A 7% margin in January. How often is the year a loss?
Nine retainers, three more expected, and a cost base that arrives whether the clients do or not. The plan says $120,500 of profit. Three unknowns turn that into a range, and one agency year in three ends under water.
Marketing Intermediate Monte Carlo Pro engine
After you install, this is the model to open.
Will the Retainer Book Cover the Year?
- In your spreadsheet, click the Sortia icon in the strip of icons down the right-hand edge. No strip? Click the arrow at the bottom-right to open it. You can also use Extensions, then Sortia, then Open Sortia.
- Click Start from a template and put that name in the search box.
- Pick the card with that name and click Load this template. It arrives on a new tab with real numbers already in it.
This one runs on a Pro engine, and every free install includes five full-quality runs on your own numbers, shared across all five Pro engines rather than five for each. After that, Pro is $199/year.
The answer
The same book, simulated rather than assumed:
- Chance of a loss
- 33% about one year in three
- Median profit
- $77,000 plan says $120,500
- P5
- -$197,000
- P95
- $336,000
The tornado puts new business first and renewal second, and the reason is range rather than importance: one point of renewal is worth $13,500 and one new retainer is worth $87,500, but the model lets new business swing from none to five while renewal swings across 37 points. Renewal is the one you can do something about in February. Tighten it to what a genuine client-service push looks like and profit rises to about $173,000 while the chance of a loss falls from 33% to about 13%: holding seven points of the book is worth more than a fourth new client and costs a fraction as much. This model treats the book as an average, so if one client is 40 percent of your fees, ask a model that names each client instead.
The model
A whole agency year on one screen: retainer count and fee, new business, project work and a fixed cost base. Renewal rate, new retainers and project income are the uncertain inputs.
| Retainers | 9 at $12,500 a month |
| New retainers expected | 3 (uncertain) |
| Renewal rate | a range, not a number |
| Project work | $320,000 (uncertain) |
| Cost base | $1,515,000 |
Once it is in your sheet
- The model arrives with real numbers in it and runs as it stands, so you can press the button first and understand it second.
- Change the numbers to yours. The sheet marks which cells are inputs and which hold formulas, and most labels carry a note explaining the row.
- Press the run button at the bottom of the panel. It is labeled for the tool you are in, and the result lands on its own tab, with a written reading of it beside the figures.
Never used Google Sheets? Start here goes the whole way, in seven steps, and assumes nothing.
Next question
- Plan for the average month or the bad one?How to Split Spend When Conversion Is a Guess
- When does a new hire start paying for themselves?Is the Next Hire Worth It?
- A product launch risk register pricing five ways a launch goes wrong against mitigation cost, from a calendar invite to production fixes. Free template.What Could Go Wrong With This Launch?
- The pipeline says you beat target. Will you?Will the New Business Pipeline Deliver?
- Can you hold the cost per customer you promised?Will the Campaign Hit the Cost Per Acquisition?
- What would have to change for this channel to pay?What Conversion Rate Makes This Channel Work?
Every model like this one, and the method behind them: Monte Carlo simulation.