POV: The creative agency model is dead – that’s why I shut mine down

Closing my agency has been one of the best things I have ever done. I have zero regrets. I closed because I wanted to, not because I had to. I’ve received many emails from people saying “I am so sorry to hear that you closed.”

“Sorry?!” I ask. “I am overjoyed!” I voluntarily closed because I believe the creative agency as we know it today is dead. Kaput. Deep in the ground.

Once heralded as status symbols. Measures of success. Mad Men glory. The 2000s were flooded with agencies, majority male-owned and led, so so white, with big clients and fat checks. When I graduated from college, working for a creative agency was all the rage. Cold brew on tap, global travel, campaigns with athletes and celebrities reigned supreme.

And then there was the backlash. The birth of the boutique creative agency. The ones who would take on the Red Antlers and Mothers of the industry. My agency, Utendahl Creative, was one of them. A boutique branding studio. Ten employees, all women, based in Brooklyn. And we were fucking great. We won every award possible, took home millions in revenue with employees making six figures a year. I am proud of it… very.

But starting at the end of 2022, into 2023, the industry started to crack. I found myself up against the big guys, but not in a way that would be complimentary but alarming. Agencies whose minimum fee was 250K were submitting RFPs (requests for proposal) for bids that were appropriate for us… 80K. I knew something was up. The model was not sustainable and the ones with inflated valuations and huge office rents and far too much overhead couldn’t hold on. Yes it was the economy. Yes AI was brewing. But more than that, the model itself was frankly broken.

The Model

Here’s how it works. Client has X dollars – for the sake of easy math let's say 100K – to spend on either their brand, a campaign, a photoshoot, you name it. That number is determined by their annual revenue and/or projections for the following year.

They either go direct, as an inbound, or request an RFP which will be a detailed breakdown of what they are looking for. The agency then submits their proposal and, based upon the RFP, determines a number that (if they are smart) has a profit margin of at least 50 per cent. However, the majority of creative agencies go as low as 10-20 per cent depending on their internal revenue, overhead, and clout of the client.

Now this is one of the biggest red flags. A story as old as time: an agency takes a lower fee than they could and should based on the project, giving them a bump in business and/or something good for their portfolio.

I did this many times. Every damn successful creative agency does this.

Mistake #1: I took lower fees and more clients before letting people go.

This is where it gets brutal. When revenue started tightening, I had a choice: take on more work at lower margins or downsize. I chose the former because I had full-time employees with salaries and benefits to protect. So I said yes to projects at 15 per cent margins. Then 10 per cent. I told myself it was temporary, that we’d make it up in volume, that the portfolio pieces would lead to better clients. They didn’t.

What happens is you enter a death spiral. Lower fees mean you need more clients to hit the same revenue. More clients means more pitching, more account management, more context-switching. Your team burns out. Quality slips. And those “portfolio piece” clients? They expect the same level of work as your premium clients, but you’re doing it on a shoestring. You can’t win.

This is the terminal flaw in the agency model: the profit margin squeeze is built into the system. You’re always competing against someone willing to go lower, and if you have overhead, which you do, you eventually have to match them or lose the work entirely.

Mistake #2: I made NYC my HQ.

Let’s talk about that overhead. My Brooklyn office wasn’t some Midtown high-rise, but it was still thousands a month. The agencies submitting those 80K bids for 250K-level work? They were haemorrhaging. They had signed leases in 2019 when the model still worked, when clients paid premium rates and you could justify the overhead as “investment in culture”. But by 2023, they were trapped. They couldn’t downsize their space without breaking leases. They couldn’t cut staff without losing capacity. So they started undercutting on price to keep the revenue flowing, hoping to outlast the competition.

I watched agencies with triple my headcount bidding on projects that would barely cover their monthly rent. They were doing it because they had no choice. The fixed costs were fixed. The alternative was closing.

I had a choice. I got out.

Mistake #3: I made everyone full-time employees with benefits.

I love my team to death. I have nothing but wonderful things to say about each and every single one of them. But having full-time employees in NYC and putting their wellbeing before myself was the biggest mistake I made professionally.

Let me be clear about something: I am proud of what the women at my firm were able to accomplish because I supported their salaries. They paid off student loans. They got out of unhealthy relationships because they could take care of themselves. They travelled. They got ample time off. I know I was a wonderful boss. But that is not enough at the end of the day.

Not because they didn’t deserve it, they absolutely did. But because the agency model is fundamentally incompatible with that level of commitment to your people. Agencies back-hire to meet client needs instead of saying no when they don’t have the staff available. Client needs a motion designer for three months? You hire one full-time because fractional feels flaky, and you convince yourself you’ll find more motion work to justify keeping them on. You won’t.

The healthy thing to do is work with the team you have and turn down work that doesn’t fit. But when you’ve got payroll, health insurance, workers’ compensation and people counting on you, saying no feels impossible. So you say yes, you hire, and suddenly your margins are even thinner because you’re carrying staff through slow periods.

That can majorly backfire. Not always, but often. The churn and burn of pitching, high salaries, and proving yourself and your talents in today’s AI-backed world is a recipe for disaster and morally questionable. It remains a boys’ club, filled with design bros who can afford to run lean because they don’t offer benefits, who undercut on price because they’re not supporting anyone but themselves.

The AI Reality

And then there’s AI. Le sigh!

I’m not pro AI. I believe in hiring entry-level employees. I believe in mentorship and training people up. But I will ring the alarm and say: if you don’t adjust your business to the times, you will get burned.

Here’s what’s happening, whether agencies want to admit it or not: clients are using AI. They’re running their first drafts through ChatGPT before they even send the brief. They’re generating moodboards with Midjourney. They’re asking why your junior copywriter costs $8,000 when they’ve already got a version they generated in ten minutes.

The agencies that are pretending this isn’t happening – the ones still billing the same way they did in 2019, still structuring teams the same way, still charging for roles that clients now perceive as automated, they’re the ones underbidding on projects out of desperation. Because clients are calling their bluff.

You can’t be naive about this. You can’t be in denial. The work has changed. The value proposition has changed. Copywriters, project managers, even interns, these roles still exist and still matter, but the billable hour model that agencies built around them is obsolete.

I’m not saying don’t invest in AI. That’s unrealistic. I’m saying, if your business model depends on clients not noticing that the landscape has shifted, you’re already dead. You’re just still moving.

What Comes Next

So if the agency model is dead, what replaces it?

I believe the future is design duos and collectives. Independent contractors collaborating and sticking together, pitching as one but entirely financially independent and not reliant on each other.

Why this works where agencies fail:

• No overhead. You’re not paying rent on space you don’t need or salaries during dry spells. You scale up and down based on actual project needs, not projected revenue that may never materialise.

• No margin squeeze. When you’re not carrying fixed costs, you can hold your rate. You can say no to the 80K project that should be 150K because you’re not trying to keep the lights on at a Brooklyn office.

• No back-hiring trap. You bring in specialists when you need them, for exactly as long as you need them. Everyone gets paid well for the work they actually do, not the work you hoped would materialise.

• Honest pricing. Collectives can acknowledge what AI has changed and price accordingly without the institutional denial that plagues traditional agencies. No one’s protecting an org chart or justifying headcount to investors. You can be real about what the work actually requires and what it’s worth.

• The traditional agency promised stability and scale. What it delivered was overhead, exploitation, and a race to the bottom on pricing. The collective model strips that away and returns to what actually matters: talented people doing great work and getting paid fairly for it. That’s not the death of creative work. That’s creative work finally freed from a business model that was killing it.

I closed my agency, and I’ve never been happier. Not because I failed – because I won. I got out. And now the work is fun again. It’s so worth it.