Set up to Fail, Even with Perfect Projects - Real Client Case Study - Ep # 212

* FREE DOWNLOAD* The Agency Profitability Toolkit
https://parakeeto.com/toolkit

Get the templates, formulas and frameworks we've used with our consulting clients to help them double their profitability in under 60 days, absolutely free.

For more information on our Agency Profitability Systems and Consulting, check out https://parakeeto.com

Love the podcast? Leave us a review on the platform of your choice!
https://lovethepodcast.com/AgencyProfit

About this Episode

In this episode of the Agency Profit Podcast, Marcel is joined by Parakeeto’s own Kristen Kelly to unpack a client case study that will feel very familiar to any agency running on a small core team plus a big bench of contractors. Together, they walk through a video-heavy, just-under-$2M agency that looked “fine” on a cash-basis P&L some months, but was constantly scrambling to cover contractor costs and make sense of its margins. Kristen breaks down how cash-basis books, lumpy project work, over-servicing, weak time-tracking habits, and a half-implemented project management tool were all symptoms of a deeper issue: a business model and unit economics problem, not just an execution or tooling problem. Using Parakeeto’s assessment process and estimator framework, she shows how they reclassified contractors, clarified delivery margin and ABR targets, reset pricing and contracts, and aligned the PM tool after the model was clear. If you’ve ever wondered why tightening your processes and buying new software still hasn’t fixed your profitability, this episode offers a grounded roadmap to finally understand your business model, price work for a 70% delivery margin, and use flex labor without constantly feeling behind on cash.

Watch this Episode

Points of Interest

00:02 – 01:49 – Introduction: Marcel welcomes Kristen back to the show and sets up another practical client case study focused on a real agency engagement.
01:50 – 04:00 – The flex-labor, video production agency profile: Kristen outlines the agency’s model: a small FTE core, 10–20 contractors, just under $2M in revenue, and constant cash flow stress tied to contractor payments.
04:01 – 06:21 – Why video production and events are so punishing for cash flow: Marcel explains how big production days and lumpy project work make earned revenue, contractor management, and cash flow especially tricky for this type of agency.
05:05 – 07:16 – Growth, service-line complexity, and early unprofitability signals: Kristen describes how larger clients, new service lines with tight price ceilings, shifting deadlines, and creeping unprofitability pushed the founders to hit pause and seek help.
06:22 – 07:25 – Becoming “exit curious” changes the stakes: Marcel notes that the owners had started thinking about selling, and viewing the business through an enterprise value lens made their efficiency and profitability issues feel more urgent.
07:26 – 11:05 – Spreadsheets, PM tools, and the stalled silver-bullet implementation: Kristen walks through the spreadsheets they built, the expensive all-in-one PM platform they bought, and how personnel changes left the implementation half-done and overwhelming.
09:06 – 13:58 – Why PM tools fail without a profitability framework: Marcel unpacks the gap between the tool’s promises and reality, highlighting how unclear definitions of cost rates, pass-through expenses, margins, and scope make it impossible to configure a PM system effectively.
14:52 – 18:52 – The client’s original thesis vs. the real problem: Kristen shares that the client blamed headcount, tools, and “project management issues,” while Marcel points out their weak time-tracking culture and the failure to treat producers as true delivery costs.
19:05 – 22:12 – Diagnosis: a business model and unit economics problem: Kristen explains how reviewing the cash-basis P&L, time data, spreadsheets, and contracts revealed that the core issue was delivery margin and pricing, not execution quality or PM discipline.
24:52 – 27:42 – Fixing the data: contractor classification and cash-basis adjustments: Kristen describes using Parakeeto’s decision tree to classify contractors as delivery expenses, annualizing their cost and hours, and reverse-engineering hours from invoices, while Marcel adds tips for reducing noise in cash-based books.
28:18 – 35:57 – Rebuilding the model: estimator tool, 70% margin, and hire-vs-contractor math: Kristen shows how the estimator tool exposed project-level unit economics and ABR targets, then explains how they improved time tracking, pricing strategy, contracts, and PM tool setup, plus modeled when it actually made sense to hire FTEs instead of using contractors.

Show Notes

Agency Fee Calculator https://parakeeto.com/blog/agency-fee...