If you’ve ever looked at your bank account and thought,
“We’re bringing in good money… So where is it all going?”
This article is for you. Because that’s exactly what a profitability report can tell you, and why it’s so important for business owners.
Let’s start with the basics… what is it?
First Things First: What Is a Profitability Report?
A profitability report shows you which parts of your business are actually making money, and which parts are just taking up time and resources.
It breaks down your income and expenses by:
- Client
- Service
- Project
- Product
- Location (or whatever makes sense for how your business runs)
It’s not a profit & loss statement (P&L), which gives you a top-level summary of all income and expenses.
A profitability report goes deeper. It helps you figure out:
- Which clients are profitable
- Which services bring in a great margin
- What work you’re doing that looks good on paper but isn’t actually profitable
Think of it like zooming in on your business with a magnifying glass, not just looking at the bank balance, but really understanding where the profit is coming from (and where it’s leaking out).
Why Does It Matter?
Without a profitability report, you’re flying blind.
You might be making decisions based on “feeling” or “momentum,” but not on actual numbers.
Here’s what that looks like in real life:
You might…
- Be offering a flat-rate service that loses money after you factor in labor and overhead
- Be giving discounts to clients who take up twice the time
- Be investing in a new product or service that hasn’t made a single dollar in months
- Be holding on to a big-name client who looks impressive, but is barely covering your team’s time
And here’s the thing: You won’t know any of that without this kind of reporting.
What It Can Look Like (In Plain English)
Let’s say you run a service business, maybe a marketing studio, a legal practice, or a boutique construction firm.
Here’s what a simple profitability report might show:
| Service / Client | Revenue | Costs (Labor, Tools, Time) | Profit | Profit Margin |
| Monthly Retainer – Client A | $10,000 | $5,800 | $4,200 | 42% |
| Custom Project – Client B | $8,000 | $8,300 | -$300 | -4% |
| Strategy Session Packages | $6,000 | $1,500 | $4,500 | 75% |
What does this tell you?
- Your strategy sessions are gold—huge margins, efficient time use.
- That custom project? It’s a loss, even though it felt like a win.
- The retainer is solid, but you might want to tighten up hours or scope.
This kind of information lets you adjust things in your business fast.
How Do You Actually Run One?
Here’s how we break it down with our clients at Affinity Accounting:
1. Choose a Focus Point
First, we decide what you want to analyze. It could be:
- Profitability by service
- Profitability by client
- Profitability by project
You can run multiple versions, but it helps to pick one to start with.
2. Pull Revenue by Segment
Let’s say you want to look at profitability by client.
We gather how much you’ve billed or invoiced each client over a period of time, monthly, quarterly, or annually.
3. Calculate Direct Costs
This is where most business owners underestimate things.
We don’t just look at the software or materials, we include:
- Time (yours + your team’s)
- Contractor costs
- Admin support
- Any tools or systems used for that client or service
We help you estimate labor time in dollars, even if you’re not tracking hours to the minute.
4. Analyze Margin
Revenue minus direct costs = Profit.
We look at both the raw dollars and the percentage margin.
Sometimes what feels like a low-paying client is actually a hidden gem because they’re easy and low-maintenance.
Other times, the “big project” with a big price tag barely breaks even because of all the hand-holding and revisions.
5. Make Decisions
Here’s where it gets fun. Once you have the numbers, you can:
- Raise prices where needed
- Cut or shift services that are dragging down margins
- Spot where you can streamline labor or tools
- Build offerings that match what’s actually profitable
Can You Do It Yourself?
Sort of.
If you’re tracking revenue and expenses by project or client, and you know your team’s cost structure, you can create a rough profitability report on your own.
But here’s what we’ve seen:
Most business owners either:
- Don’t have their data organized that way
- Forget to include labor/time as a real cost
- Get stuck turning a spreadsheet into something useful
That’s why we do this work with our clients, not just hand them a report and wish them luck.
How We Help at Affinity Accounting
At Affinity, we work closely with service-based businesses to build clear, customized profitability reports—ones that actually reflect the way you work.
But we don’t stop there. We walk through the numbers with you, help you understand what they’re really saying, and use those insights to guide smarter decisions, whether it’s pricing a service, hiring a new team member, or rethinking how an offer is delivered.
And because profitability isn’t a one-time check-up, we revisit the numbers with you regularly to make sure your business is growing in the right direction.
We’re not just here to hand over a spreadsheet and wish you luck.
We’re here to make sure you know how to use the data to run a stronger, more profitable business.
Final Thoughts
You don’t need to work harder.
You need better clarity on where your money is coming from and where it’s disappearing.
A profitability report gives you that clarity and puts you back in control of your business.
If you’re ready to finally understand what’s working, what’s not, and what to do next, we’d love to help.
Let’s build your profitability report together.
Get In Touch With Our Team at Affinity Accounting Here →
Until next time!
