Why Are Agencies Struggling to Grow Despite Rising Demand?
In 2025, agencies are operating in a paradox.
Demand for digital, creative, and strategic services continues to rise, with brands increasing investments in technology, customer experience and performance-led marketing. Yet, 60% of agencies report that acquiring new clients is their biggest challenge, while only 54% saw revenue growth in 2023 and just 51% achieved operating profits above 10%. Many agencies are struggling to scale, protect margins and sustain long-term growth despite growing market opportunities.
Clients no longer want execution alone they expect strategic thinking, measurable outcomes, faster turnaround and flexibility. However, many agencies are still operating with outdated models, inefficient processes, limited resources and growing talent gaps. Turnover rates among mid-level talent reach 35–40%, while 63% of agency professionals plan to change jobs, further straining operations and delivery capabilities.
The data reflects this reality: growth is slowing, profitability is under pressure, and operational issues from missed deadlines to team burnout, which affects 35% of agency employees are increasingly visible. This article dives into the key pain points agencies face in 2025, supported by industry data and explores how addressing them strategically can position agencies for stronger foundations, better focus, and sustainable growth in 2026.
1. Client Acquisition and Retention: A Persistent Bottleneck
For most agencies, growth starts and often stalls with client acquisition.
Recent research shows that 60% of agencies identify new client acquisition as their biggest challenge, consistently ranking it as one of the top reasons agencies fail. A LinkedIn report further reveals that 43% of agency leaders say finding new clients is harder today than ever before.
But acquiring clients is only half the battle.
Retention remains a major blind spot across the industry:
- Average client churn rates range between 2% and 8% annually
- Alarmingly, 15% of agencies don’t even track their churn rate
Without a predictable pipeline and strong retention strategy, agencies struggle to forecast revenue, plan investments or scale sustainably. Growth becomes reactive rather than strategic.
2. Revenue Growth and Profitability Under Pressure
Even agencies that win clients are finding it increasingly difficult to grow profitably. Financial pressures are mounting, and many firms struggle to convert strong demand into sustainable revenue and healthy profit margins. Key statistics highlight the scale of the challenge:
- 54% of agencies with revenues over £1M reported fee growth in 2023, down from 78% in 2022
- Agencies generating over 10% operating profit fell from 71% in 2021 to 51% in 2023
- The global agency services market exceeded $450 billion in 2025, yet growth is uneven
- Larger agencies maintain profit margins of 25–32%, mid-sized agencies average 18–22%, while smaller agencies operate under tighter margins
These figures show that, despite rising demand, many agencies are struggling to achieve consistent growth. Slower revenue expansion and compressed profitability limit their ability to invest in talent, technology and strategic initiatives critical factors for long-term success.
3. Project Delivery and Creative Execution Challenges
Winning business doesn’t guarantee success if delivery falls short.
A 2025 Project Management Institute (PMI) survey found that 97% of agencies experienced significant campaign delivery challenges, including:
- Missed deadlines
- Budget overruns
- Execution and quality issues
Even more concerning, one-third of campaigns failed to resonate with target audiences or deliver meaningful outcomes.
Inconsistent delivery erodes client trust, weakens long-term relationships, and makes it harder for agencies to prove their strategic value beyond outputs.
4. Talent Shortages and Workforce Instability
Talent remains an agency’s greatest asset and its greatest vulnerability.
Larger agencies report turnover rates as high as 35–40%, particularly among mid-level professionals who play a critical role in client success.
The outlook is even more concerning:
- 63% of agency professionals plan to change jobs
High attrition leads to rising recruitment costs, loss of institutional knowledge, and disrupted client relationships. Over time, this instability weakens creative consistency and operational resilience.
5. Technology Gaps and Market Volatility
Agencies are also under pressure to keep up with rapid technological change and shifting client expectations:
- 20% of agencies struggle to keep pace with new technology
- 45% report unpredictable client budgets
- 35% of agency employees experience burnout
These challenges signal deeper structural issues. As clients demand faster delivery, data-driven insights, and omnichannel execution, agencies must become more agile, tech-enabled, and operationally efficient—capabilities many are still developing.
Why Addressing These Issues Is Critical?
Taken together, these challenges point to a systemic issue: traditional, transactional agency models are being stretched to their limits.
Agencies focused primarily on outputs rather than measurable business impact face serious disadvantages:
- Slower revenue growth and shrinking margins limit innovation
- Operational inefficiencies weaken client relationships
- Talent burnout and turnover reduce creative and strategic capacity
To succeed in 2025 and beyond, agencies must evolve from service providers into true strategic partners organizations that deliver outcomes, not just deliverables.
Moving Forward: Strategic Solutions for Agencies
- Predictable Client Pipelines: Build diversified, repeatable acquisition strategies to reduce reliance on referrals and create steady, long-term growth.
- Retention Through Results: Track performance against meaningful business metrics such as revenue growth, customer lifetime value, and client retention to demonstrate real impact.
- Streamlined Delivery Management: Implement scalable project and delivery systems to improve predictability, reduce friction, and ensure consistent quality across teams.
- Investing in People and Skills: Prioritize continuous learning, career development, and a supportive culture to retain top talent, reduce burnout, and maintain a competitive edge.
- Strategic Use of Technology: Leverage integrated tools for automation, collaboration, and data insights to enable smarter decisions, faster execution, and improved operational efficiency.
- Strategic Partnerships: Collaborate with complementary agencies and service providers to expand capabilities, respond faster to client needs, and position the agency as a long-term strategic partner rather than just a vendor.
Agencies in 2025 face a complex mix of challenges from client acquisition hurdles and revenue pressures to talent shortages and technology gaps. These obstacles highlight a larger truth: traditional models focused solely on deliverables are no longer enough. Every agency founder begins with ambition, creativity, and a vision for impact, but sustainable growth requires strategy, systems, and strong partnerships.
At Kilowott, we’ve seen how strategic collaborations empower agencies to scale efficiently, unlock new opportunities and deliver measurable business value, allowing teams to focus on what they do best. By embracing these approaches, agencies can confidently move into 2026 with stronger foundations, sustainable growth and lasting client impact.
