Five services killed in Q1 2026. P&L improved 22% in two quarters. Here is the kill criteria, the five services, the reasons, and the audit template for your own list.
Most agencies offer too many services. The revenue looks healthy. The margin is a disaster. Every low-margin service is a tax on operator attention, delivery capacity, and client-relationship quality. The fix is a kill list: a formal, quarterly process of identifying which services should stop existing at your agency.
We ran our first kill list in Q1 2026. We cut five services. Two were high-revenue offers we had built significant pipeline around. All five were dragging margin and consuming operator time at rates that made them net-negative when fully burdened. Two quarters after the cuts, gross margin across the remaining services improved from 48% to 63%, and net revenue was flat. The agency was more profitable with less to sell.
A service goes on the kill list if it fails on any one of four criteria.
Criterion 1: gross margin below 55%. Every service should generate at least 55 cents of gross profit per dollar of revenue after accounting for direct labor, tools, and delivery overhead. Below 55%, the service is a cash-flow positive trap: it looks like revenue but funds growth for competitors with better margins. We calculated gross margin per service line using 6 months of time-tracking data and allocated tool costs. Three of our five killed services were in the 31-44% range.
Criterion 2: bespoke scope per client. If the service requires a discovery call to define scope, a custom quote, and a custom delivery timeline, it is not productized. Bespoke services scale at the rate of operator availability, which is zero. Two of our killed services had been running bespoke since their inception. We had never successfully repeatd the same scope twice.
Criterion 3: NPS below 7. Net Promoter Score measures whether clients would recommend the service. Below 7 means they would not. A service clients will not recommend is a service you cannot grow through referrals, which means you fund its pipeline through cold outreach, which compounds the margin problem. Our lowest-NPS service was averaging 5.8. We killed it.
Criterion 4: AI tool replacement below $200/month. Some services we offered in 2024 can now be purchased via AI tools for under $200/month. If a client can replace the service with a ChatGPT subscription and one afternoon of setup, the service is in structural decline. We identified two services in this category and cut both before the market did it for us.
A service fails the criteria if it scores below threshold on any one dimension. It does not need to fail all four. One is enough.
Here is the full list, with reasons and financial impact.
Total killed revenue: $331K/year. That number looked alarming until we ran the margin calculation. $331K at an average 36% margin left $119K of gross profit. The same operator hours redirected to our retained services at 63% margin generated significantly more.
We did not replace most of them with anything. That was the point. Two services were replaced by upscoped versions of retained offers:
The other three services were simply ended. Existing clients were given 60 days notice and referred to appropriate alternatives. Churn from the cuts: two clients out of eleven. Both were single-service clients who chose not to transition to our retained offers.
The kill audit takes 3 hours and a spreadsheet. Run it quarterly.
Step 1: list every service you sold in the past 6 months, including one-offs and retainers.
Step 2: pull actual time-tracking data per service. Include delivery, client communication, scoping, and reporting time. Estimate if you do not have tracking.
Step 3: calculate gross margin per service: (revenue minus direct labor cost minus tool allocation) / revenue. Use real loaded cost for labor, not a simple hourly rate.
Step 4: score each service on the four criteria (0-4 per criterion). Services scoring below 8 of 16 are candidates for the kill list. Services scoring below 6 are scheduled for discontinuation.
Step 5: for each kill candidate, identify: who is affected, what the 60-day transition looks like, and whether a higher-margin replacement exists. If the replacement does not exist and cannot be built in 90 days, kill the service anyway and reallocate the capacity to sales for the services that remain.
Most agencies find 2-4 services that should not exist. The hesitation to kill them is usually revenue-anchored, not margin-anchored. The revenue is real. The margin is often not. Run the numbers first.
Focus compounds. An agency offering 4 services can build deep delivery systems, deep client relationships, and deep referral pipelines for 4 things. An agency offering 12 services builds shallow systems for 12 things, which means average delivery quality across all 12, which means average NPS, which means average retention.
McKinsey research on professional-services firms consistently shows that focused firms outperform generalist firms on margin by 8-12 percentage points (per McKinsey Global Institute on professional-services productivity, 2023). The mechanism is delivery systemization: you can only build a repeatable system for something you repeat. Cut services, build systems, charge more for what remains.
Striveloom's services page lists four offers today. We sold 11 at peak. The four remaining services have higher NPS, higher margin, and faster sales cycles than any of the 11 did individually.
Pull the last 6 months of invoices. Group them by service. Run the margin calculation for each group. Score against the four criteria. Anything below 8 of 16 is a candidate. Anything below 6 is overdue for a kill.
The number you are looking for is not revenue. It is gross-profit-per-operator-hour. The kill list reveals that number. Services you thought were healthy often rank last. Services you thought were small often rank first.
Run the audit. Build the list. Kill with 60-day notice. Reallocate the capacity. Repeat every quarter.
The agency that can say no to revenue it does not want is the agency that earns the revenue it does want.
Direct and early. We send a 60-day notice email that explains the decision plainly: we are focusing our service offering and this service is being retired. We include two or three alternative providers we trust, and we offer to help with the handover. Most clients appreciate the directness. The ones who do not would have churned eventually anyway. Two clients out of eleven churned from our Q1 2026 kill round. Both were single-service, low-margin clients.
Yes, if it fails the kill criteria. Loyalty is valuable but not sufficient. A loyal client on a low-margin, bespoke service is a constraint on your agency's ability to scale. The respectful move is to give them 60 days notice, refer them to a specialist who does that service well, and offer to transition the relationship to one of your retained offers if it is a fit. Most loyal clients understand a business decision explained honestly.
55-70% gross margin is healthy for digital agency services in 2026. Below 55% and the service cannot fund overhead, sales, and investment in systems at the same time. Above 70% is possible for highly productized, AI-augmented services. The industry average for digital agencies sits around 42-48% gross margin per service line, which is why most agencies are profitable on paper but struggle to invest in growth. The kill list is how you move from average to 60%+.
Kill it anyway, with a plan. The highest-revenue service failing the criteria is the most expensive service you offer. It is consuming the most capacity at the worst margin. The plan: give 90-day notice instead of 60, use the 90 days to sell harder on your highest-margin services to replace the gross profit (not the revenue), and run the transition in phases. Do not try to fix a fundamentally broken service structure. Cut it and reallocate.
Quarterly is optimal. Markets move fast enough that a service viable in Q1 can be AI-replaceable by Q3. The quarterly cadence also prevents the emotional attachment that builds when you run a service for years before evaluating it. Set a recurring calendar block. Three hours per quarter. Compare each service against the four criteria. Update the kill list. The goal is not to kill services aggressively but to make the decision analytically rather than emotionally.
Founder & CEO of Striveloom. Software engineer and Harvard graduate student researching software engineering, e-commerce platforms, and customer experience. Builds the agency that ships like software — one team, one pipeline, one platform. Writes on AI agencies, web development, paid advertising, and conversion optimization.
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| Service | Kill reason | Annual revenue | Gross margin | Replacement |
|---|
| Social media management | AI tool replacement, margin 38% | $84K | 38% | Scheduling tools + client in-house |
| Custom email template design | Bespoke scope, NPS 5.8 | $31K | 44% | Template libraries + Figma AI |
| Google Analytics implementation | AI tool replacement, margin 29% | $56K | 29% | Self-service + GA4 docs |
| Copywriting retainer | Bespoke scope, margin 41% | $112K | 41% | Content strategy (replaced below) |
| Monthly reporting dashboard | AI tool replacement, margin 31% | $48K | 31% | Looker Studio + client template |
