Definitions
There are a lot of different terms for the same metrics depending on your region and industry. These are the ones we’re concerned about as well as some alternative or similar ones you may be familiar with. This list isn’t comprehensive but will give you the tools to use our calculator effectively and find ways to increase profit in your agency.
Gross revenue
The total amount of money your company brings in.
Other terms include:
- Total billings
- Revenue
Agency Gross Income (AGI)
Agency Gross Income is an industry-specific term for used to describe the total amount of money coming into your organization after any expenses paid to produce a client project (CoGS).
Other terms include:
- Gross profit
- Adjusted gross income
- Real revenue
Cost of goods sold (CoGS)
Cost of goods sold are the expenses your company pays to produce a client project.
Examples include:
- Contractor fees
- CMS and plugin licenses
- Font and other media licenses
Other terms include:
- Cost of Sale (CoS)
- Pass-through expenses
Expenses
Expenses are what your company pays for regardless of how much work you produce. They get subtracted from AGI.
Examples include:
- Rent and overhead
- Salaries and benefits
- Sales & marketing
- Administration costs
Other terms include:
- Operating expenses
- Overhead
Net profit
Net profit is all the money left over after all the expenses and taxes are paid. This is what we’re trying to maximize because it gives your safety, stability, options, and room to grow.
Other terms include:
- Profit
- Surplus
- Net profit margin (expressed as a percentage)
- Agency profit
Step one: Plot your existing revenue, size, and clients
Start by inputing your:
- Agency Gross Income (AGI)*
- Net profit margin
- Number of active clients per year
- Number of full-time employees (both billable and non-billable)
Ballparks are fine. A healthy agency should aim for between $160–220K in revenue per full-time employee. In other words, for every employee that works there and bills clients for their time or commitment, you should make sure your company is generating at least this much to accommodate growth, expenses, benefits, taxes, and profit.
Check out our healthy clients guide for more details.
![](https://louderthanten.imgix.net/articles/profit-step1_2022-11-22-035807_gwol.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=365&ixlib=php-3.3.1&q=82&w=1568&s=1cd7dd89949cfead4772bf851fdbb784 1568w, https://louderthanten.imgix.net/articles/profit-step1_2022-11-22-035807_gwol.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=731&ixlib=php-3.3.1&q=61&w=3136&s=6686009b6a8ec631e2002b75721a8a99 3136w, https://louderthanten.imgix.net/articles/profit-step1_2022-11-22-035807_gwol.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=1097&ixlib=php-3.3.1&q=41&w=4704&s=5739475642207a3a6abf4edb68d1d3a9 4704w, https://louderthanten.imgix.net/articles/profit-step1_2022-11-22-035807_gwol.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=239&ixlib=php-3.3.1&q=82&w=1024&s=1f5b138d94064ace2d49260d1ca72401 1024w, https://louderthanten.imgix.net/articles/profit-step1_2022-11-22-035807_gwol.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=478&ixlib=php-3.3.1&q=61&w=2048&s=eac71538cc9c035a4d676825ac0b968c 2048w, https://louderthanten.imgix.net/articles/profit-step1_2022-11-22-035807_gwol.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=717&ixlib=php-3.3.1&q=41&w=3072&s=002b7b61486777313e4621cd05caaac5 3072w, https://louderthanten.imgix.net/articles/profit-step1_2022-11-22-035807_gwol.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=178&ixlib=php-3.3.1&q=60&w=766&s=9f728d82c3b3ac0fcde67228c840f89e 766w, https://louderthanten.imgix.net/articles/profit-step1_2022-11-22-035807_gwol.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=357&ixlib=php-3.3.1&q=45&w=1532&s=8636288422c3506490e74b7a6ea1e67f 1532w, https://louderthanten.imgix.net/articles/profit-step1_2022-11-22-035807_gwol.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=536&ixlib=php-3.3.1&q=30&w=2298&s=292ecb45109ab50fc3a2ee497d9fd513 2298w, https://louderthanten.imgix.net/articles/profit-step1_2022-11-22-035807_gwol.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=104&ixlib=php-3.3.1&q=60&w=448&s=bd8d32529fe4356d157c01ca502c89dd 448w, https://louderthanten.imgix.net/articles/profit-step1_2022-11-22-035807_gwol.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=209&ixlib=php-3.3.1&q=45&w=896&s=3b5857406f88e7fb78868e821fadca16 896w, https://louderthanten.imgix.net/articles/profit-step1_2022-11-22-035807_gwol.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=313&ixlib=php-3.3.1&q=30&w=1344&s=07051aaff78694ff94d051efd63d088a 1344w)
*Agency Gross Income (AGI) is revenue after any pass-through expenses like contractor fees and client software licenses that you pay out immediately.
Step two: Trim off expenses
Want to increase profit? Start by controlling your spending and improving project efficiency.
If your profit margin is 10%, that means you spend 90 cents of every dollar you bill on expenses like labour, overhead, and taxes.
Put another way, you’d need to sell $10 to generate $1 in profit.
Let’s say you want to make $2 in profit. You could sell $20… or you could simply save $1 in expenses while still selling $10. In other words, saving $1 on expenses is worth $10 of sales.
When you save on expenses and production efficiencies, that money goes straight to the bottom line. Those savings are converted to profit and can be reinvested in your company for growth or distributed to your employees. Small changes can make exponential impacts.
Common ways to decrease expenses and increase efficiency
- Properly estimating projects (reduces labour overages)
- Better requirements gathering (reduces meeting time)
- Tighter handovers and approvals (reduces delays and labour)
![](https://louderthanten.imgix.net/articles/profit-step2_2022-11-22-040238_jyfh.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=348&ixlib=php-3.3.1&q=82&w=1568&s=32428c80c198f35a4ed298de9a18cf3c 1568w, https://louderthanten.imgix.net/articles/profit-step2_2022-11-22-040238_jyfh.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=697&ixlib=php-3.3.1&q=61&w=3136&s=58bd3aa0ebf8fa504f69743af43d8130 3136w, https://louderthanten.imgix.net/articles/profit-step2_2022-11-22-040238_jyfh.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=1046&ixlib=php-3.3.1&q=41&w=4704&s=aca1e5a5d790c6fe519ade5cf90f5a28 4704w, https://louderthanten.imgix.net/articles/profit-step2_2022-11-22-040238_jyfh.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=227&ixlib=php-3.3.1&q=82&w=1024&s=68521d7c9f3a8a0a10b7eca20e33f49e 1024w, https://louderthanten.imgix.net/articles/profit-step2_2022-11-22-040238_jyfh.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=455&ixlib=php-3.3.1&q=61&w=2048&s=00e53f4f24222fab2e2da82bb7babb8a 2048w, https://louderthanten.imgix.net/articles/profit-step2_2022-11-22-040238_jyfh.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=683&ixlib=php-3.3.1&q=41&w=3072&s=6e2c393d1a8e20a90ace6671222ee7d1 3072w, https://louderthanten.imgix.net/articles/profit-step2_2022-11-22-040238_jyfh.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=170&ixlib=php-3.3.1&q=60&w=766&s=e9527edda7e2a66066dd7ba775f3708c 766w, https://louderthanten.imgix.net/articles/profit-step2_2022-11-22-040238_jyfh.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=340&ixlib=php-3.3.1&q=45&w=1532&s=58ae75313c026ce86a3820ed281a66f2 1532w, https://louderthanten.imgix.net/articles/profit-step2_2022-11-22-040238_jyfh.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=511&ixlib=php-3.3.1&q=30&w=2298&s=2e8ba62f7b18e612c17390b694e6023e 2298w, https://louderthanten.imgix.net/articles/profit-step2_2022-11-22-040238_jyfh.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=99&ixlib=php-3.3.1&q=60&w=448&s=6f7a629f65de02f61289492fd54d7143 448w, https://louderthanten.imgix.net/articles/profit-step2_2022-11-22-040238_jyfh.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=199&ixlib=php-3.3.1&q=45&w=896&s=5a3c0fa7c14855ee5646416951d2e511 896w, https://louderthanten.imgix.net/articles/profit-step2_2022-11-22-040238_jyfh.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=299&ixlib=php-3.3.1&q=30&w=1344&s=b11b0130d84b50e156640c3fecdbe959 1344w)
Step three: Generate unexpected revenue
Even though expense reductions have a bigger impact, don’t sleep on revenue increases. There’s only so much you can trim from expenses (at some point you need to pay for electricity to keep your lights on, right?), but a well-trained project leader can generate a significant amount of high-margin revenue in unexpected places.
Creative paths to revenue
- Converting scope creep into paid features
- Upselling client accounts or retaining clients
- Adding a new revenue stream or recurring monthly service
![](https://louderthanten.imgix.net/articles/profit-step3_2022-11-22-040259_vvfa.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=360&ixlib=php-3.3.1&q=82&w=1568&s=83999c8c25a56b160f9ec44d5d91ffd1 1568w, https://louderthanten.imgix.net/articles/profit-step3_2022-11-22-040259_vvfa.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=720&ixlib=php-3.3.1&q=61&w=3136&s=bccbefda2c80073b18c99969f911abf1 3136w, https://louderthanten.imgix.net/articles/profit-step3_2022-11-22-040259_vvfa.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=1081&ixlib=php-3.3.1&q=41&w=4704&s=7be5e48084f0f177663264314d0246e5 4704w, https://louderthanten.imgix.net/articles/profit-step3_2022-11-22-040259_vvfa.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=235&ixlib=php-3.3.1&q=82&w=1024&s=8e8b9c7eebce52296b17cd1a3c044bd6 1024w, https://louderthanten.imgix.net/articles/profit-step3_2022-11-22-040259_vvfa.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=470&ixlib=php-3.3.1&q=61&w=2048&s=6b5dcc2ab408199f82013d719ccceebd 2048w, https://louderthanten.imgix.net/articles/profit-step3_2022-11-22-040259_vvfa.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=706&ixlib=php-3.3.1&q=41&w=3072&s=ceb4b789d5d030eb0291c5c463d13e13 3072w, https://louderthanten.imgix.net/articles/profit-step3_2022-11-22-040259_vvfa.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=176&ixlib=php-3.3.1&q=60&w=766&s=40b81b8e3deca734efd3f13294627577 766w, https://louderthanten.imgix.net/articles/profit-step3_2022-11-22-040259_vvfa.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=352&ixlib=php-3.3.1&q=45&w=1532&s=6a44cbc3324cf9f184c48d72e882a36b 1532w, https://louderthanten.imgix.net/articles/profit-step3_2022-11-22-040259_vvfa.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=528&ixlib=php-3.3.1&q=30&w=2298&s=f479054e57670b74674b12b46e501ebc 2298w, https://louderthanten.imgix.net/articles/profit-step3_2022-11-22-040259_vvfa.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=102&ixlib=php-3.3.1&q=60&w=448&s=f12d87b175999869ee7b251161f3daca 448w, https://louderthanten.imgix.net/articles/profit-step3_2022-11-22-040259_vvfa.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=205&ixlib=php-3.3.1&q=45&w=896&s=7a5026204a44e5e257b6353290602d9e 896w, https://louderthanten.imgix.net/articles/profit-step3_2022-11-22-040259_vvfa.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=308&ixlib=php-3.3.1&q=30&w=1344&s=fa08175b9cce9e20af1aeab0a8d201d0 1344w)
Step four: Check out your profitability
When you reduce expenses you have a multiplier effect on savings. Save $1 on every project and you will notice $10–20 savings across your company each time. Save $1000 on every project and you will save hundreds of thousands of dollars for your company that can be redistributed back to your team or invested in company growth.
Project efficiency is the secret ingredient to a healthy agency. Finding ways to generate more revenue is the icing on the cake.
![](https://louderthanten.imgix.net/articles/profit-step4_2022-11-22-041238_kilp.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=341&ixlib=php-3.3.1&q=82&w=1568&s=4493132c012ef30f17013ce0be9084d6 1568w, https://louderthanten.imgix.net/articles/profit-step4_2022-11-22-041238_kilp.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=683&ixlib=php-3.3.1&q=61&w=3136&s=9b9d88bd16d3a01362eecab1908501dd 3136w, https://louderthanten.imgix.net/articles/profit-step4_2022-11-22-041238_kilp.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=1024&ixlib=php-3.3.1&q=41&w=4704&s=16e4161d0a96795ac7f37a7ed3ac0ce0 4704w, https://louderthanten.imgix.net/articles/profit-step4_2022-11-22-041238_kilp.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=223&ixlib=php-3.3.1&q=82&w=1024&s=3406573cb609c09c2423c5f73ff28593 1024w, https://louderthanten.imgix.net/articles/profit-step4_2022-11-22-041238_kilp.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=446&ixlib=php-3.3.1&q=61&w=2048&s=786a01d9c2ae3119d71f675bb0912abd 2048w, https://louderthanten.imgix.net/articles/profit-step4_2022-11-22-041238_kilp.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=669&ixlib=php-3.3.1&q=41&w=3072&s=78a6470164b0e894d07f52d4f6fda1c3 3072w, https://louderthanten.imgix.net/articles/profit-step4_2022-11-22-041238_kilp.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=166&ixlib=php-3.3.1&q=60&w=766&s=534d3fc3ab1c7a31e0e93babb674aad1 766w, https://louderthanten.imgix.net/articles/profit-step4_2022-11-22-041238_kilp.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=333&ixlib=php-3.3.1&q=45&w=1532&s=a78d09572c6164b7b6b62c132bda1127 1532w, https://louderthanten.imgix.net/articles/profit-step4_2022-11-22-041238_kilp.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=500&ixlib=php-3.3.1&q=30&w=2298&s=e0af383e436f882a4720868a70cd25af 2298w, https://louderthanten.imgix.net/articles/profit-step4_2022-11-22-041238_kilp.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=97&ixlib=php-3.3.1&q=60&w=448&s=1327baa50c0bd955add95bfe1a4cc0d4 448w, https://louderthanten.imgix.net/articles/profit-step4_2022-11-22-041238_kilp.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=195&ixlib=php-3.3.1&q=45&w=896&s=b56d6c7e585ad1c7825bf95a66861770 896w, https://louderthanten.imgix.net/articles/profit-step4_2022-11-22-041238_kilp.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=292&ixlib=php-3.3.1&q=30&w=1344&s=8f87010d935777e454c9eca5d044330b 1344w)
Reflect on how you can use this new moola
Use this extra money to hire, increase salaries and benefits, or reinvest in your agency
When you save on efficiency and generate more revenue through stronger client relationships you can:
- Work with fewer clients per year
- Hire more full-time employees
- Raise salaries
- Reduce working hours
- Shut down the office for holidays and team building (hello 4-day work weeks)
Want to play with your numbers and check out your opportunity to save and generate more profit?
![](https://louderthanten.imgix.net/articles/agi-profit.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=1291&ixlib=php-3.3.1&q=82&w=1568&s=d6e527267167ac5ac40c3692e590a881 1568w, https://louderthanten.imgix.net/articles/agi-profit.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=2582&ixlib=php-3.3.1&q=61&w=3136&s=fc00b024a062c4d9aca458064612d7d9 3136w, https://louderthanten.imgix.net/articles/agi-profit.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=3874&ixlib=php-3.3.1&q=41&w=4704&s=79ca059e1748c26c09aafddf5a6d08ff 4704w, https://louderthanten.imgix.net/articles/agi-profit.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=843&ixlib=php-3.3.1&q=82&w=1024&s=991e2e69c2ea7c679bcb959c72c07fd6 1024w, https://louderthanten.imgix.net/articles/agi-profit.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=1686&ixlib=php-3.3.1&q=61&w=2048&s=b7bf98804d87305a3e9526734e200e52 2048w, https://louderthanten.imgix.net/articles/agi-profit.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=2530&ixlib=php-3.3.1&q=41&w=3072&s=7a61615d79437e82235f15167688e41f 3072w, https://louderthanten.imgix.net/articles/agi-profit.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=630&ixlib=php-3.3.1&q=60&w=766&s=c63e684b8b73287eab12eb0f414e73b1 766w, https://louderthanten.imgix.net/articles/agi-profit.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=1261&ixlib=php-3.3.1&q=45&w=1532&s=30fa9e192986a9d16ece4cf5d8d570a7 1532w, https://louderthanten.imgix.net/articles/agi-profit.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=1892&ixlib=php-3.3.1&q=30&w=2298&s=c9ef35e58d21a715c411c0252ca7c0ce 2298w, https://louderthanten.imgix.net/articles/agi-profit.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=368&ixlib=php-3.3.1&q=60&w=448&s=fb72638a31b5c4631d2838ce817b41b0 448w, https://louderthanten.imgix.net/articles/agi-profit.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=737&ixlib=php-3.3.1&q=45&w=896&s=4016bd8b41c4ce10654c94bf33e0ddcc 896w, https://louderthanten.imgix.net/articles/agi-profit.png?auto=format&crop=focalpoint&domain=louderthanten.imgix.net&fit=crop&fp-x=0.5&fp-y=0.5&h=1106&ixlib=php-3.3.1&q=30&w=1344&s=7ab78307964c2c205f3f591937a8689e 1344w)
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