What profit margin should my agency make?
Measured on a normalised basis, 15 to 22% EBIT is acceptable and above 22% is strong. Below 15% is fragile. Normalised means stripping out founder salary adjustments, overtime and non-recurring items, because that's the number a buyer will use. Then test how the margin is produced. Margin that depends on people working beyond sustainable capacity reverts when they leave, cut their hours, or burn out.
Most owners quote their headline EBIT. Buyers don't use it, so neither should you.
Normalised is the real number
Normalised EBIT strips out the distortions: founder salaries adjusted to market rate, overtime, and non-recurring items. It's the margin the business actually produces under normal conditions, and it's the number every buyer will calculate whether you offer it or not.
The benchmarks: below 15% normalised is fragile. 15 to 22% is acceptable. Above 22% is strong. If your headline margin looks healthy but the normalised figure sits below 15%, you don't have a margin. You have a founder subsidising one.
Structural margin or effort margin
The harder question is how the margin is produced. Is your EBIT generated by the operating model, or by the effort of specific people working beyond sustainable capacity?
Margin that depends on individuals doing heroics isn't structural. It's borrowed, and it reverts the moment those individuals leave, reduce their hours, or burn out. And be clear about the human side of this: if you burn out your people, you will lose them. The sustainability of your business depends completely on your people being able to do their jobs while staying healthy.
Buyers test this directly, because they're not buying last year's effort. They're buying next year's system.
The company your margin keeps
Margin sits inside a wider set of sustainability benchmarks, and a buyer will run all of them. Contracted or committed revenue above 70% of net revenue is strong; below 50% is fragile. An average remaining contract term of six months or more, with a renewal track record, is strong; under three months signals churn risk. A data room you can produce within 30 days is strong; more than 60 days is fragile.
If any of these sit in the fragile range, the exit conversation gets harder: earnouts get longer, discounts get steeper. Most of the agencies I've worked with had at least two in the fragile range when we first spoke. The ones that improved treated sustainability as a design problem rather than a future problem. The system either works under pressure or it doesn't. Better to find out on your terms than during due diligence.