Freelancer vs Agency: When to Hire Which

It’s a question that comes up in client minds more often than most marketing and advertising agencies like to think:

Should I have my agency do this project or hand it directly to a freelancer?

As a young agency owner, I never wanted my clients to directly hire a freelancer. I wanted to be our clients’ everything. However, as both glassCanopy and I have matured over the past twelve years, I’ve come to realize that this is a formula for failure. Now, we stick to what we’re good at and are open to working with client-side freelancers and temporary help when it makes sense for the client.

So, back to the perennial “Freelancer vs Agency ?” question.

Like all great questions, the answer is:  “It depends.”

The biggest variables are:

1. Do you Have Spare Management Time?

Adding a freelancer is generally the overhead equivalent of adding an additional direct report.  No matter how good they are, you still have to orient them to the project and your organization, help them with assets, shepherd them through purchasing and accounts payable, provide guidance on what is (and isn’t) on-brand, and supervise and evaluate their work product.[i]

Junior freelancers without deep vertical and horizontal experience will require additional management time… so keep that in mind when evaluating their oh-so-affordable rates.

How much time will this consume?

  1. For your estimate factor in the time to find an available and competent contractor, negotiate with them, sign a contract, initiate payment, bring them up to speed, set expectations, outline scope, review, revise, etc.
  2. Now double that estimate. Everything takes longer than you think it will and each additional to-do takes mindshare away from your most important projects.

You might save some money by directly hiring a freelancer, but you’ll pay for it with a significant chunk of your time.  If you’ve got the time to spare for the length of the project, then this might make financial sense.  Otherwise, you’re probably better off handing it to your agency.

2. Where is the Relevant Expertise?

Directly supervising and evaluating a project which is not in your area of expertise is really hard to do well.  This is as true for your agency as it is for you.

If there is a strong disparity of expertise on either side, this can be a strong argument for bringing any given project under either client or agency purview.

Ask if the project falls under your agency’s core competencies. If not, is it close enough that they can effectively manage the project with outside resources?

When a project requires expertise that you have, but your agency lacks, then you should strongly consider directly hiring a freelancer (or another agency) to handle it.  After all, the last place you want to be in is supervising your agency’s contractors. On the other hand, if the activity is within your agency’s expertise, even if it’s relatively simple project, you’re probably better off handing it to your agency.

Usually the Wrong Reason: Price

Sometimes clients are pushed by others in their organization to “save” money by hiring a freelancer.  If you find yourself in this position, try factoring in the cost of your time when presenting this alternative vs. your agency’s price.

You can estimate your effective hourly “rate” by taking your total annual compensation and dividing by 1600 (assumes a conservative 12 weeks a year for vacation, sick time, training, internal meetings and anything other than actually doing your primary job) and then multiplying by 1.5 to factor in benefits, taxes, equipment, rent, etc.  Tack your estimated additional hourly time commitment to the contractor’s quote.

OR

You can estimate the cost as equivalent to the benefit that your organization would receive by your concentrating on some other aspect of your job like a long-term project.

Of course, sometimes it does make financial sense to directly outsource some projects.  Especially if it’s a low value-add recurring task that doesn’t require a lot of oversight or if you are feeling underutilized.

Don’t be Afraid to Talk About It

A hallmark of a good agency is that they’re willing to talk about anything that’s important to their clients.  If you’re seriously questioning the expertise of your agency, or their pricing, for a given project… talk to them about it.

As long as you aren’t just using freelancers as a stick with which to beat lower prices out of your agency, they’ll probably welcome the question.  After all, they know you think it sometimes, so why not give them a chance to respond?

 


[i] Of course, your agency also requires all of this guidance.  However, assuming you already have an agency, this is a sunk cost that does not significantly increase by adding additional projects and responsibilities.

 

Rich Quarles

Rich Quarles

Rich is a marketing strategist focused primarily on startups, technology, and financial services. He has advised startups that have collectively returned almost $2 billion to founders and investors. Rich founded glassCanopy in 2001.
Rich Quarles

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