A sew-on badge has no garment to hide in. Every stitch sits on twill and is seen up close, so thin coverage, a ragged edge or a squashed motto is obvious straight away.
The border is planned for how the badge is finished. Merrowed badges need room for the overlock to wrap the edge; laser-cut badges need a solid satin wall exactly where the laser cuts, or the twill frays.
If a crest is being stitched straight onto blazers or jumpers instead, that is a different job: see schoolwear digitising for crests stitched direct.
Decide the edge before the file is built. A merrowed badge and a laser-cut badge from the same crest are two different files.