Growing an agency is about more than just winning new business but many agency management teams ignore the elephant in the room. They overlook the impact of client churn. This is the elephant in the room; everyone talks about new business, but few address the real cost of lost clients.
Ignoring churn creates a false sense of growth. You might be signing new clients, but if old ones keep leaving, you’re treading water. It’s time to face this challenge head-on.
The Cost of Client Churn
Client churn is the rate at which existing clients stop working with your agency. A high churn rate means unstable revenue and wasted new business efforts. According to Bain & Company, increasing client retention by 5% can boost profits by 25% to 95%. Despite this, most agencies focus on acquisition rather than retention.
A simple example highlights the issue. If an agency wins £500,000 in new business annually but loses £400,000 in existing accounts, net growth is just £100,000. The effort to replace lost revenue is exhausting and unsustainable.
Why Agencies Underestimate Churn
Agencies tend to overestimate client loyalty and underestimate dissatisfaction. This happens for several reasons:
- Lack of tracking – Many agencies don’t measure churn properly. They look at new wins but not losses.
- Optimism bias – Agency leaders often believe clients will stay because they deliver great work. They forget about shifting priorities, budgets, and competitor offers.
- The focus on new business – New business wins are celebrated, while client losses are quietly accepted.
The Hidden Impact of Churn
Churn affects more than just revenue. It damages reputation, team morale, and operational stability. Constantly replacing lost clients creates pressure on staff, leading to burnout and reduced service quality. According to Harvard Business Review, acquiring a new customer is five to 25 times more expensive than retaining an existing one.
Moreover, long-term clients often bring higher margins. New clients require onboarding, learning curves, and initial discounts. Retained clients, on the other hand, need less hand-holding and contribute to a more predictable cash flow.
How to Reduce Client Churn
Addressing churn requires a shift in mindset. Here are five strategies to improve client retention:
1. Track and Measure Churn
Monitor the percentage of revenue lost from departing clients each year. Set a target to reduce it.
2. Improve Client Experience
Regularly check in with clients. A study by PwC found that 32% of customers stop doing business with a brand after just one bad experience. Make every interaction positive.
3. Offer Strategic Value
Clients leave when they stop seeing value. Go beyond execution—offer insights, proactive ideas, and market intelligence.
4. Develop Stronger Relationships
Build deeper connections beyond the day-to-day contacts. Engage senior stakeholders and understand their long-term goals.
5. Identify At-Risk Clients Early
Look for warning signs—delayed payments, reduced scope, or less engagement. Act before they leave.
Conclusion
New business is exciting, but client retention is essential. Agencies that ignore churn risk stalling growth, damaging morale, and exhausting their teams. To achieve real, sustainable growth, agencies must stop underestimating churn and start making client retention a priority.
