In the high-stakes world of startups and enterprise growth, the relationship between a company and its external agencies is often viewed as a strategic partnership. Founders and executives invest months vetting firms, negotiating contracts, and onboarding teams, hoping to secure a long-term ally in their mission. However, a provocative perspective shared by industry veteran and SaaStr founder Jason Lemkin suggests that this long-term loyalty may be a fundamental business error.
Lemkin, echoing lessons from his early days as a co-founder of Adobe Sign (formerly EchoSign), argues that the agency business model is inherently designed to degrade over time. In a recent discourse, he posits a radical management rule: "You have to fire all your agencies every six months." While the sentiment sounds aggressive, it highlights a structural reality in the service industry that often leaves clients paying premium prices for "maintenance mode" service delivered by junior staff.
The Chronology of Agency Decay: From "A-Team" to "Annuity"
The lifecycle of an agency-client engagement typically follows a predictable, if cynical, trajectory. When a company first signs a contract, they are presented with the agency’s "A-Team"—the senior partners, the most creative strategists, and the seasoned account managers. During these initial three to six months, the agency is incentivized to secure the relationship and prove their value through immediate wins.
The Honeymoon Phase (Months 1–3)
During this period, the agency exerts maximum effort. If it is a PR firm, they exhaust their entire Rolodex, calling in every favor they have at top-tier publications like The Wall Street Journal or TechCrunch to secure early, high-impact press coverage. This creates a perception of high performance that validates the client’s monthly retainer, which can range from $7,000 to over $15,000.
The Transition to Maintenance (Months 4–6)
Once the initial list of contacts is tapped and the early wins are secured, the agency reaches a critical juncture. Having exhausted their "easy" wins, the agency must now do the heavy lifting—pitching less prominent outlets, developing long-term narrative arcs, and navigating the complexities of a client’s evolving strategy.
It is here that the "half-life" of the agency begins to manifest. The senior partners who sold the account often pivot to new business development, leaving the actual execution to junior associates or "B and C teams." The engagement, once a dynamic engine for growth, transforms into an "annuity"—a predictable, low-effort revenue stream for the agency, and a stagnating expense for the client.
Supporting Data: The Economics of Agency Scaling
To understand why this degradation occurs, one must look at the structural incentives of the agency business model. Agencies, by definition, require a high volume of clients to remain profitable. If every client demanded the same level of white-glove, top-tier attention that they received during the onboarding phase, the agency’s cost structure would balloon, and they would likely collapse under the weight of their own labor requirements.
The "Facebook" Tax
The reality of agency pricing is often detached from the cost of labor. In an extreme example cited by Lemkin, a senior events leader once revealed that her primary role at a top-tier agency was to charge a client like Facebook double the market rate—not because the work was twice as hard, but simply because the client had the budget to pay it. This practice is not necessarily an anomaly; it is an optimized business strategy designed to maximize margins on high-value, less-demanding accounts.
The Diminishing Returns of Tenure
While long-term employee retention is a virtue in internal hiring—where institutional knowledge and cultural fit are invaluable—it can be a trap when applied to external contractors. Research into outsourced service models suggests that:
- Innovation Fatigue: After six months, an external team often stops challenging the status quo, choosing instead to align with the client’s existing biases to avoid friction.
- Resource Shifting: The best talent is frequently rotated to the newest, most lucrative "onboarding" projects to keep them engaged and the agency’s "win rate" high.
- Inelastic Pricing: Agencies rarely lower prices as a project matures. Instead, they often raise them to cover the overhead of the firm, even as the output quality plateaus or declines.
Official Perspectives and Industry Skepticism
The debate surrounding agency "churn" has divided industry leaders. Proponents of long-term agency relationships argue that deep domain expertise takes years to cultivate. They suggest that firing an agency every six months prevents the firm from understanding the nuances of the product, the customer journey, and the company’s long-term vision.
However, the "pro-fire" camp, which includes many seasoned SaaS founders, counters that the "nuance" argument is often a justification for laziness. If an agency cannot produce high-quality, high-impact work within a 180-day window, they argue, the agency is either incapable or unwilling to scale their efforts.
In response to these critiques, some modern agencies have adopted "sprint-based" contracts rather than monthly retainers. These models force the agency to re-bid for the client’s business at the end of each sprint, ensuring that the team remains hungry, the talent remains senior, and the work remains aligned with the client’s most pressing objectives.
Implications for Modern Founders and Marketing Leaders
The primary implication for business leaders is a need for a shift in mindset: agencies are not "team members"; they are "elastic capacity." They should be used to fill specific gaps or to execute high-intensity initiatives where internal resources are lacking.
1. Identify the Half-Life
Leaders must become more attuned to the signs of agency decay. If the frequency of high-impact deliverables drops, if communication shifts from senior partners to junior associates, or if the "new ideas" begin to sound like recycled strategies from the previous quarter, the agency has likely reached its half-life.
2. Guard Against the Annuity Trap
Profit-sharing and deep integration, while well-intentioned, rarely solve the fundamental issue of agency incentives. An agency’s business model is built on volume and margins, not on the singular success of one client. Founders should be wary of contracts that trap them into long-term commitments without performance-based off-ramps.
3. Build Internal Core Competencies
The most successful companies eventually bring their most critical functions in-house. Agencies are most effective as a bridge. If a company finds itself relying on an agency for years for the same core task, it is a sign that the company has failed to internalize a critical competency.
4. The "Refresh" Culture
Adopting a "fire every six months" mentality does not necessarily mean constant disruption. It means constant evaluation. It means holding every vendor to the standard of their initial proposal. If, after six months, the agency is still delivering at an "A-Team" level, the contract can be renewed. But the renewal must be an active choice, not a passive default.
Conclusion: The Agency as a Tool, Not a Partner
The takeaway for modern leadership is not necessarily to be cruel or to treat people as disposable. Indeed, Lemkin notes that he has never laid off a single internal employee in his career, emphasizing that internal loyalty is a powerful driver of long-term value.
However, external agencies occupy a different space in the business ecosystem. They are tactical instruments. When the instrument begins to dull, the most professional action is to sharpen it or replace it. By accepting the reality that agencies have a shelf life, founders can stop wasting capital on "maintenance mode" services and instead keep their growth engines firing at maximum velocity. As the saying goes, if you treat your agency like a permanent employee, you are likely to be disappointed. If you treat them like a tool for high-leverage growth, you may finally get the return on investment you were promised at the signing of the contract.
