Spin squeezing is a form of entanglement that can improve the stability of quantum sensors operating with multiple particles, by inducing inter-particle correlations that redistribute the quantum projection noise. Previous analyses of potential metrological gain when using spin squeezing were performed on theoretically ideal states, without incorporating experimental imperfections or inherent limitations which result in non-unitary quantum state evolution. Here, we show that potential gains in clock stability are substantially reduced when the spin squeezing is non-unitary, and derive analytic formulas for the clock performance as a function of squeezing, excess spin noise, and interferometer contrast. Our results highlight the importance of creating and employing nearly pure entangled states for improving atomic clocks.