Why Agencies Lose Clients (and How to Stop It)

Sei-Wook Kim (00:03.437) On today's episode, we'll be talking about how agencies lose clients. We'll cover the common mistakes that drive clients away, the factors that are out of your control, and what you can do to strengthen relationships and reduce the risk of churn. Peter Kang (00:16.974) Pretty excited to dive into this. We got a lot of different examples and we'll look back on some of the ways that we've lost clients while operating our agency. But first and foremost, why is it so important for agencies to not lose their clients? We talk about client retention a lot. Maybe you could frame it from the perspective of agency growth and profitability — shed some light on that. Sei-Wook Kim (00:51.182) It might be self-explanatory that you need clients around to make money. But even if you're a project-based business, you want to retain your client at least through the project you're working on. If you're a retainer-based business where you rely on clients to continue working with you over a long period of time, it's important to have that client around and make sure that you're not reliant on having to go out and find business every single month. Client retention is really important as that baseline to continue to add upon every single month or period of time. Peter Kang (01:35.778) Exactly. Client acquisition can get pretty expensive if you have to do it over and over again. One image that we've talked about with our agencies is this concept of a leaky bucket. You fill it up with new clients, but if there's a hole where you're churning clients out, no matter how much you fill up, it never quite gets higher. The level of water in the bucket never gets quite high because of that leak. Growth really comes from retaining clients. Sei-Wook Kim (02:08.802) Yeah, and the reality is there will always be some aspect of churn for a variety of reasons. But it's making sure that's minimal and the top of the funnel filling the bucket is larger than the amount leaking out of the bottom. Peter Kang (02:24.769) Definitely. Okay, so let's dive into some reasons. We have a bunch that I think we can speak to. I'll start with the first one of how agencies lose clients, and that's this idea of not setting expectations well and not communicating well. Part of it — we talk about it on the onboarding side of things — is a client signs a new engagement and they're supposed to get things going, but then the agency drops the ball. They don't give the client a heads up on what's coming. They also don't have things buttoned up in terms of schedule or the steps the client needs to take. Can you speak to where agencies lose clients when it comes to onboarding? Sei-Wook Kim (03:28.928) This falls under the bucket of account management or project management, but it's all about setting clear expectations on what's to come and always being one step ahead of what the client's next question is going to be. Onboarding is obviously the first step of a relationship — really just establishing what we're kicking off, who we need from their team, what the project schedule looks like, and aligning clearly upfront on what to expect. Because you could erode trust right at the beginning before even starting any actual work on a project. Peter Kang (04:17.216) There's a painful story that comes to mind. We actually had a client once where this guy — we had done some really good projects with them on the web side of things and we had sold them on doing some paid marketing work. But for whatever reason, we weren't buttoned up about getting account access. Our team was fumbling on the steps to get the right access and get them set up to do the work. There were delays that took a couple of weeks. At that point the client was like, hey, this is not working — I needed this last week and you guys still don't have access to my account, so I'm going to stay with my current agency. That was a very unfortunate moment where just a simple thing like onboarding — you think you have it in place — but because we fumbled that one, we lost the opportunity. Sei-Wook Kim (05:15.533) Yeah, and for an account like that, even if we just told them it would be two weeks — it's going to take two weeks to get the account ready — that information upfront would have been helpful to manage their expectations on what was to come. Peter Kang (05:29.288) Yeah. Okay. Let's do a couple rapid-fire ones. How about missed deadlines? Sei-Wook Kim (05:37.834) Once you're in a project and working on it, it's all about expectations and whether you're delivering to what you promised. If you miss a deadline, you're consistently late, you're missing meetings — all of those erode the trust with the client. Peter Kang (06:04.03) So what can we do to mitigate that? Sei-Wook Kim (06:08.554) Setting realistic deadlines. Often that might be a lack of communication with the internal team on when we can actually deliver something and setting internally what the steps are, checking in daily or every few days so that by the time a deadline comes around, nothing is a surprise. And also, even if you know you're going to miss a deadline, just being upfront with the client and saying, hey, we actually need another couple of days, so let's move the meeting we have scheduled. Peter Kang (06:41.897) That proactive communication is so key to at least making things right. The next one is poor quality control. What can we say about that? Sei-Wook Kim (06:52.286) Things are done, they're rushed, and there are mistakes — whether it's in design, coding — if there's just a lack of polish, there are errors, there are bugs. Those are the things that clients recognize. And even if you're upfront about it, like this is not in a polished state, here's what you should expect to see — generally when things aren't polished or in a presentable state, it feels like things just aren't buttoned up at the agency. Peter Kang (07:32.798) We've had so many frustrating moments around quality control over the years in various capacities. Some of that was, hey, we're on a tight deadline and we just had to show the client something on a certain date. Without prompting them and letting them know — even just showing them a staging link that's in disarray — that caused a lot of issues. Or even after a client has reviewed something and left a lot of notes, not addressing the quality issues they thought were important and coming back with a revised version that doesn't address all the things they flagged — that's also caused issues. What are some ways in terms of quality control that we've done to help improve how projects ultimately turn out? Sei-Wook Kim (08:42.458) Quality control starts much earlier in terms of aligning on what you're making and delivering at a certain point in time, having internal checkpoints so that there are many eyes on things before they're presented, and being clear about expectations. One example: let's say you're making a website and you tell the client you're going to share 10 pages at the next meeting, but the team is feeling strapped and hastily puts together 10 pages. It's almost better to focus on three to five pages that are really polished and complete versus trying to do too much at once when nothing is polished at all. It's again just being clear — it's this project management of what are we promising, what are we delivering, and making sure what we're putting out is of high quality. Peter Kang (09:43.752) Absolutely. Another way that agencies lose clients is unresponsive account management, poor communication to some degree. This one is a big one — can you speak to some of the examples here? Sei-Wook Kim (10:01.36) It's a line that clients sense a lack of account management before they sense a lack of quality in the work. What that means is, if the client is not hearing from you — let's say a team is busy, heads down working on something, and you're not proactively updating them on what's going on — it almost feels like they're being ignored or undervalued. That's from an update side. But also, when a client emails or calls, being quick to respond is really important from an account management standpoint so that the client feels like they're a top priority. Peter Kang (10:54.397) The interesting thing is, from the agency's perspective, they can think that everything is going well with this client — maybe the quality of the work is good, or they're hitting all the deadlines. But by not being communicative, by assuming things are all good and not checking in, not having a regular channel of communication, that can actually put the relationship at risk. That's something that sometimes gets overlooked because it's very easy to assume things are going well. It's actually why some of the things we really encourage is even a basic quarterly business review check-in with a client, or even some kind of email check-in every once in a while — so much better than going radio silent. Sei-Wook Kim (11:46.461) Yeah, and the other thing around that is being proactive about understanding the state of the client's business. Your project might be going great, but on a macro level the client's company could be doing not great. If you haven't had that conversation and been transparent and proactive about it, it could be a surprise — hey, we lost a client, things were going so well, why did it happen? But the signs were there all along. Peter Kang (12:16.22) Absolutely. The next one is something we've felt firsthand several times: a new stakeholder coming in on the client side. In the beginning they're friendly, they say nice things, but you're on edge because they probably have another agency they prefer and are looking to replace yours. Maybe we can talk about how we've lost clients this way. Sei-Wook Kim (12:46.726) This has happened a lot over the years. The thing we've learned in these situations is that it's a pivotal moment in a relationship when a new stakeholder comes in. For us it's almost like treating it as you've got to win the client again. All the effort you put in early on to inform the client on who you are, your experience, what you're working on — it's almost like a re-onboarding of this new person who has absolutely no idea who you are. You can put your best foot forward and try to present yourself in the best light, but at the end of the day the reality could be they have a partner they've worked with for 10 years and their goal is to replace you. There's not much you can do about that. Peter Kang (13:41.615) Yeah, and you almost want to — just as much as you want to win it and stay on — you've also got to be like, okay, the clock is ticking, this will probably end. We should make sure our business development efforts are taking that into account to replace this account that's probably going to churn. That's the other internal clock that starts running once a new stakeholder comes in. Sei-Wook Kim (14:09.019) Yeah, definitely. And you also want to make it a smooth process, because the person who comes in could also be an advocate for you in the future for whatever new engagement or new company they end up going to. Peter Kang (14:23.207) No, it goes both ways — a new stakeholder could be an opportunity to make another connection that helps your business grow. Okay, the next one. I'm big on this because I think it also applies to people you hire within the company and relationships within the team: misaligned tone or communication style. One thing I want to highlight is that the speed of comms is important in terms of communication style. Can you speak to this a little bit? Sei-Wook Kim (14:53.255) Tone is an interesting one because it's hard to read tone in an email or written form. Generally, if it's something that could be challenging, we might recommend just picking up the phone, doing a Zoom call, and having verbal communication when tone could be misunderstood. Style is a big one too — everyone has a different style. Some people are text people, some people are email people, some people are in-person. We've had all kinds of clients throughout the years. One big thing for us is speed is important regardless of the format — just making sure you're mirroring the pace of communication. If it's text, it's responding quickly and just showing that you're on top of whatever it is, because it could be a very important thing to get a response to quickly for whatever question they have. Peter Kang (15:56.646) It's on the agency to really feel out from the beginning whether this is a client that is very fast with comms and expects fast responses. Because the moment there's a mismatch — let's say the client is used to same-day responses, maybe a couple of hours is the max, and the agency is more used to next business day — that's going to create instant erosion of trust in a big way. Recognizing that doesn't necessarily mean you need to have a polished answer ready to go, but just acknowledging receipt and setting the expectation — we'll follow up with a more detailed response in X hours or tomorrow — that can handle it. You just need to make sure you're reciprocating in a way that makes the client feel good. This comes up a lot because when clients feel frustration or express that the team is slow or doesn't care, a lot of times it has to do with the speed of comms. It's not a heavy lift, honestly, but it's something we've learned the hard way — when you have a PM that's a little slow to get back to clients, or an account manager who's taking their sweet time, it can create a lot of problems. By the way, some people are on the fence about this, but having a texting relationship with clients sometimes — that could be one way to make sure there's a direct line to that client. Sei-Wook Kim (17:52.622) Yeah, with various clients we've developed a lot of good personal relationships that way, because you just end up talking about things outside of the specific projects. Peter Kang (17:59.301) Let's talk about another way that agencies have lost clients: ego and defensiveness. Especially if you're on the creative side, maybe even the tech side. Can you talk about instances where this has been a way to lose a client? Sei-Wook Kim (18:27.248) This usually comes up when clients have some sort of feedback on the work output or they call out what could be a mistake. It could have been a small mistake, but how you handle that sets the tone for the relationship. If you put up a front and say no, you're defensive — that didn't happen — or you come from a position of ego saying, you're wrong, we're right, that type of dynamic sets a tone where clients don't like being on the receiving end of that. Sometimes it's all about delivery. You could disagree with what the client is saying, but if you communicate that in a respectful tone, explain where you're coming from and the background, they can make the decision whether they agree with you or not. It's more about that perception of how they feel from your communication. Peter Kang (19:34.616) Absolutely. In the course of a relationship, you also just need to understand that you don't need to fight all the battles. You don't need to be right. You need to feel out what the client is trying to achieve and be supportive in that path. Having low ego but high standards for yourself and what you're delivering and the service you're delivering — that's the service mindset that sometimes, if you're a craftsman of the work and you really take pride in what you do, you can forget. It's very important to be grounded in humility and to remember that at the end of the day the clients are paying for this. Sei-Wook Kim (20:24.056) Yeah, and then it's really just being open-minded and trying to understand where everyone's coming from. Peter Kang (20:31.159) Exactly. Okay, the next one is cost creep without justification. Agencies sometimes, if they haven't done a good job of setting this up, face situations where there's expanded scope or whatever, and that surprise invoice is not going to land well. Can you talk about some instances where we've made some mistakes on this end? Sei-Wook Kim (21:00.292) A lot of it is established at the beginning of the relationship — understanding the scope, and if there are change orders that increase the scope for a variety of reasons, just being clear on what's in or out of scope. That's step one to prevent any surprises on what's happening. Part of it is understanding that the client probably had to go through a process to get budget for this engagement. If they were to go over budget, that reflects poorly on them in some instances, or they have to go back through a whole system to get more budget approved, which could cause friction. In both situations, if they just don't know and it's a surprise, you never want to be in a position where that keeps happening. Over time, if you have many little changes, it can feel like you're nickel-and-diming them, or a small project has ballooned into a larger project and they feel like they've just been misled from the beginning. Peter Kang (22:09.25) 100%. Part of this is training our teams over the years on how to have these kinds of conversations. A tight scope is the foundation of it, because then you can say, hey, we talked about delivering this, but from our discussions it seems like you really want this thing that was not defined in our scope. For that, here's what it would cost additionally — do you really want this or not? Just having that discussion and giving the choice diffuses a lot of the challenges that could happen. We've been in situations where a project manager — the scope isn't the tightest, and they're more of the people-pleaser type — the client says, hey, we want this, and the PM goes, okay, that sounds good, they do it, and then later, here's the increase in the invoice because we did what you told us to do. When the client gets hit with that, they get incredibly mad because they're like, you never told me. Part of it is that training on how to manage scope really tightly. A lot of times, if you do it right, clients are more than willing to pay for something they see as added value. Sei-Wook Kim (23:43.159) Yeah. Peter Kang (23:44.929) Okay, this next one is related in terms of the work and scope: perceived lack of value. Agencies get fired for this a lot. Sometimes clients spend a lot of money on something and they're like, wait a second, this isn't really driving the results I thought — why am I spending so much on this? Can we speak to some examples of this? Sei-Wook Kim (24:05.816) This comes into play typically for ongoing or retainer-type relationships. For a project, they've budgeted and have a set sense of what value they're trying to get out of an engagement. But if they're paying monthly for some kind of outcome and it's not clear, it's on the agency to prove what value they're offering to that business. If it's not clear and it just feels like an expense versus an investment that will yield a positive outcome for their business, that's an easy thing for a client to just cut. Peter Kang (24:53.061) More specifically, something like — we used to charge for 100 hours a month of web support, adjustments, whatever. A lot of times clients use some but not all the hours. We try to make up things, like hey, you need to update this, make this page look better, freshen this up, swap out this imagery. Sometimes we didn't tie that to, hey, this increases conversion rates, so it led to more leads or allowed you to close more deals. Without those kinds of results tied to our efforts, some clients after a while are like, I'm paying you guys tens of thousands of dollars a quarter and I don't know what I'm paying for. That's an easy way for them to perceive a lack of value and cut the agency. Sei-Wook Kim (25:54.018) Yeah, definitely. And even in situations like that — let's say you sold in 100 hours a month and you're only using half of it — it may be wise to just say, hey, let's reduce the scope to half of what we've originally signed on for. That can lead to a longer time horizon for working with a client versus going from 100 to zero. Peter Kang (26:13.172) Yeah. Speaking of which, the next reason agencies lose clients is a rigid pricing model. What can we say about this? Sei-Wook Kim (26:28.48) That's one example we just talked about — if you're fixated on the specific amount, like it's an hourly model where we have to charge you 100 hours a month and that's the only way we'll do it, clients will say, that doesn't work for us, let's move on. Another thing is there are so many different pricing situations where clients may need to back-load or front-load their budgets depending on how their fiscal year occurs. Being flexible with how you work with clients and understanding how things work on their end is important. Peter Kang (27:12.372) This is more new business related, so maybe it's not about client loss, but it was a lost deal nonetheless. We had this big media brand come to us and they needed help on a landing page or whatever it was. At the time our floor for a landing page with those kinds of features was $25,000 and they said, hey, we have $18,000, can you guys do it? For whatever reason we were like, no, this is below our line, we're not going to do it. We passed, and lo and behold, another agency that we know ended up doing that initial site and then ended up getting many, many projects after that that probably added up to more than seven figures worth of work. Just funny thinking back on that — rigid pricing model — and we probably could have made it work for $18K, honestly, but we were just super rigid about it. Peter Kang (28:14.514) Another reason clients might ditch an agency is an M&A event. We could talk about both sides because we've seen it happen both ways. Let's talk first about a client getting acquired by a larger company. What can we say about that? Sei-Wook Kim (28:31.2) That's a similar situation to when a new stakeholder comes in — a company gets acquired and you may need to sign new MSAs with a larger organization, basically re-sign all your contracts, and you're essentially proving your value to the larger company that acquired them. That opens up more potential for loss, especially if the larger company also has preferred vendors they work with and want to consolidate with some of the other companies they work with. Peter Kang (29:12.861) We've had this happen a few times with some really cool brands we worked with — we brought them onto Shopify and created some really cool work, only to see that company get absorbed by a much larger company that had a different tech stack. All of a sudden all that work we did the previous year just got flushed out because they were like, we've got to integrate with this bigger system and Shopify is not going to factor into that. We were immediately cut out and the client just kind of goes away. That's always a risk. Let's talk about the flip side — when the agency experiences an M&A event. Sei-Wook Kim (29:58.117) I was actually going to mention the flip side where the company gets acquired and then you can sell into all the other companies at the larger company. That's the opposite of losing a client — turning it into a bigger opportunity. Peter Kang (30:07.81) Yeah, you could gain. If you're a superstar vendor and they start spreading you around, it could be a good business development opportunity where they're like, we work with these guys, they're fantastic, you should use them for your other needs. That's a way we've grown accounts in the past as well. Sei-Wook Kim (30:30.271) Yeah, and then on the flip side, if you yourself as an agency are getting acquired and you're working with a client, that's sometimes just an opportunity for the client to revisit contracts and determine whether or not they want to continue. It also depends on how your contracts are written — you want transferability as much as possible so that clients don't have to re-sign if the agency gets acquired. But that's definitely a moment where it can cause one of your clients to reconsider their relationship. Peter Kang (31:08.894) We saw this firsthand in a very stark way when we announced that we had acquired an agency. We saw right away that a client was like, hey, I know what happens when agencies get acquired, I've seen this happen on the private equity side — service is going to suffer, so I'm putting my notice in right now. We didn't even have a chance to show that the business could continue, but for whatever reason they just thought this was going to be bad news and took the step to churn. Sei-Wook Kim (31:39.849) There were probably signs before in that relationship that led to that specific instance. In those cases, again, it's reiterating your services and in some cases just trying to show that there's going to be as little impact as possible to their existing projects. Peter Kang (31:58.814) Yep. Let's talk about market conditions as another reason. This is a little bit outside the agency's control, but it does definitely happen. What are some things here, and what can the agency do to still keep the client? Sei-Wook Kim (32:17.948) We saw this recently in a few different waves. When funding for e-commerce businesses dried up quite a bit, a lot of our clients who were relying on the next round of funding to buy inventory and continue their business weren't able to raise the money and make those investments. So they had to reduce spend on marketing — both because they didn't have product to sell, and because they needed to find opportunities to scale back. In those cases, you can be as accommodating as possible — think about whether you can service that client at a lower revenue level for yourself, or whether you can pause services: hey, this might be a temporary thing, let's pause for three months and pick things up later on. You're just trying not to lose that relationship or make it completely disappear, but find a way to continue working together in a different capacity. Peter Kang (33:23.133) Absolutely. One thing I'd call out for agencies to be careful about: when market conditions go down, it's very important to make sure from a receivables and cash payment collection perspective that you try not to let the client fall behind. One of the challenges is if you're accommodating, you have a great relationship, you do a lot of work, but then you start to see that they haven't paid their bills — that puts the agency in a very dangerous spot. The client could run up quite a balance with the agency. If market conditions are bad, who knows how long it'll take for them to pay back that amount. In some cases we've been in situations where the client doesn't pay, they default on the payment, and you're left holding the bag. Sei-Wook Kim (34:14.578) Yeah, definitely continue to receive the money even if you are being flexible with other terms. Peter Kang (34:22.321) Yeah, and honestly that could be a point at which you do let it churn, because if the client is like, hey, we can't pay — okay, you probably should not be doing work for them. Okay, we've got a couple more left. This one — I have a very specific example — is another agency offering a more compelling value prop. Can we talk to this particular reason? Sei-Wook Kim (34:48.089) This can happen in a lot of different ways. You're working with a client, and someone else comes along to say, we can do this very niche specific thing better than your current agency, or we can undercut their pricing, or we can do these other services, or we have better creative than what you're getting currently. Just because you have a client doesn't mean people aren't trying to steal that client away from you. Peter Kang (35:16.028) Agencies need to realize that clients are getting hit up by other agencies all the time — just like employees are getting hit up by recruiters. At any given moment, if they're unhappy with your agency and there's some doubt in the agency's ability to do something, there are dozens of other agencies that have been knocking on their doors. At any point they're liable to move on or entertain conversations with other agencies. You have to assume that you've got to show up every day and prove yourself. I remember this particular example where one of our clients' CEOs went away to some kind of leadership retreat and was talking to another entrepreneur CEO there, and that other CEO recommended his own agency — said, hey, they are really good at XYZ stuff, they're really good at solving for this particular e-comm thing. Lo and behold, we had been working with this brand and next thing we know this other agency is kind of in the mix with us and we're like, what the hell's going on? These things happen. We were actually able to fend off and keep that relationship in the end, but wow, that was a stressful moment. Sei-Wook Kim (36:47.185) Yeah, you never know when things are coming from all sides — different stakeholders, different reasons, different aspects of the project or engagement that you're not even touching, where you might be working with other agencies in those cases. Peter Kang (37:01.564) So we've gone through a ton of things and I'm sure there's some stuff we've left out, but we'll wrap up with this last one: in-house build, the in-house resourcing. Clients sometimes do this when working with an agency — maybe the cost goes up to a level where they think they can bring some of these full-time resources in-house. Can you speak to the in-house part of why agencies lose clients? Sei-Wook Kim (37:28.209) Typically the instance I can think of is a client hired a really competent person who had managed product teams in the past — engineers, creative project managers — who was initially managing our teams, and they had a sizable retainer with us. Over time, they realized there are certain roles we could hire internally. Instead of paying an external agency to do it, we can hire that resource directly and manage them. Then over time, one role became two, three, four, and suddenly they've replaced all the team members that had been working on that account. It's usually cost-driven when a team wants to bring things in-house, or if there's some specific aspect of things they want to control — maybe they're building up a big tech team in-house and want to make sure everything is integrated and they can manage everyone internally. In-housing is definitely a reason why we lose clients. Peter Kang (38:48.494) If you're on a model where you're selling manpower to clients, you're at more risk sometimes. One way to mitigate this is to really have certain responsibilities or specialty areas where the client thinks, there's no way we're going to hire full-time for this, it's just too focused. Being able to provide that — so maybe if a client has hired a group of devs or designers or QA people for their in-house team, you can still have a CRO expert, maybe a solutions architect type, maybe somebody who's more high-level DevOps that can be fractionally still assigned to the client, and the client will be happy to pay for those resources. It just goes to show that you've got to continue to feel out the client's needs and not just stay on the default of your staffing — make sure you can provide something that's extra valuable. Sei-Wook Kim (40:12.986) Definitely. Peter Kang (40:15.265) Okay. Well, we've covered a bunch. As we said at the top, it's so important to retain your clients. Just think about everything we said about how agencies lose clients, do your best to retain them, because that's a sure way for your agency to grow. All right. Till next time. Thank you. Sei-Wook Kim (40:38.116) Thanks.