The agency model is broken—so how do some still thrive?

You work longer hours, but margins keep shrinking. In-house teams are more reliant on contractors, but they’re peevish about hiring freelancers over agencies. And as AI eats the work, it’s easy to imagine hourly billing going away.

What does it all mean? The traditional agency model—the way agencies have operated for decades—is breaking. It's outdated and no longer reflects how clients buy or what they actually need. If your agency doesn’t evolve, it may risk becoming obsolete.

That’s why we spoke to John-Henry Scherck, CEO of Growth Plays, a content agency that works with companies like Copy.ai, Calendly, and Lattice, and which is currently growing and hiring. We wanted to know what’s changing, how agency founders can adapt, and why Growth Plays has never experienced a dip in demand.

Growth Plays is hiring, and Pilot’s bookkeeping helps with that → 

Tip 1: Offer a specialized service 

With a slowing U.S. economy and global venture funding down, companies are under more pressure than ever to justify spend. They’re focused on activities and functions that generate revenue, and people are looking for specialized agencies and contractors to produce fast results they can show to their boss.

That is why instead of offering a full suite of services as many traditional agencies do, many are adopting the hedgehog approach: they are niching down and going deep. That specialty makes it easier to deliver the work, to build institutional knowledge, and to hire and train. It also helps you stand out in a crowded market.  

“Being an expert in one area allows you to be the go-to person. When you are known for something specific, it’s easier to get referrals, build expertise, and grow a personal brand. It’s hard to be known for doing everything,” says John-Henry Scherck, Founder and CEO of Growth Plays.

Take Growth Plays. They’re a highly specialized agency offering content, SEO, and generative engine optimization services, and they work almost exclusively with mid-market B2B tech companies. Clients come to them not for generalist support, but for deep, domain-specific expertise. As a result, they’re still able to grow headcount and win clients in this uncertain market.

“You don’t get economies of scale with us. You get best-in-class services delivered by experts,” says John-Henry.

There are a few ways to specialize: by location, by industry, or by service. In most cases, we recommend specializing by skill or service, such as SEO, paid ads, web design, or email marketing, because it gives you the most flexibility to shift verticals if, say, tariffs suddenly affect your clients’ industry. From there, you can differentiate how you deliver that service:

• Your process (how you work with clients)
• Your technology or automations
• Your team’s specific expertise
• The types of companies or industries you work with

It may go without saying, but pick a specialized service you are already quite good at, so you’re starting with an advantage, and build a brand around that service.

Tip 2: Ditch hourly billing

Your clients read the same headlines you do. They know ChatGPT and Claude can write passable copy. They’ve seen Midjourney generate decent visuals. So when they see line items in your invoice like “10 hours at $150/hour” for an article or “15 hours at $200/hour” for a landing page design, they’re asking themselves: “Why am I paying agency rates for something AI can do instantly?”

You know these tools can’t replace thinking or create high-quality work without human involvement. But many clients don’t see that, at least not right away. That’s why you should reframe how you charge. Instead of billing for hours, price your work based on the value it delivers. That’s where value-based and subscription pricing come in.

With value-based pricing, you charge based on what you deliver, not how long it takes. If your landing page increases a client’s conversion rate from 2% to 7%, that’s potentially hundreds of thousands in new revenue for them. Your price should reflect that impact.

To set value-based prices:

• Have a conversation with the client: What’s the business goal? What’s the upside if it succeeds?
• Estimate the potential gain and your contribution to it
• Price based on the return on investment the client expects from your work (3-5x is often considered fair)

Another option is subscription pricing. With this model, clients pay a flat monthly fee for ongoing access to a set scope of work. This structure gives clients flexibility and helps anchor your value. For a content agency, this might include a set number of blog posts, newsletters, or social media assets each month.

To appeal to different client types and budgets, use a tiered structure. Neville Medhora’s Three-Pronged Pricing Technique is a good starting point:

Tip 3: Keep a core team of five

Jeff Bezos has a simple rule: If your team can’t be fed with two pizzas, it’s too big. That’s a good benchmark for many smaller agencies contemplating growth.

More companies are now choosing smaller, agile agencies because the bigger ones imply more overhead, take longer, aren’t as flexible to scope changes, and don’t devote as much individual attention. Clients also now know their work may be passed off to junior staff, and they’d rather work with a hands-on, focused, senior team that delivers results.

This team setup benefits you in a lot of ways, too. A smaller team is easier to manage and way more cost-efficient. If you only have a core team of about five people or fewer, you can keep more profit because of reduced overhead costs. “Aim to not grow headcount as fast as you grow revenue,” says John-Henry. “Your revenue growth should accelerate beyond headcount growth, so you’re growing more and more profitable.”

But that doesn’t mean you should never grow headcount. “If you don’t grow headcount, your employees will get bored, stagnate and leave,” he says. Many talented individuals want to move up the career ladder, so if you don’t offer them that opportunity, you’ll have a problem retaining them. 

So, eventually, you should hire, but only when:

• You're consistently hitting a certain MRR (e.g. $50K monthly or more)
• You have enough work to keep someone busy for at least 3–6 months
• Hiring full-time will save you money compared to paying contractors
• The new hire frees up your time so you can focus on other revenue-generating activities

Otherwise, use contractors instead. You’ll keep more margin, stay more agile, and avoid the pressure of making payroll when things get slow.

Tip 4: Overcommunicate with the client

The top things clients want more of from agencies are clear, honest communication and access to their data so they can make strategic decisions according to a 2023 Marketing Relationship Survey. This shows the agency-client dynamic has changed. Now, you need to overcommunicate with clients.  

“To run your agency for the long term, you need to have a close relationship and honest communication with the client, while providing best-in-class services,” says John-Henry.

Clients want more transparency. They want to know how you’re using their budget, what progress is being made, and whether anything needs their input.

Overcommunicating doesn’t mean spamming them with emails or Slack updates; it means being proactive and clear in a way the traditional model never was, so they’re never confused or reaching out to you first for updates. Some ways to do this are:

• Set weekly, bi-weekly, or monthly check-ins based on client preference.
• Send weekly status updates with completed tasks, progress, and blockers.
• Share live performance dashboards or reports.
• Use shared folders or docs for full visibility into deliverables.
• Flag issues early before the client notices.

No matter how much changes, the fundamentals still matter

Despite all the changes happening—AI, shrinking budgets, pricing strategies—the fundamentals of building a successful agency haven’t changed. Clients still want results. They want partners they can trust. They want to know you understand their business and that you're in it with them. 

If you keep delivering great work, communicate openly, and stay flexible in how you operate, you’ll survive this new era of agency operations.