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Profitability in agencies rarely disappears overnight. It slips away quietly through misaligned teams, uncontrolled scope, and the kind of rework that becomes business-as-usual. Most of the time, these operational leaks aren’t tracked, flagged, or discussed. They’re just absorbed until margins tighten and burnout sets in.
To unpack where agencies are losing profit in 2025 and how to fix it, we sat down with two leaders who’ve seen both sides of the problem: Manish Kapur, a global creative operations consultant, and Candida Henning, Group Operations Director at VML South Africa.
Between them, they’ve helped scale creative and digital teams, refine delivery structures, and address the everyday decisions that impact profitability. Their experience brings real-world insight into how agencies can build more resilient, margin-aware operations without adding more layers or burning out their teams.
During the session, several recurring themes emerged - patterns that point to why even well-run agencies quietly lose margin over time. Rather than recap the event, we’ve distilled the insights into this playbook: a breakdown of the operational blind spots, behavioural shifts, and structural changes that matter most if you want to scale profitably in 2025.
Lets get into it, shall we?
A common misconception in agency management is that profitability is directly tied to pricing. While pricing strategy is important, it's only part of the equation. More often, margin loss comes from how the work is delivered, not how much is charged for it.
Here’s where most agencies lose margin:
What makes these so dangerous is how normalised they become. When waste is embedded into everyday workflows, it becomes invisible.
One of the first leaks that many agencies overlook is the blurred line between account management and project delivery. When roles aren’t clearly defined, you get duplication: AMs chasing updates, PMs stepping into client management, and no one owning true delivery outcomes.
This creates:
The solution isn’t to add more people, it’s to get clearer on the function of each role. High-performing agencies separate the client service function from delivery leadership. They build defined responsibilities around scope, timelines, QA, and client management. This doesn’t mean more silos, it means more focus.
Scope creep is often viewed as a client issue “they keep asking for more.” But in reality, it’s usually a symptom of internal issues: unclear deliverables, misaligned expectations, or vague scoping documents.
Most agencies don’t track:
Without this data, scope creep becomes anecdotal, something felt but not proven. And when you can’t prove it, you can’t push back on it.
High-maturity firms implement feedback caps, clearer sign-off processes, and post-mortems that track deviations. They also coach teams to differentiate between legitimate change requests and internal quality issues. This builds a culture of accountability and protects the margin.
It’s one thing to know how many hours were spent on a project. It’s another to know why those hours were spent.
Too often, agencies log time without separating out rework that could’ve been avoided. Is that revision round because the client changed their mind—or because the internal team missed the mark?
When all time is treated the same, teams are penalised for mistakes they didn’t make. This creates frustration, under-reporting, and resentment. Worse, it hides where process improvements are really needed.
To fix this, progressive firms are adopting more granular time tracking. Instead of obsessing over every billable minute, they focus on:
Resource management remains one of the hardest balancing acts for agencies. Everyone wants higher utilisation, but not at the expense of burnout, quality, or client satisfaction.
The root problem? Most resourcing models are built on inaccurate assumptions:
These reactive models create over-reliance on top performers, uneven workloads, and poor visibility. Instead, firms need to move from tactical scheduling to strategic resource planning.
This means:
The best agencies in 2025 are moving to flatter, role-flexible teams with built-in clarity on responsibilities and tools that show workload at both individual and team levels.
We’ve all seen it: time tracking that takes longer than the task itself. When internal processes become performative or punitive, teams disengage.
One firm we spoke to removed mandatory tracking for internal tasks and saw a rise in productivity and morale. Why? Because they redefined what data was actually useful.
Agencies should ask:
Firms that streamline internal reporting and automate wherever possible free up their teams to focus on delivery not admin.
No tech tool will fix a broken process. But the right system can illuminate where it’s broken and how to fix it. Agencies that rely on spreadsheets and disconnected tools end up with fragmented data and slow decision-making.
What high-performing agencies are doing differently:
The point isn’t just automation, it’s alignment. When everyone from account managers to finance teams is working off the same source of truth, operations become faster, leaner, and more scalable.
Profitability isn’t just structural it’s behavioural
Fixing hidden leaks requires more than new tools or processes. It requires cultural change:
Agencies that perform best in 2025 are those that embed margin thinking into the culture - from the way briefs are written to how meetings are run.
This doesn’t happen overnight. But it starts with awareness, education, and consistent reinforcement at every level.
Every agency is different. But the principles behind operational efficiency are remarkably consistent. If you're building your own playbook, start here:
In uncertain markets, many agency leaders look outward to pricing models, client retention, new business development. But some of the biggest wins sit internally, in the operational machine that delivers your work.
Fixing leaks isn’t about working harder, it’s about working cleaner. And when you do, margin doesn’t just stabilise, it grows.
If your agency is facing hidden profitability challenges, now’s the time to address them, not when the quarter ends and the margin is gone.
Want to dive deeper into the strategies discussed in this article? Watch the full session from The 2025 Agency Profitability Playbook: Fixing Hidden Leaks in Operations, featuring expert insights from Manish Kapur and Candida Henning.
👉 Click here to view the recording
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Agencies often lose profit through everyday inefficiencies rather than major failures. These include overlapping roles (like blurred AM/PM responsibilities), excessive revisions due to poor briefing, scope creep, reactive resourcing, and time spent on untracked or non-billable internal work. These leaks go unnoticed because they’ve been normalised - but they quietly eat into margins over time.
Magnetic gives agencies real-time visibility into feedback loops and revision patterns. You can track how many revision rounds occur, where they originate, and what changes are out-of-scope. This allows teams to distinguish between valid client feedback and avoidable internal rework — enabling better accountability, clearer sign-offs, and stronger margin protection.
Knowing how many hours were logged doesn’t tell you if that time was productive, wasteful, or preventable. Agencies that track the reason behind time entries - especially rework or scope changes - access insights into systemic issues like poor briefing protocols or process breakdowns. Magnetic supports this with contextual time tracking that flags the source and type of effort spent.
Tactical resourcing fills gaps reactively (“who’s free?”), often leading to burnout and uneven workloads. Strategic capacity planning forecasts resource needs by looking at capacity and workload, balances skillsets with project types, and protects deep work time. Magnetic’s Resource Planning module allows agencies to visualise real-time capacity, match projects with the right talent, and avoid over-servicing before it starts.
Many teams suffer from “tracking fatigue” - over-reporting without clear actionability. The solution isn’t more data, it’s better data. Magnetic helps agencies streamline reporting by surfacing only the metrics that impact performance: project progress, resourcing efficiency, revision volume, and time use trends. Dashboards are customisable to keep insight sharp and reporting lean.
Tools and processes only go so far without the right behaviours to support them. High-performing agencies in 2025 are moving from a reactive, hustle-driven mindset to one rooted in clarity, accountability, and margin awareness. Magnetic helps embed these values operationally - reinforcing clarity around scope, reducing guesswork, and enabling teams to focus on high-impact work.
Magnetic is an all-in-one workflow management platform designed and built for professional services firms.
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