Why do so many dreams turn into disappointment? Why do so many Agencies fail?

Maybe some agency founders aren't good enough designers/marketers/consultants or coders. 

I have a feeling, completely lacking in evidence and entirely anecdotal, that most failures will be caused, not by a lack of core talent, but by a lack of wider business or commercial knowledge.

Very often the main role of the Agency FD is to worry about overhead levels and suggest ways of controlling costs. Top of the list for cost savings is usually the freelance bill. It's a tap which can be turned off quickly with a "thank you, we don't need you next week and we'll give you a call when we get busy".