In-House vs Agency — True Cost Comparison
Agency hourly × hours vs in-house fully-loaded salary. Breakeven is typically 60-80 hours/month. See the exact point for your role and rates.
0.7-0.85 typical (meetings, admin, ramp)
How the Comparison Works
Both paths have hidden costs. Agency seems expensive per hour but includes zero overhead for slow periods. In-house seems cheap per hour but burns money during underutilized months.
1. Agency math
Hourly rate × hours used. Scales directly with need. No fixed cost when you don’t need the function.
2. In-house math
Fully-loaded annual salary / 12 months, adjusted for realistic productivity (meetings, admin, ramp).
3. Breakeven
Hours at which monthly agency cost equals monthly in-house cost. Above this, in-house wins on pure cost.
Frequently Asked Questions
At how many hours per month does in-house beat agency?
Rule of thumb: when you consistently need more than half a full-time equivalent (80+ hours/month) of a specialized role, in-house usually wins. Below that, agency is cheaper in aggregate.
What agency hourly rates are typical?
Development: $100-250/hr. Design: $75-200. Marketing strategy: $125-300. Copywriting: $50-175. Specialist agencies 2-3x. Solopreneur freelancers 20-40% lower than agencies.
Why factor in productivity? My team works 40 hours.
They work 40 hours but produce less than 40 hours of billable equivalent output. Meetings, admin, context-switching eat 20-40% of the day. In-house effective productivity is 60-80% of hours worked.
When is in-house worth the cost even below breakeven?
When work requires deep product knowledge (core engineering), strong continuity (long-term customer relationships), or strategic judgment that compounds over time.
Can I do contractor (1099) instead of either?
Yes — contractor is often the right middle ground. Lower cost than agency, more flexibility than employee. Watch IRS 1099 rules: contractors cannot be treated like employees without misclassification risk.
How does agency retainer billing change the math?
Retainers can be cheaper per hour but may include hours you don't need. Convert retainer to effective hourly: retainer / actually-used hours. An $8K/month retainer with 40 hours used = $200/hour effective rate.
Track External vs Internal Spend
See your agency, contractor, and FTE spend side-by-side with monthly breakeven analysis.