#99: The Two Decisions That Quietly Destroy Agency Margins
At some point, agency ownership stops feeling scrappy and starts feeling heavy.
You’re busy. The team is busy. Clients are asking for more. Revenue might even be going up, yet somehow, profitability, morale, and sanity are heading in the opposite direction.
I’ve lived this firsthand while building and operating a digital agency for over eight years, scaling past 50 people. And I can tell you with confidence: most agency burnout isn’t caused by lack of skill, effort, or hustle.
It’s caused by a small set of early decisions that compound over time.
Two mistakes show up more than any others when I diagnose agencies under $3M ARR:
Taking on hopeful clients outside your Ideal Client Profile (ICP)
Operating with a fuzzy or undefined scope of work
Individually, each one hurts.
Together, they quietly destroy profitability, operations, and team morale.
Mistake #1: Signing “Hopeful Clients” Outside Your ICP
A hopeful client is the deal you know isn’t quite right but you convince yourself you can make it work.
Maybe the pipeline is light. Maybe the client is excited. Maybe the revenue looks good on paper.
So you say yes.
Here’s the problem: without a clearly defined Ideal Client Profile, you’re gambling, not growing.
Why Agencies Take Bad Fit Clients
Most agency owners don’t ignore their ICP because they don’t believe in it. They ignore it because:
Pipeline pressure forces short term decisions
Cash flow feels more urgent than strategy
Entrepreneurs naturally believe they can “figure it out”
And to be fair, you probably can figure it out.
But your team pays the price.
The Real Cost of Hopeful Clients
When you take on work outside your ICP:
Your team has to reinvent the wheel
Results take longer to show up (or don’t show up at all)
Clients get nervous faster
You overcompensate with extra meetings, deliverables, and attention
What starts as a revenue decision quickly becomes an operations problem.
Worse, you’re risking your reputation, not just your margin.
The 3 Month Containment Rule
If you do take on a hopeful client, you need a hard container.
Three months. No more.
At the end of that period, ask:
Did we achieve meaningful results?
Did we make money after real resource costs?
Is this a client type we should repeat?
If the answer is no, the right move isn’t to push harder.
The right move is to transition the client to an agency that specializes in their problem professionally and transparently.
That’s leadership.
Mistake #2: Operating Without a Clearly Defined Scope of Work
Most agencies under $1M ARR don’t actually have a real scope.
They have a rough idea.
That’s not enough.
A scope of work must clearly define:
Deliverables
Timelines
Quantity
Boundaries
What success looks like
Without this, clients fill in the gaps themselves.
And clients will always expect more if you don’t tell them otherwise.
Why Scope Creep Is Usually the Agency’s Fault
Clients are economically incentivized to get as much value as possible.
If you don’t define boundaries, they will.
What starts as being “helpful” turns into:
Extra meetings
Extra creative
Extra revisions
Extra strategy
None of it priced in.
Over time, you’re no longer running client acquisition, you’re running client appeasement.
When These Two Mistakes Compound
This is where agencies really get stuck.
You:
Took on the wrong client
Didn’t define a tight scope
Aren’t getting great results
Add more work to compensate
Train the client to expect unlimited access
Now the account is:
Barely profitable or unprofitable
Consuming founder time
Draining team morale
Creating delivery chaos
Even worse, the client now believes this is “normal.”
Trying to pull back later feels like nickel and diming even when you’re right.
The $0 Change Order: How to Reset Boundaries Without Conflict
When a client asks for something outside of scope, you need a system, not a reaction.
This is where the $0 change order comes in.
How the $0 Change Order Works
Estimate the true time required
Assign a dollar value to the work
Present it as a formal change order
Discount it to $0 as a one time exception
You’re saying:
“Yes, we’ll do this.”
“Here’s what it’s worth.”
“Next time, this is billable.”
Why This Protects Profitability
The client:
Feels taken care of
Understands the value
Thinks twice before asking again
Next time, they either:
Don’t make the request
Or happily pay for it
Either way, you stay in control of scope and margin.
Every client should get one $0 change order, not unlimited freebies.
How to Fix This in Your Agency (Step by Step)
If this feels familiar, here’s what to do next.
Step 1: Redefine Your ICP
Be ruthless.
Document:
Industry
Company size
Geography
Budget range
Buying triggers
If it doesn’t match, don’t sell it.
Step 2: Lock Your Scope
For every service, define:
What’s included
What’s excluded
Quantities and timelines
Success metrics
Bake this into:
Sales calls
Contracts
Kickoff calls
Step 3: Train Your Team
Client-facing team members must:
Know the scope cold
Identify out of scope requests
Use change orders consistently
This is operations, not rigidity.
Final Thought: Burnout Is Usually Structural
Most agencies don’t fail because they lack talent.
They fail because they ignore boundaries early and pay for it later.
If your agency feels chaotic, exhausting, or fragile, don’t assume it’s broken.
Fix the structure.
Stop signing hopeful clients.
Define your scope.
Protect profitability and everything else gets easier.
If you want to go deeper, you can run the full version at agencyuplift.co/mini. Even if you never book a call, the clarity alone is worth it.
