In-House Team vs Marketing Agency: What's Best for Your Startup?
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Let me call a spade a spade.
As the founder of a marketing agency, I’m biased for you to hire an agency: mine. Everyone has biases though.
And I’ll also say this:
Hiring an in-house marketing team is less expensive in the long-run. The question you should answer is what to do in the short-to-medium run while you establish your growth ramp.
So let’s get into the pros and cons of hiring an in-house marketing team and an agency. This will help you decide which is best for your startup.
One of the biggest advantages of hiring a marketing agency is there speed to getting results.
Let’s say you plan on hiring an agency today. For simplicity sake, I’ll assume you have everything you need to onboard a new employee.
Here’s what the timeline to hiring an agency might look like:
Compare this process to hiring an employee. It may take 23-31 days just to find and hire an employee (more below). This doesn’t include time spent onboarding or training. Nor does it include giving a two-week notice to their boss.
Because agencies work with many clients, it’s common to have a streamlined onboarding process too. Since quality employees stay at companies for several years, it’s rare for them to have a process to onboard fast.
A second advantage to marketing agencies is that they often have a larger skillset and experience to pool from.
The price you invest for one employee may get you 3-5 employees at an agency. While it’s unlikely all employees are working full-time on your project, that’s more creative minds working toward a solution.
As a result, you only need to hire the right agency before seeing results.
Third, agencies also often work with clients in different industries and niches.
Quality marketers will be able to adapt to any niche fast. But agencies can see what’s working for another client and test the campaign in your industry before it’s lost its effectiveness.
Often every advantage comes with an equal-and-opposite disadvantage.
You can often hire an agency in less time than an employee. But you may have to wait your turn before starting.
When you look at the big picture, an agency requires less of your time than hiring an employee. And while you should regularly check in with the agency, there is often less oversight needed.
But top-tier marketing agencies often have a waiting list. This is why the time from signing paperwork to the first day of work may be up to two months.
As a result...
It’s common to need a longer commitment to an agency than an employee.
Psychologically, it’s often harder to let an employee go than an agency because of the time and resources you invest in hiring an employee. This bias is the sunk-cost fallacy.
But many marketing agencies require a 3, 6, or 12-month commitment. A longer commitment helps them to deliver a positive ROI for you.
Different agencies may offer certain services to reduce your risk. At Growth Ramp, we do a gap analysis first, which is a one-month project. What you invest in the gap analysis becomes a credit for your next project. This allows both of us to make sure we’re a good fit before committing more resources.
While marketing agencies offer is faster speed to results, you often have less direct input into the creative process.
This is often a breath of fresh air to technical co-founders and entrepreneurs to maximize their results. But if you like to control every jot-and-tittle, not every agency will put up with extreme oversight.
A marketing agency increases how many people are solving your problem. But it also means they have more client projects to work on.
Open communication is important for every relationship. That’s not to say agency workers are less focused than employees. Instead, you should see how pro-active an agency and employee are when work isn’t going “according to plan.”
If I were to sum up the advantages of an in-house marketing team in two words, it’s this: deep focus.
First, you pay an in-house marketing team to live and breathe your brand.
Since the employee’s goal is to grow your brand, each employee focuses on this task every day they come to work. This may make it harder to overcome a problem because it’s harder to draw inspiration outside of your startup. But every week, they dedicate a full week to solving your marketing problems.
Second, an in-house marketing team will know your industry better than an agency.
Employees may not get the advantage of working in different industries as an agency does.
But in time, top-notch employees will know your industry inside and out. A sixth-sense will develop where they will better predict what’s best next.
Third, you get to handpick your in-house marketing team.
You get to train them exactly how you want things done. This gives you more control over how you build your startup.
That said, great employees stick around when they have a sense of ownership in their projects. No one likes a micromanager hovering over their desk.
Building an in-house marketing team takes time to build right.
Here’s what the timeline to hire one employee might look like:
To be fair, some of this process will overlap. But what’s clear is hiring, training, and onboarding takes more time than it does with an agency. Here are some hiring stats to give you a clearer timeline:
Most cofounders agree it’s worth investing this time to find a quality employee. But if you have not proven your go-to-marketing strategy, it may be wise to invest in an agency first.
If you lack marketing experience, it will become difficult to know what to look for in an employee.
Hiring an agency or employee is difficult in any industry. Marketing has an added challenge as you need to know if someone produced a result, or they were with a company that was successful in spite of them.
With an agency, you can attempt to negotiate for a one-month test project to see if they can deliver some results.
But with an employee, it can be hard to attract top talent at all if you don’t have a big brand. If you prefer to work with a junior employee, you will need to give them the tools and training. This also will prove difficult if you don’t know the ins-and-outs of marketing.
With an in-house marketing team, you need enough work to keep them productive.
Top-notch employees can often keep themselves busy executing on the marketing strategy. But even they can run out of steam without resources to complete projects.
This means either you are paying an employee to do nothing, or keeping busy with work they’re not proficient doing.
Sometimes it’s necessary to put the SEO director on event planning. But the more work an employee does outside their strengths, the more likely they’ll quit because the work isn’t satisfying.
Speaking of hiring for skill…
In-house marketing teams require you to focus on the skills you want on your team.
It is rare to find an in-house marketer skilled in all areas of digital marketing. Even if you find such a diamond-in-the-rough, they cannot do everything.
When hiring an in-house team, you’ll need to prioritize the skills and experience you want. For the same bang-for-your-buck, your marketing team will be smaller than an agency’s team. Thus it’s often better to use an agency to fill in your team’s skill gaps.
Keep in mind, you will need to pay to continuously train your team. With an agency, they are responsible for the cost of training their employees.
Pricing is a gnarly ball of wax.
Many factors that will influence pricing. Especially for an agency. This includes:
Pricing is so complicated, I could write this article to show you how an agency or an in-house team is more expensive.
Most in-house teams are more expensive at first. But in time, your team adds more value at a lower cost as they grow in their industry knowledge.
Here are some details of the cost of marketing agencies and in-house teams.
The biggest value agencies provide for the cost is a diverse pool of talent.
Let’s say you hire a senior digital marketing manager. According to Glassdoor, you’ll pay $90,500 a year, plus $9,000 a year in added cash compensation. That’s a little under $8,300 a month before benefits.
In March 2019, The Bureau of Labor Statistics reported benefits cost 45% of a worker’s salary. This puts the total cost for a senior digital marketing manager to over $12,000 a month. And as I’ll talk about in the next section, there are other hidden costs to hiring too.
Spending $12,000 a month at an agency, I’d expect to hire 2-5 marketers or someone who had a system with the promise of considerable results.
Some marketing agencies say you are only paying for the staff, skills, and tools to moving the marketing needle forward. The problem is while you’re not paying for the high price of benefits, you’re effectively paying for the overhead of the agency. This includes the sales team, all marketing software, and what the agency needs to grow their business.
Still, the overhead costs of an agency are traditionally lower than the employee. For example at an agency, the cost of marketing software is effectively spread out among all clients.
Again, the value of a marketing agency is getting a team of skilled professionals without needing to hire everyone full-time. As a result, agencies can help fill in the skill gaps.
An in-house marketing team is dedicated to continue growing your startup.
Hiring an agency will often result in more team members at an effectively lower cost. But they are not dedicating all 40 hours in a week to grow your startup.
Yet with an employee, everything comes out of your pocket. This includes:
This does not even account for hiring the wrong employees. According to a CareerBuilder survey, companies lost an average of $14,900 on every bad hire. 74% of companies say they've hired the wrong person.
Then there is the time cost of onboarding. Long hiring cycles and time spent training the employee also costs money.
Sure, you can reduce some of the above costs if you hire remote employees. But it’s still a large commitment.
If you know how to hire, fire, and train an employee with enough work, hiring an employee is typically less in the long run.
If time and money are no object, I’d take a well-trained marketing team over an agency every time. Employees are your most valuable asset.
But enough time, money, and skills to hire aren’t always available for an early-stage startup. This is why even late-stage startups often hire agencies to fill in missing skill gaps.
Here’s my simple advice:
If you are less familiar with marketing, start with an agency to get you results. After you grow, you can move into an in-house team. This way, you’ll have enough money and work to keep them productive.
If you are more familiar with marketing, use an in-house team, then consider an agency or contractor to fill the skill gaps. Many larger startups use outside agencies to increase their capabilities too.
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