I've lived both sides of this. In-house at SaaS companies, then five years as the top strategist at Disruptive Advertising, ranked the #1 US digital marketing agency by Clutch, and now I run my own agency. So I've hired agencies, been the agency, and built teams on both sides of the table.
The honest answer to "agency or in-house" is that it depends, but not in the useless way people usually mean it. Specific conditions tip the decision one way or the other, and most of them have nothing to do with what founders tend to argue about. Here's how I'd actually think through it.
What pushes you toward an agency
The fractional expert problem
Most companies don't need a full-time anyone. They need a fraction of several roles. A bit of paid search, a bit of paid social, some analytics, some creative, someone who understands tracking and attribution.
Finding one person who's genuinely skilled across all of those is hard and expensive. An agency can cover the same ground for the same cost, sometimes less, with an actual expert owning each piece.
The in-house version tends to break down at that size anyway. One or two of those roles are less exciting, and they get ignored.
I see it constantly with PPC. It rarely needs a full-time internal person, so whoever gets hired for it gets pulled into other projects, until the role they were hired for becomes an afterthought instead of the core job.
The macro-economic cycle
Agencies are counter-cyclical to the labor market.
When hiring is hard, like the 2022-23 great resignation, agencies thrive. You bypass the entire problem of attracting and retaining top talent. You don't compete for people who have ten offers, you just hire the firm.
When layoffs hit, and they tend to find marketing teams first, you get thousands of good marketers looking for work. That's where we are right now. Talent is "easy" to find, and companies lean in-house because the market makes it cheap to.
The catch is that the agency pitch gets harder at the exact moment the economy makes in-house hiring look easy. If you're making this decision, know which part of the cycle you're in, because it shapes what feels like the obvious choice.
The cost of being wrong
Here's a risk people underweight: what happens if the hire doesn't work out.
Firing an underperformer internally can be slow and painful, and it's worth looking at your own HR policies to see how slow. At my wife's company, it takes a minimum of two quarters of someone missing their numbers before you can let them go. That's half a year of underperformance you're committed to. And when they did let someone go, they often still had to offer a severance package to avoid legal issues, and sometimes there were legal issues anyway. It got messy and expensive fast.
Most agencies now run on 30-day cancellation notices after any initial term. If it's not working, you're out in a month. That reversibility is worth real money, especially for larger teams that need to be able to pivot.
As an example of how this can look, we structure it one of two ways. You can take a setup fee with a 30-day cancellation at any point, or waive the setup fee in exchange for a six-month initial term that then rolls into the same 30-day notice. Either way there's no long lock-in, and you can change direction far faster than you could with a bad internal hire.
Cost, honestly
People search for whether an agency is cheaper than in-house, and the honest answer is that it's the wrong comparison. You're not comparing a retainer to a salary. You're comparing a retainer to the true cost of an in-house hire: salary, benefits, payroll taxes, software and tools, ramp time before they're productive, and the management overhead of someone actually leading them.
Once you stack all of that up, the agency is often competitive or cheaper for the same coverage, especially when you'd otherwise need more than one hire to cover the work. Where in-house wins on cost is at scale, when the volume of work genuinely justifies full-time people and you have someone senior enough to direct them.
In practice, we tend to see companies start building fully in-house teams somewhere in the 250 to 500 employee range. But that's a tendency, not a rule. I've worked with PLCs with thousands of employees who still used an agency, usually because a director was marketing one product inside a much larger org. Those products almost work like micro-businesses inside the company, and they hit the same fractional-role problem. They need a piece of several skill sets, don't have the budget or headcount to hire each one, so they bring in an agency to cover all of it for a similar cost. It's almost cyclical. A product is small until it isn't, the work gets pulled in-house at scale, then the company launches the next product and that one starts the cycle over as its own micro-business.
The DIY-with-AI option
Knowledge has gotten so accessible that companies who used to outsource execution can now prompt their way through a lot of it with AI.
That's real, and it puts execution-based agencies at genuine risk.
But being able to prompt your way through the work doesn't mean you want to, that you know the questions to ask, or that you want to practice with your business's budget on the line. Being able to do something and it being the right use of your time are two different things.
What pushes you toward in-house
Incentive alignment
This is the strongest argument for building internally. An in-house employee's incentives are fully yours. They work on your business and only your business. An agency, by definition, splits attention across a roster of clients, and you're one of them.
A good agency manages that well and gives you senior attention. But the structural reality is that no outside partner is ever as singularly focused on you as someone whose entire job is you.
Institutional knowledge and proximity to the business
An in-house marketer lives inside the company. They sit in on sales calls, hear the customer complaints firsthand, absorb the product roadmap, and pick up the thousand small things that never make it into a brief.
An agency has to be fed that context, and it never gets all of it. You can close a lot of the gap with good communication and real access, but you're always transferring knowledge to an outside party rather than having it live in the building.
This is exactly what we tell clients up front. We'll do everything we can to understand your business as deeply as possible, but we'll never understand it as well as you do, and we don't pretend otherwise. That's why we keep a high communication cadence, usually weekly calls, so the context keeps flowing. You stay the expert on your business, we stay the experts on the marketing, and when those two are tightly synced, the alignment is where the results come from.
Control and speed
In-house, you can grab someone and change direction the same day. Agencies add a layer: scoping, approvals, an account manager, a queue.
For some companies that layer is worth it, because it comes with expertise and process. For fast-moving teams that want to turn on a dime, it can be friction. Be honest about which kind of team you are.
What matters regardless of which you choose
Turnover cuts both ways, and the honest question is which loss hurts more
People bring up turnover as a point for agencies: hire in-house and the knowledge walks out the door when the person quits. True. But agencies have turnover too.
The real question isn't which side has turnover. It's whether losing your one internal person who covered five areas hurts more than losing one specialist on an agency team who was doing just one of those jobs. Losing the generalist who held the whole thing together is often the harder recovery.
There's a mirror test buried in here that's uncomfortable to run. Assessing your internal turnover risk honestly means asking whether your team culture is actually good. A lot of owners struggle to look in the mirror and admit people don't really want to stay, but that's what a fair assessment requires.
And yes, agencies have a reputation for burning people out. It's earned in plenty of cases. But the best agencies I've seen are conscious of it and retain their people well. It's worth asking any agency you're evaluating how long their team actually sticks around.
Accountability and what you measure
In either model, the thing that determines whether it works is what you hold it accountable to.
In-house, accountability can get fuzzy. It's easy for a team to stay busy and report on activity that never connects to revenue. A good agency lives and dies by reported outcomes, which is a point in its favor. But agencies can also hide behind vanity metrics if you let them, dressing up clicks and impressions and cost-per-lead while the pipeline doesn't move.
The fix is the same on both sides. Hold whoever runs your marketing to business outcomes, qualified pipeline and revenue, not platform metrics. Cheap leads that don't close are not a win no matter who generated them. If you measure the right thing, you'll know quickly whether your agency or your hire is working.
So when does an agency actually make sense?
None of this means an agency is always the answer, and it doesn't have to be all or nothing. Sometimes the best move is an agency filling the gaps an in-house team can't cover, working alongside your people rather than replacing them.
But an agency makes real sense in a few specific situations.
When you're growing and can't yet justify hiring for every role internally.
When you want to hire and simply can't find the talent, or can't win them against better offers.
And when you, as the CEO, VP, or director, find yourself doing the work because you now can, instead of because it's the best use of your time.
Even if you can run the campaigns yourself, you'll probably underperform a team of experts who do only this, and you'll do it with the time you should be spending where only you can add value.
Decide based on your stage, your labor market, your appetite for doing it yourself, and an honest look at your own team. Not on whichever option feels cheaper this quarter. If an agency looks like the right fit, here's what we actually do, or you can get a free system review.
About the author
Kyle Rutledge
Owner
I’m Kyle, founder of Gradari, a paid ads lead generation agency that helps B2B and SaaS companies stop wasting budget on low-quality leads and start building systems that actually drive growth.