Change Order
Quick Definition
A formal document that modifies the original scope of work โ adding deliverables, extending timelines, or adjusting the budget when the client requests something new.
What Is Change Order?
A change order is the professional mechanism for handling the inevitable moment when a client says, "Can we also add..." or "What if we changed the direction on..." It's a mini-contract that amends the original SOW to add, remove, or modify deliverables, timelines, or costs.
Change orders are how agencies get paid for work that wasn't in the original agreement. Without them, scope creep happens invisibly โ your team keeps delivering more work, but the budget stays the same. With change orders, every modification is documented, priced, and approved before the work begins.
A good change order process is simple: the client requests something new โ the account manager writes up the change (what's being added, the additional cost, the timeline impact) โ the client approves in writing โ the work proceeds. Some agencies use formal change order documents; others use a simple email chain with a sign-off. The formality doesn't matter as much as the discipline of always documenting and pricing changes before executing them.
Why It Matters for Agencies
Change orders are the difference between agencies that are profitable and agencies that work twice as hard for the same money. The work clients request beyond the SOW is often the most expensive kind โ it's disruptive, it pulls people off other projects, and it requires re-thinking work that's already in progress.
The psychological barrier to change orders is real: account managers don't want to nickel-and-dime clients, and clients don't like feeling surprised by extra costs. That's why the original SOW matters so much โ if the boundaries were clear from the start, change orders feel reasonable rather than adversarial. Frame them as transparency, not upselling: "We want to make sure you know the impact before we move forward."
Example
A PR agency has a $15,000/month retainer that covers media relations, 3 press releases, and monthly reporting. In Month 3, the client asks the agency to also manage an influencer campaign for a product launch โ that's not in the SOW. The account manager writes a change order: 30 hours of additional work over 6 weeks at $175/hour = $5,250. The client approves, the work gets done, and the agency gets paid for it. Without the change order, the team would've absorbed those 30 hours into the existing retainer, dropping the effective rate from $175/hour to $130/hour.
Key Takeaways
- โ A change order formally amends the SOW โ it documents new scope, cost, and timeline before work starts
- โ Always get written approval before starting change order work
- โ Frame change orders as transparency, not upselling โ clients respect agencies that are upfront about costs
- โ Track change order revenue separately to see how much out-of-scope work you're doing
How Holdings Helps
Holdings helps agencies keep project finances clean โ track change order payments separately from retainer revenue so you see the full picture of each client's profitability.
Related Terms
Scope of Work (SOW)
A document that defines exactly what your agency will deliver, by when, for how much โ and just as importantly, what's not included.
Unbilled Revenue
Revenue your agency has earned by completing work but hasn't yet invoiced to the client โ money that's owed to you but hasn't been billed.
Realization Rate
The percentage of billable work your agency actually gets paid for โ the gap between what you could bill and what you actually collect.
Effective Rate
The actual hourly rate your agency earns on a project after accounting for all the hours worked โ including the ones you didn't bill for.
Work in Progress (WIP)
The value of client work your agency has started but hasn't finished or billed for yet โ it's revenue you've earned on paper but haven't collected.
Scope of Work (SOW)
A document that defines exactly what your agency will deliver, by when, for how much โ and just as importantly, what's not included.
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