In Focus: Where agency margins are won – or lost in delivery

Most creative agency founders didn’t start their businesses to maximise profit. They started them to do good work – work they were proud of, work that clients valued, work that built reputations.

The tension tends to show up later. Many agencies producing strong creative work struggle to achieve consistent, healthy margins. Not because the work isn’t good enough, but because the commercial decisions that sit behind that work aren’t always managed well.

At the recent DBA Member Forum, I focused on two places where agencies tend to lose margin. They’re not the whole story, but small changes here can make a noticeable difference.

Accurate and realistic proposals

Many agencies lose margin before a project has even started.

This usually happens at the proposal stage. Work isn’t properly costed, assumptions aren’t tested, or pricing is adjusted downwards in an effort to stay competitive. The result is a project that looks viable on paper but is already under pressure the moment it kicks off.

A common mistake is reusing old proposals without understanding how those projects actually performed. If you don’t know where time was really spent, how many revisions were required, or where delivery became stretched, you’re guessing. Guesswork rarely leads to profitable outcomes.

This is also where timesheets matter. They’re the bane of most agencies because teams don’t enjoy filling them in, and leaders often question whether they’re worth the hassle. They’re there to tell you whether the work was priced accurately. If projects regularly overrun, the issue is usually scope, not delivery. Without that data, you’re pricing on assumptions rather than evidence.

There’s also a tendency to reduce the price while keeping the deliverables intact. This is where many projects start to unravel. If the budget is fixed, the scope has to flex. You have to cut your cloth accordingly.

Designers will always want more time – and rightly so. I’ve never had one say, “You’ve given me too much budget, take some back.” But time isn’t free. If the budget doesn’t stretch, the scope has to adjust.

This is why internal alignment matters so much at proposal stage. There needs to be an honest discussion with the delivery team about what can realistically be achieved within the budget – and a shared agreement that the team will stick to it. Without that buy-in, budgets become theoretical and overruns are absorbed later.

Strong proposals are honest documents. They align budget, scope and resourcing assumptions clearly, and they set expectations internally as well as externally. When teams are involved early and understand the constraints, staying within budget becomes a conscious decision rather than a constant battle.

Getting resource management right

Most agencies default to scheduling when what they really need is resource management. Scheduling is reactive – it deals with what’s already landed. Resource management looks ahead at demand, capacity and skills, and plans before problems show up.

To do that well, you need two things: visibility of upcoming work and a simple, agreed process for allocating people. Without those, you’re not really managing resources – you’re just fitting work into whatever gaps you can find.

The tool you use matters far less than getting that foundation right. Most agencies still rely on Excel because it’s flexible and familiar. Dedicated resource management software can help, but it won’t fix the underlying issue. Once the basics are in place, the tooling becomes secondary.

When this is working, projects start on time, teams aren’t stretched, and the hours you priced into the proposal are actually the hours you have available. That’s what protects margin. It also means you have the right talent on the right work, giving the team the time and headspace to deliver to a high creative standard – not just to hit the deadline.

What this looks like in practice

The way work is scoped influences how it needs to be resourced. And how well it’s resourced determines whether the margin you priced in at the start survives delivery.

When agencies struggle with profitability, the symptoms are familiar – scope creep, the wrong skills on the job, and rework. The causes usually sit earlier, in how work is priced, planned and resourced.

Profitability isn’t about compromising creativity. It’s about setting work up properly so it can be delivered well on time and within budget.

Read other expert perspectives:

In Focus: Staff cost to fee income ratio: DBA Expert Mike Almandras

In Focus: The people story behind the numbers: DBA Expert Aliya Vigor-Robertson