Agencies & studios
Illustrative case study
Finding nine points of margin in a design studio
A busy, well-regarded studio that was somehow not making money. Project-level profitability showed where the margin was going, and pricing changed within a quarter.
The situation
Tessellate was fully booked, respected by clients and barely profitable. The partners suspected some projects lost money but had no way to show which ones, and timesheets were treated as a formality.
The challenge
Revenue was recognised on invoicing, not delivery, so long projects looked profitable early and disappointing late. Overservicing was invisible. Pricing was set by instinct against what competitors charged.
What we did
The result
Gross margin improved by nine percentage points over two quarters (an illustrative figure for this demo). Two of the three problem relationships were repriced; the third was wound down amicably. The partners now review project margin monthly and price new work from the model rather than from instinct.
It was the first time a finance person told me what to do next, not just what had happened. We changed how we price projects within a month.
Jonah Reyes,
Managing Director,
Tessellate Studio
Client profile
Company
Tessellate Studio
Industry
Agencies & studios
Size
$3.5M revenue
Stage
Partner-owned
Team
24 people
Structure
Single entity
Services used
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