Before the pandemic, I encouraged my employees to find new opportunities. When the last one did, I shifted my focus to being a fractional CMO. I didn’t want to close my doors; I cared deeply for my staff, was passionate about helping my clients, and was proud of our growth and achievements. But I was tired.
I grew weary of clients who took advantage of my team, tired of those who abandoned us after years of helping them grow, and – most of all – tired of companies who wouldn’t pay their invoices on time. The work has always been challenging and amazing… but it was shrinking in the background as these challenges consumed more and more of my time.
Years later, it appears it’s only getting more difficult for agencies to survive. Marketing and advertising agencies in the U.S. are navigating a turbulent financial landscape. Even as demand for digital marketing remains strong, agencies face intense operational and financial pressures threatening their stability. Unpredictable cash flow, chronically late client payments, creeping project scopes, and pricing squeezes erode profits.
At the same time, firms are racing to adopt automation and modern billing models to plug revenue leaks and streamline operations. Ignition’s recent 2025 Agency Pricing & Cash Flow Report highlights just how widespread these issues are – and the numbers are eye-opening. This article delves into the data and expert insights on the challenges agencies face. We also explore how owners, from boutique studios to freelancers and fractional CMOs, adapt their business models to survive and grow.
Table of ContentsAgency Challenges and TrendsLate Payments and Cash Flow VolatilityBilling StrategiesPrice PressuresBattling Scope CreepEmbracing AutomationRevenue Operations (RevOps)Broader Economic TrendsStrategies to Strengthen Your Agency
Agency Challenges and Trends
Ignition’s 2025 Agency Pricing & Cash Flow Report surveyed over 270 U.S. marketing, creative, and digital agencies, revealing major revenue leaks in agency operations. Late payments, volatile cash flow, and scope creep emerged as pervasive issues, driving many firms to embrace new pricing models and automation. The report’s findings underscore the urgent need for agencies to tighten billing practices and modernize their workflows to protect profitability. Here’s a snapshot of key challenges and trends affecting agencies this year:
Late client payments: 97% of agencies are chasing overdue invoices, indicating a widespread issue with timely client payments (Ignition).
Cash flow volatility: 63% of agencies say their cash flow is unpredictable, making it difficult to plan for growth or stability (Ignition).
Scope creep (unpaid extra work): 57% of agencies lose between $1K and $5K in monthly revenue due to unbilled out-of-scope work (Ignition).
Hiring on hold due to cash issues: 82% of agencies have postponed hiring or growth investments due to cash flow unpredictability (Ignition).
Inflation driving price increases: 36% of agencies raised their fees in the past year to offset rising operational costs (AgencyAnalytics).
Finance automation uptake: 64% of agencies currently use finance automation tools, with another 17% planning to implement them in 2025 (AvidXchange).
The data suggests that most agencies are grappling with late payments and cash flow shortfalls. Below, we examine these pain points in detail and discuss emerging solutions – from subscription pricing to billing automation – that forward-thinking agencies use to fight back.
Late Payments and Cash Flow Volatility
97% of agencies have to chase down late payments from clients regularly
Ignition
Getting paid on time has become a daunting challenge for agencies of all sizes. This aligns with broader trends in B2B services – over half of all invoices issued in the U.S. are paid late, according to recent data. This pay later culture creates a cash flow crunch that can be fatal for small businesses. As one industry executive bluntly noted, “Late payments are relatively accepted in this space” – a sad reality that agencies have come to expect, even if it puts them in a bind.
Unpredictable cash flow is the natural result of these payment delays. Nearly two-thirds of agencies say their cash flow is volatile and hard to forecast. When incoming revenue is a question mark, agencies struggle to plan for the future.
82% of agencies had to cancel or delay planned hires or growth investments because of cash flow uncertainty.
Ignition
Payroll, rent, and vendor bills are still due like clockwork, but client payments arrive unpredictably, sometimes weeks past due. In other words, eight in ten firms pumped the brakes on expanding their team or purchasing new tools simply because they weren’t sure they’d have the cash when needed. This finding is echoed by other research – for instance, one survey found 28% of small business owners stop hiring new employees whenever they’re dealing with overdue receivables. The opportunity cost of late payments is huge: agencies forego growth and instead dedicate resources to chasing invoices and covering short-term gaps.
Cash flow chaos kills the growth for most agencies.
Rashik Hoque, Agency Coach
Lack of timely payments forces agencies into survival mode, making it nearly impossible to scale their business. The impact isn’t only strategic but also personal. Agency owners report sleepless nights and constant stress over making payroll when a big client is 30+ days late to pay. In worst cases, agencies tap lines of credit or personal funds to float expenses while awaiting checks – essentially financing their clients’ marketing on credit.
Delayed payments have a domino effect: if an agency can’t pay its bills or vendors on time, it strains those relationships. This precarious position has only been exacerbated by economic swings in recent years.
As of mid-2024, 46% of all B2B payments arrived late, and 11% were over 15 days late, a level nearing recent highs.
The persistence of slow payments—even as the economy stabilized from the pandemic—suggests that large clients have normalized longer payment cycles (e.g. Net 60 or 90) to protect their own cash flow at the expense of agencies’ financial health.
Cash flow volatility is especially tough on small agencies, independent consultants, and fractional CMOs who lack a large cash buffer. A lean operation can ill afford a client paying 60 or 90 days late. For freelance marketers, a single late-paying client can mean missing a rent payment or struggling to cover insurance in a month.
These realities drive many solo practitioners to seek more stable income streams or back-up funding. In 2025, more creative freelancers will negotiate for upfront deposits, shorter net terms, or even use escrow and payment milestone platforms to guarantee timely payment.
Some jurisdictions (like New York City) have enacted Freelancers’ Protection laws to penalize late payers, reflecting the seriousness of the issue. But legal recourse is a last resort – agencies and contractors prefer to solve the cash flow puzzle through more innovative business practices, as we’ll explore next.
Billing Strategies
Agencies are evolving their billing and pricing models in response to these financial pressures. The traditional approach of billing by the hour or billing per project and waiting to get paid in lump sums is falling out of favor, especially among smaller agencies and independent marketers. In 2025, a clear trend is the growth of recurring revenue models – monthly retainers, subscriptions, and productized service packages – offering more predictable income.
43% of agencies say retainer packages are their most popular offering.
Recent industry benchmarks show that long-term retainers are the preferred pricing model for most agency clients and firms. Under a retainer, clients pay a flat monthly fee (or quarterly fee) for a defined scope of ongoing work. This gives the agency a steady cash inflow and helps clients budget more easily. Agencies love retainers because they smooth out the feast-or-famine cycle – you’re not starting each month at $0, and you can forecast revenue weeks or months. Clients appreciate retainers when they expect a continuous need for services, as it locks in support and often comes at a slight discount versus one-off projects.
Subscription-style and productized services are an offshoot of the retainer trend. In a productized model, an agency offers a pre-scoped, fixed-price service package – essentially turning a service into a product with a menu and price tag. For example, a marketing agency might sell an SEO Boost Package for $3,000 per month, which includes a set number of content pieces, backlinks, and reports. Or a design agency might have a subscription where clients pay a flat fee for unlimited design tasks within a month. These productized services often publish their pricing openly and aim to be easy for clients to sign up for (sometimes even self-serve via a website).
The benefit is twofold: agencies get recurring income and scale by standardizing their work, and clients get transparency and consistency in pricing.
Look at what provides recurring revenue without a lot of labor. We call it ‘mailbox money.’ It’s easy to focus on getting that next $5k or $10k/month client instead of 100 people who can pay $100/month.
Ryan Kelly, CEO of Pear Analytics
Even freelancers and fractional CMOs are moving toward retainer agreements for their consulting services. For instance, many fractional CMOs (like myself) charge a fixed monthly fee for a set number of hours or deliverables, rather than hourly billing. This ensures they aren’t left high and dry if a client slows down work – the retainer locks in the engagement and payment. It also transforms the relationship from a one-off vendor to a trusted ongoing advisor.
According to marketplaces for marketing talent, fractional CMO retainers commonly range from $2,000 up to $8,000+ per month, depending on scope, giving both the CMO and the client a clear expectation of cost. Freelance creatives, similarly, might offer package pricing to encourage clients to commit to a longer term in exchange for better rates and guaranteed delivery.
Price Pressures
Pricing pressures from the market are another factor driving new billing strategies. On one hand, inflation and rising costs have forced agencies to re-evaluate their rates – just over half of agency leaders reported significant challenges due to inflation in 2023–24, and 36% responded by raising their prices to protect margins.
Higher software subscriptions, vendor costs, and talent wages mean agencies must charge more to stay profitable. Yet raising prices is tricky; agencies worry about client pushback or losing business to cheaper competitors. On the other hand, some clients are pressuring agencies to lower fees or deliver more value for the same budget, especially as DIY marketing tools and in-house teams become alternatives.
This squeeze means agencies have to defend their value more than ever. They are achieving this by specializing and tying pricing to outcomes: agencies with a strong niche expertise can command higher fees, and some are experimenting with performance-based pricing (e.g., bonuses for hitting lead targets, or revenue-sharing models) to align with client ROI directly. Not every agency can swing a pure pay-for-performance deal – such models carry risk if the results don’t materialize – but offering a hybrid (base retainer plus success bonus) can be attractive to clients while still covering the agency’s costs.
Crucially, agencies are learning to say no to bad deals. With data showing how over-servicing and under-pricing hurt them, many agency owners have become more selective about clients. They’re insisting on clear contracts (no open-ended we’ll do whatever it takes clauses) and instituting late fee policies or pause work clauses if invoices aren’t paid on time. Some are also splitting large projects into phases with separate fees, to avoid getting too far ahead of payments.
The overarching strategy is to smooth revenue streams and limit unpaid work, even if it means turning down a potential client who demands unfavorable terms. As we discuss next, one of the biggest profit killers for agencies – scope creep – is being reined in through better scoping and proactive upselling.
Battling Scope Creep
57% of agencies report losing between $1,000 and $5,000 monthly in revenue due to unbilled extra work from scope creep.
Ignition
Nearly anyone who has run an agency knows the pain of scope creep: a project that starts with a clear scope of work but gradually balloons in complexity or volume without proportional budget increases.
That’s potentially tens of thousands of dollars a year in lost income per agency – doing work for free that you hadn’t originally agreed to. Scope creep often sneaks in under the guise of excellent service or being flexible for the client, but it can devastate an agency’s profitability if unchecked.
Why is scope creep so rampant? Often, projects are sold under tight budgets or vague specifications, and as the work unfolds, the client requests just one more thing repeatedly. Account managers and creatives, eager to please, say yes to small requests that cumulatively turn into major time sinks. Sometimes, agencies fear that saying no to extras will jeopardize the client relationship, so they absorb the cost. However, this erodes margins over time and sets a precedent that the agency will handle out-of-scope tasks at no charge. It’s a tough cycle to break. As one agency advisor put it, scope creep is “the stuff of nightmares” for agency staff – project teams work overtime on deliverables that weren’t in the contract, causing both frustration and burnout.
However, smart agencies are learning to manage and even monetize scope creep. First and foremost, clear contracts are essential. A solid agency contract explicitly defines the scope of work, deliverables, timelines, and what constitutes out-of-scope work (along with how that will be billed). By setting these expectations upfront and getting the client’s agreement, agencies create a framework to refer to when new requests come in.
For example, “We’d be happy to add that feature, but per our agreement, it’s outside the current scope, so here’s a quote for the additional work.” This conversation is much easier when the scope boundaries are defined from the start. Ignition’s report emphasizes that clients signing off on a detailed scope (through integrated proposal + contract tools) helps prevent “scope confusion” and missed payments later.
Beyond contracts, agencies are turning scope creep into an upsell opportunity. Rather than denying out-of-scope requests, leading firms treat them as a chance to offer additional services for additional fees. After all, if a client asks for more work, that signals they value the agency’s contribution – it’s an opening to deepen the engagement (for a price).
Project scope creep is a natural opportunity to upsell your clients – and best of all, it’s usually they who request it.
AgencyAnalytics
This means training your team to respond to new requests with a friendly, “Absolutely, we can handle that for you – let me get you a quick estimate for adding it to the project.” Many clients expect to pay more for more work; it’s often poor communication or fear on the agency’s part that leads to giving it away for free.
By systematizing how you handle scope changes (e.g., a formal change order process or use of an Instant Bill feature to charge for extras on the fly), agencies can recoup what would otherwise be lost revenue. This protects profitability and teaches clients to respect the value of the agency’s time.
Of course, preventing scope creep in the first place is ideal. Agencies are doing this by scoping projects more meticulously and involving clients. Clearly outlining what’s included (and what isn’t) in proposals, setting up regular check-ins to track scope, and ensuring any grey area request is quickly classified as billable will reduce ambiguity. Some agencies even build small buffers into project quotes to accommodate a bit of scope flexibility, anticipating that 10% more work might be requested and pricing accordingly. The key is not to let scope changes derail timelines or budgets silently. As soon as a project starts to veer off the mapped course, successful agencies pause and renegotiate terms (or defer extras to a Phase 2 engagement).
In 2025, with clients expecting more agility from agencies, avoiding scope creep may be impossible, but managing it actively separates profitable agencies from struggling ones. By saying “Yes, and here’s what it will cost” instead of an unqualified “Yes” to new requests, agencies turn a profit killer into a growth driver.
Scope extensions can become a significant revenue stream: a happy client might keep adding projects or upgrades when they know the agency can deliver, effectively increasing the lifetime value of that client. The lesson is that scope creep doesn’t have to mean free work – it can mean more work, under a controlled and compensated framework.
Embracing Automation
In 2025, adoption of finance automation tools is accelerating, with 64% of agencies already using such technology and 17% more planning to implement it this year.
AvidXchange
Faced with tight margins and operational bottlenecks, agencies are investing in automation to claw back time, improve collections, and streamline financial operations. These tools automate billing tasks that used to be handled manually—from generating invoices to sending reminders and collecting payments via credit card or ACH. The goal is simple: get paid faster with less human effort.
Many agencies now require clients to enter payment details upfront, enabling automatic billing at fixed intervals. Tools like Ignition, Stripe, and Paddle allow agencies to embed payment capture directly in proposal and contract workflows. Once signed, clients are automatically billed based on predefined schedules. According to Ignition’s research, this shift has helped some firms eliminate overdue invoices, replacing the traditional bill and chase model with a seamless sign and pay experience.
Beyond improving cash flow, automation reduces labor costs and administrative burdens. Many finance teams report spending 30–40% of their time reconciling invoices, chasing payments, or handling billing errors—tasks that automation can essentially eliminate. Automation also enables agencies to scale without hiring more back-office staff, critical when profit margins are tight and talent is expensive.
Agencies also use automation for collections management, triggering late payment reminders, pausing work when payments are overdue, and even automatically enforcing late fees. Sometimes, agencies offer small early-payment discounts to encourage clients to pay within 10 days, adding a positive reinforcement layer to the system.
Ultimately, automation is no longer a nice-to-have. In an environment where nearly all agencies struggle with late payments and unpredictable cash flow, automated billing has become essential infrastructure, especially for small firms, solo consultants, and fractional CMOs who can’t afford to chase money every month.
Revenue Operations (RevOps)
In parallel with automation, many agencies are adopting a broader framework called Revenue Operations (RevOps) — integrating sales, finance, and delivery systems to drive end-to-end performance. Instead of treating proposals, invoicing, payments, and project delivery as separate workflows, RevOps aligns them into a cohesive, data-driven system.
Modern agency platforms — including Ignition, Accelo, and Function Point — increasingly combine proposals, contracts, scope definition, billing, and payments in a unified environment. When a client signs a deal, the billing schedule is automatically created, synced with project milestones, and tied to a CRM or project management system. This integration reduces handoff errors and ensures that nothing falls through the cracks — a significant problem in agencies juggling spreadsheets and disconnected SaaS tools.
In 2025, agencies using integrated RevOps tools are also beginning to track and optimize more sophisticated metrics: monthly recurring revenue (MRR), client lifetime value (CLV), project margin, and days sales outstanding (DSO). These KPIs, long standard in SaaS, are now entering agency vocabulary as firms look to run more like scalable, predictable businesses.
A particularly powerful use of RevOps is in real-time scope and billing adjustments. For example, when scope creep occurs, a project manager can trigger a scope change request, generate a new quote, and send it to the client for approval — all within the same system. If approved, the updated fee is billed automatically. This agility keeps billing accurate and ensures the agency captures more revenue from evolving engagements.
Agencies are also investing in specialized roles to manage these systems, such as RevOps Managers or Client Finance Leads, who work across departments to ensure scoping, delivery, and revenue are tightly aligned. For smaller agencies, this role may be handled by the owner or a part-time consultant, but the principle remains: RevOps is no longer optional if you want to scale sustainably.
A strong RevOps foundation and automation enable agencies to move from reactive cash management to proactive growth planning, improving client satisfaction, profitability, and operational control.
Broader Economic Trends
Agencies are also navigating a challenging economic climate shaped by inflation, high interest rates, and cautious client spending. Many clients are delaying projects or shortening contracts, leading to unpredictable cash flow, reported by 63% of agencies in Ignition’s survey. Extended payment terms, like net 60 or even net 120, are becoming standard, forcing smaller firms into cash flow compromises to stay competitive.
Meanwhile, in-housing is accelerating, with 20% more clients bringing marketing functions internally to save costs. This puts pressure on agencies to replace lost accounts and prove their unique value—offering creative thinking, cross-industry expertise, and complex execution that’s hard to replicate in-house. Many are diversifying into areas like analytics and martech consulting to stay indispensable.
Hiring trends reflect this shift, too. With agency profits under pressure and 23% annual turnover, many favor contractors and fractional roles over full-time hires. This allows cost flexibility but requires strong operational systems to manage distributed teams and retain knowledge.
The M&A trend is also gaining steam, as nearly half of agency leaders consider mergers or acquisitions for scale, margin improvement, or exit strategies. Larger networks offer operational support, while boutique spinouts compete on agility and lower costs, heightening market competition.
Finally, AI is reshaping operations and pricing models. Agencies using AI for content, analysis, and media buying gain efficiency, but clients are also aware of these tools and expect more value for less. Leading firms are shifting to value-based pricing and retraining staff to work alongside AI, maintaining margins while meeting growing client demands.
In short, the agency landscape is defined by volatility, innovation, and pressure. Success now hinges on agility, clear value delivery, and operational efficiency.
Strategies to Strengthen Your Agency
Adopt Modern Pricing Models: To improve income reliability, shift from hourly billing to recurring retainers, fixed packages, or value-based pricing. These models align better with client goals and protect your margins during economic uncertainty.
Enforce a Scope Change Process: Implement a formal process to handle out-of-scope requests and ensure they’re priced accordingly. This trains clients to respect your boundaries while giving you a structured way to turn extra work into extra revenue.
Institute Upfront and Automatic Billing: Require upfront payments or auto-billing to eliminate late payment issues and stabilize cash flow. Agencies using automated systems often report near-zero accounts receivable and improved financial predictability.
Invest in Client Relationships and Communication: Strong client rapport can reduce payment delays and increase loyalty during tough negotiations. Regular check-ins and transparent discussions about deliverables and billing foster trust and prompt action.
Leverage Technology for Financial Insight: Use forecasting, KPI dashboards, and billing automation to get ahead of cash shortfalls and tighten operations. Tools that link project progress to billing can prevent revenue from slipping through the cracks.
Maintain a Cash Buffer or Credit Line: Build a reserve or secure a line of credit to cushion against unexpected revenue gaps. Tools like invoice financing can also provide stopgap funding, but they should be used strategically, not as a crutch.
Strengthen Client Qualification and Portfolio Mix: Focus on clients with good payment histories and fair expectations while phasing out high-risk accounts. Diversify your client base to avoid overreliance on a few large clients that could disrupt your cash flow.
Tighten Contracts and Scope Definitions: Define scope, deliverables, and payment terms in every contract to protect against delays and unpaid extra work. Strong contracts also create leverage to pause work if payments fall behind, reinforcing your terms.
Upskill Your Team in Finance & Ops: Train staff on financial basics, project scope, and profitability to make smarter day-to-day decisions. Hiring a fractional CFO or bringing in operations experts can dramatically improve margins and sustainability.
The agency landscape is defined by financial pressure, operational complexity, and the urgent need for reinvention. From late payments and scope creep to the growing demand for strategic pricing and automation, agencies are learning to treat revenue operations as core to survival. Those that adapt—by shifting to retainers, enforcing contracts, leveraging AI, and building financial resilience—are stabilizing and creating room for growth. As the industry evolves, the agencies that combine creative excellence with disciplined business practices will be best positioned to thrive.
Download 2025 Agency Pricing and Cash Flow Report
©2025 DK New Media, LLC, All rights reserved | DisclosureOriginally Published on Martech Zone: The Harsh Truth About Agency Margins and the Smarter Path Forward