The Top 3 Profit Drains In Agencies And How To Fix Them
I frequently audit agencies, and the same three delivery issues commonly drive margin slippage.
Fix these quickly, and profit follows.
1. Scope drift disguised as “Client Service”
Symptoms:
Slack requests become projects.
“Quick favors” become routine.
Constant gaps between what it takes to “do our best work” and the actual approved budget and scope.
Fix: One intake form everyone uses, a process for daily triage, and a simple change order process template. Investments become rare - upsells become common.
2. Pricing based on vibes instead of math
Symptoms:
Rates from hearsay and not grounded in financial strategy.
Service packages priced without labor assumptions (senior-level support, on-demand triage, etc.)
Fees reduced during negotiations without scope or timeline adjustments.
Fix: Build a bottom-up pricing model that scales with teams and the agency, establish a margin floor for every client, determine minimum fees for certain types of work or engagements, and a red-line rule that stops work and forces rescoping if certain parameters are hit.
3. Same-day capacity planning
Symptoms:
Constant fire drills.
Weekly heroics by one or two people are required to “get it done”.
Scope and hours overages discovered after delivery.
Constant and consistent utilization gaps
Fix: 30-day capacity view, weekly load balancing meeting to address issues and gaps, include a protected buffer for urgent work in the capacity plan, and set clear schedule ownership with a triage plan.
Quick wins and priorities that you can implement this month
Stand up a single intake path for all work requests that are “unplanned”
Reevaluate rates or service pricing to ensure it covers labor costs and overhead today (and 6 months from now).
Publish a forward schedule and “lock” work 7-10 days out. This becomes your baseline.
Establish a change control process for when work shifts unexpectedly (it always does)
Who is notified
Who owns the decision
Who informs the client of the new plan (and when)