In this episode, hosts Peter Kang and Sei-Wook Kim break down the six fundamental levers that drive profitability across all client engagements, whether you run fixed-fee projects, retainers, or long-term service programs. Drawing from real challenges within their own portfolio at Barrel Holdings, Peter and Sei-Wook provide a practical framework for diagnosing and fixing margin compression.
They start by defining gross margin and then explore each lever in detail: from pricing and scoping to staffing, engagement design, scope management, reusable IP, and the role of automation and AI. The hosts also fold in core principles around utilization, forecasting, and delivery discipline, showing how these habits reinforce each other to protect and grow your bottom line.
For any agency owner feeling the squeeze on margins or looking to systemize profitability, this episode is an actionable guide to building a more efficient and financially resilient business.
Key Moments
1. Defining Gross Margin: The starting point for understanding your agency's financial health.
2. Lever 1: Pricing & Scoping – How to align your fee with the cost of delivery from the very beginning.
3. Lever 2: Staffing & Utilization – Balancing senior and junior talent and using contractors to flex capacity.
4. Lever 3: Engagement Design & Approach – The cost of poor process and the power of a clear project plan.
5. Lever 4: Scope Management & Change Orders – Turning scope creep from a profit killer into a managed process.
6. Lever 5: Reusable Components & IP – How specialization and systematization create leverage and higher margins.
7. Lever 6: Automations & AI – Using technology to reduce administrative and execution costs across the delivery lifecycle.
Real Talk Takeaways
1. Profitability often leaks at the very start through misaligned pricing and vague scopes. Get this right first.
2. High gross margin on a single project means little if your overall team utilization is low. You must look at the whole picture.
3. A clear, even if imperfect, project plan is far better than a perfect plan that never gets finished or has an open-ended timeline.
4. Managing scope is an art that involves trade-offs, prioritization, and clear documentation—not just issuing change orders.
5. Building a library of reusable components and IP is an investment that pays off by allowing you to deliver higher-quality work faster and with less expensive resources.
6. Automation and AI are no longer optional; they are critical tools for cutting administrative overhead and accelerating execution.
7. Profitability is a team sport. It requires shared accountability through weekly check-ins, forecasting, and structured debriefs.
Timestamps
00:00 – Introduction: Why Profitability is Top of Mind
01:00 – The Core Concept: What is Gross Margin?
02:21 – The Three Main Sources of Margin Leakage
02:55 – Introducing the Six Profitability Levers
03:27 – Lever 1: The Critical Alignment of Pricing and Scoping
06:36 – Lever 2: Balancing Staffing Mix and Tracking Utilization
10:36 – Lever 3: Designing Engagements for Efficiency, Not Waste
13:54 – The Importance of Starting with the End in Mind
15:23 – Lever 4: Managing Scope Creep and Change Control
17:48 – Applying Scope Principles to Retainer Engagements
19:57 – Lever 5: Creating Leverage with Reusable Components and IP
22:53 – Lever 6: Implementing Automations and AI
26:01 – Four Habits to Systemize Profitability
29:12 – Closing Thoughts: Profitability is a Team Effort
Notable Quotes
"Gross margin is the revenue that you receive as a company, minus the cost of delivery... that metric is an indicator of how efficiently you're doing the work." — Sei-Wook Kim on the definition of gross margin.
"If you have way too many team members for the amount of work that you have... idle hours where someone has zero billability really crushes your margin really quickly." — Sei-Wook Kim on the impact of poor utilization.
"Vague scopes are one of the biggest liabilities when it comes to profitability, because you can get taken for a ride as an agency if you're super vague about what you're actually delivering." — Peter Kang on the danger of unclear scopes.
"Building a library of reusable components frees up senior folks to do higher-value work. This is a huge part of why we beat the drum on specialization." — Peter Kang on how IP creates leverage and higher margins.
Links & Resources
Peter Kang on LinkedIn: https://www.linkedin.com/in/peterkang34/
Sei-Wook on LinkedIn: https://www.linkedin.com/in/seiwookkim/
AgencyHabits Website: https://www.agencyhabits.com/
AgencyHabits on LinkedIn: https://www.linkedin.com/company/agencyhabits/
Barrel Holdings Website: https://www.barrel-holdings.com/
Barrel Holdings LinkedIn: https://www.linkedin.com/company/barrel-holdings/
