

Everyone got their bonuses back.