In my first decade as a tech CEO, I consistently got advice about how building a great team was essential to building a great business. Agencies and consultants were never part of this conversation. It was always: hire full-time employees in areas where you need a competitive advantage; only hire agencies for functions you want to put on autopilot or don’t need to be good at. Loads of my fellow CEOs (and, perhaps more influentially, investors) told me that if I wanted world-class engineering talent, I had to hire full-time engineers. If I wanted remarkable marketing, I had to hire full-time marketers. If I wanted exceptional financial advice, I needed a full-time finance team. You get the picture.
So, I followed the crowd and hired teams of full-time employees (FTEs) for each of these functions, continuing to add more staff anytime there was a new practice to invest in. Tech Ops, retention marketing, user research, events, UX—all got managers, reports, budgets, the whole nine. Was this the right way to go? I no longer think so.
Like many “best practices” from my former life, I eventually questioned, and now have entirely reversed course on building an internal team vs. using agencies, consultants, and contractors. This is a very hard shift to make when you’ve already built an organization, but surprisingly easy in the formative stages.
In later years at my previous startup (after I’d stepped down as CEO, but while I was still on reasonably good terms with leadership), I tried to convince the executive team to hire agencies four times. Once was to build a new product, another to ramp up content marketing, a third (an independent consultant) to help with positioning, and a fourth to craft a better customer onboarding experience. These suggestions were met with hesitation and sometimes outright hostility, not entirely without cause. Trying new things is risky. And for internal managers, the benefits of consultants and agencies are overshadowed by threats, risks, and lost opportunities for your own career growth. Unfortunately, what’s better for the business isn’t always better for everyone in it.
Via Benji Hyam
I want to address why I’ve come to believe it’s wiser to start with outside help and why we’ve made SparkToro such a consulting/agency-biased company (one that’s already hired five consultants and four agencies in our first two years).
Comparing Agencies & Consultants to Full-Time Employees
While it’s impossible to universally apply criteria for every business need, let’s assume comparison for only those projects well-suited to outside consulting help. If you’re hiring for a full-time hardware engineer to design your company’s 3D printer, an agency likely won’t be a match. But if your 3D printer company needs someone to manage payroll, conduct PR campaigns, handle legal issues, or run online advertising, consultants will likely be considered.
Criteria to Consider:
Time to Effective Productivity
- When I’ve hired agencies, productive work toward the project’s goal starts immediately. Time taken to understand your business, the problem, and any requirements is usually covered in the proposal period.
- Conversely, when I hire FTEs, there’s often a lengthy ramp-up to even half-productivity. In small teams, this might be as fast as a week or two, while in larger ones, it could be a month or more.
- Edge: There are ways to minimize both, but in most scenarios, consultants will start faster.
- Agencies can be expensive. They have to price in hours worked on proposals that don’t convert, training for their teams, and all the overhead that comes with FTEs. But, when it comes to specific, well-structured deliverables, it’s hard to match.
- FTEs have high variance. If you’re hiring very junior, inexperienced talent in subprime geographies, labor can be extremely inexpensive. On the flipside, a talented, experienced software engineer or digital marketer in a top-10 metro can cost more per month than an entire agency’s billing. As an example, we recently received quotes for some content strategy and production work from agencies in the ~$15,000/month range. In Seattle, an experienced content marketer might make $140,000/year + $4,500/month in benefits and taxes. Go to San Francisco or New York and those prices jump even higher.
- Edge: With so much range based on geography, experience and choice of consultant, this one’s likely a tie.
Flexibility of Cost
- Firing an agency or consultant isn’t fun, but it’s generally easy and largely unemotional. And when done for cost reasons, there’s usually goodwill from the consultants and the hiring firm. What’s more, you can often negotiate for less work/hours/projects and save money, then ramp up spending if you need more; an impossibility with FTEs.
- Letting go of a team member is the opposite. No matter how good you are at offboarding, friction, emotions, and negative feelings are inevitable. The nature of full-time work creates an expectation that only in severe events is downsizing done. Layoffs (for performance or cost) are always ugly. Furthermore, there’s no way to ramp up or down without this pain — FTEs don’t give fractional time, nor can they take fractional pay.
- Edge: Consultants.
Emotional Resources Required
- Generally speaking, agencies and consultants require very litte emotional investment. You might (and probably should) build a great relationship, but the business processes of agency-client relations tend to be more distant, professional, and straightforward.
- On the flipside, great people management means bringing your emotions to work and leaning into difficult issues, conversations, and feelings. There are organizations and managers who ignore these needs… The less said about them, the better. I don’t mean to disparage these efforts; on the contrary, they’re both important AND worthwhile. But they can’t be ignored in your investment calculus.
- Edge: Consultants
Quality of Strategic Output
- If you’ve got short-term needs, smart consultants who see dozens of problems similar to yours every day should be able to contribute more rapidly and in more strategic fashion. That’s why they’re hundreds of dollars an hour.
- Over longer periods, the goal of hiring FTEs is to create a team of experienced, capable folks whose depth of knowledge around your particular business makes up for the lack of experience they might have on a specific, new issue.
- Edge: This one’s so context and problem-specific that it’s likely 50/50. In an ideal world, you’d always have both types of resources: deep, internal knowledge combined with an outsider’s perspective and experience.
Quality of Tactical Output
- Agencies are usually better at ramping up fast, producing work that matches the client’s request, and remaining at or near that level of output.
- Employees usually start slower, but once they establish momentum, can outpace and outproduce external resources. That’s both because they’re free from the context-switching required of a consultant, and because they can establish a consistency unavailable to someone working on a project part-time, for shorter periods.
- Edge: Context-dependent, but if you need tactical effectiveness fast, go for consultants. If you want to build a long-term flywheel effect, invest in FTEs.
Replacement Time & Effort
- Switching between agencies is sometimes challenging, but, at least in areas where consultants are well-established and well-marketed, it’s generally a matter of a few days or weeks of work.
- Firing and re-hiring for a role internally, on the other hand, is one of the most resource and emotionally-intensive activities a business can undertake. The stats are ugly: turnover costs average between 100-300% of the replaced employee’s salary, and it’s ~8 months on average for a new employee to reach productivity.
- Edge: Consultants. No question.
Paying for Deliverables vs. Time
- Agencies tend to deliver projects and results, as specified by you. They might fail to live up to what they promise (in which case, you’ll probably replace them), but the model is exceptionally straightforward: money in exchange for deliverables.
- Employees, especially in complex, information-economy jobs, rarely adhere directly to this model. Some FTEs do, sometimes. But in 20 years of experience, I’ve worked with fewer than five people (out of hundreds) who delivered as consistently on work promised as an agency. That’s not because employees are lazy or bad at their jobs! I myself often promised work to my team that I failed to deliver on time or exactly as requested. The reasons vary from the very good (e.g. while doing the work, I realized it wasn’t the right work to do) to the very bad (e.g. I realized I could turn in something a few days late, be quickly forgiven, and still keep my job) with everything in between (e.g. I found more pressing projects and prioritized them).
- Edge: This is a complex subject, but if you have carefully spec’d work, consultants (in my experience) deliver on time and on budget far more often than FTEs.
No matter what advantages and disadvantages I perceive in this equation, others will disagree. That’s not only OK, it’s accurate! Different organizations and leaders have different strengths and weaknesses. It could well be that I’m bad at interviewing and hiring, but good at vetting agencies and consultants. Your company might be the inverse, and so you should make a different decision.
Drawbacks of Agencies/Consultants
The big drawbacks of agencies often stem from the internal politics, beliefs, and emotions of you and your team. When discussing this subject on Twitter, many of the anti-agency responses came from folks who believed that agencies/consultants could never be as “invested” in your business as team members. My experience has been the inverse: agencies desperately wanted to deliver on their promises and keep us happy; employees recognized circumstances were more flexible.
But, to fully understand the pushback, we’ve gotta look outside of the owner/founder/President/CEO mindset to how the rest of a team might feel about hiring consultants.
If you’re a full-time engineering manager and your CEO says, “hey, maybe we should hire a dev agency to work on this new project,” you’ve got a lot of reasons to be worried. It’s all downside risk, with very little upside for you and your engineers. You’d have to feel extremely secure in your abilities, your value, and your ties to the organization to say “sure boss, that’s a great idea, let’s try it out.“
Why? Just think of what can go wrong:
The project goes well, and…
- Your ability to hire engineers is diminished, which means you get a smaller team and stunted career growth (since size of team is almost always correlated to responsibility, influence, experience, and pay)
- Your engineers feel that they’ve been overshadowed and reduced to a maintenance and support group rather than getting to do more fun, higher-status R&D work
- At the extreme, leadership switches to external resources and you’re out of a job (granted, this is a rare move in venture-backed world, but a more common one in private equity, where profit maximization is the goal)
The project goes poorly, and…
- You and your engineering team have to clean up a mess
- The wasted capital can’t be applied to growing your team or investing in tools or giving salary bumps
- Trust in external projects sinks, which harms your own ability to get approval for future contractors
- Time’s been lost getting the new feature/product shipped
- Your team *still* feels like they weren’t trusted or valued to do the work initially, and you have to manage their diminished morale
The project looks like it’s going well, but then…
- The consultants didn’t create good documentation, analytics, failsafes, security, code hygiene, etc. and you have to pick up the pieces
- The initial versions work, but the consultants don’t provide support, and your team’s left to manage and maintain a system they didn’t build
- Weeks or months after contract completion, additional work is required, but the agency charges exorbitant rates for additional help, or worse, is entirely unavailable
- Some of these problems are unique to product development/engineering, but plenty can equally apply to marketing, finance, design/brand/UX, etc.
So, how do we work around these thorny issues?
How to Get the Best of Both Worlds
I believe it’s possible to eliminate most drawbacks that come from consultants. But it’ll take intentional, strategic foresight early on, and continual investment in process. Like anything else in the world of company scaling, there’s complex systems and human motivations to work through. I think it’s possible, even at scale, but there’s no doubt this is far easier if you start early.
If you want the best of what internal teams’ continuous focus and outside agencies’ expertise and pay-for-performance model, you’ll need to:
- Hire agencies early and often. If your team is used to working with outside contractors, the emotional issues (ownership of projects, trust in the team, and potential jealousy) fade.
- Contract for work that requires little to no maintenance. Content projects, SEO, digital PR, email onboarding setup, and CRO fit this bill flawlessly. So do one-time data purchases, market research, training, and many more.
- Contract for work that’s relatively easy to switch to another provider. In addition to the above, investments like branding, digital advertising, accounting, tax prep, WordPress site management, and numerous other tasks can be done with low agency switching costs.
- Bring on full time employees when you have a consistent, ongoing need for deep work in an area of either singular focus (engineering, marketing, etc) OR need a generalist who can regularly task-switch with great competence (e.g. sales, customer success, content editor, most management roles)
- Be willing to switch agencies/consultants if you’re disappointed. But if you’re doing this a lot, beware: it might be you, not them. Setting reasonable deliverables, showing patience, and judging based on work quality/performance is crucial.
- Aim for a culture where firing (or losing) FTEs isn’t seen as abnormal or failure. Talk to folks you interview about this, talk about it regularly at internal meetings (“should we hire a consultant to do this, or do you have bandwidth?”), don’t make it something you (or anyone you work with) fear. And read Liz Fosslien and Mollie West Duffy’s book, No Hard Feelings.
If you put these into place, you can scale a business faster, more effectively, and with less cost structure than if you’d done it alone.
My goal with SparkToro was to reach profitability as quickly as possible, then settle in to the process of scaling. We don’t have unlimited funds, but we do have enough of an initial investment to make consultants and agencies the perfect way to make progress with low fixed costs, high productivity, and minimal emotional/managerial bandwidth. Using help from folks like Monty Hayton, Jennifer Newkirk-Kruchoski, Christine Ryu, Dawn Shepard, Elevate, Conversion Rate Experts, Sprious, Joe Wallin, and more has given us exactly the kinds of expertise we want, when we need it, for a combined cost that’s less than 6 months of an FTE.
Arguments Against Consultants & Agencies
As I was writing this post, I turned to Twitter and asked folks there about their experiences, objections, and concerns. Several of the responses brought up points I haven’t addressed above, and it’s only fair to include these for anyone choosing between the two.
Via Sarah Hum
I like Sarah Hum’s response, because she’s clear that it’s about philosophy and approach vs. a strict measure of expertise, productivity, or finances. That is the freedom entrepreneurship is supposed to give us: the ability to choose our path because we believe in building something our way, prefer it to alternatives, and aren’t necessarily maximizing some arbitrary, purely capitalist number. If you hate using consultants and agencies, guess what? They’re probably not gonna work well for you! And if you love having a team that you want to keep together and work with because you like the camaraderie, kinship, and communication that stems from that, a team of FTEs is almost certainly right for you.
Via Amy Woods
Amy Woods’ point is well-made. Hiring for a role that fullfills your company’s core product, especially one with high complexity and permanent need requires full time employees. Consultants and agencies wouldn’t make sense here, and I hope my post isn’t misconstrued to suggest otherwise. When I say “for everything you can” I don’t want anyone to stretch applications beyond what makes sense.
Via Kristian Bannister
Kristian Bannister brings up a great point that if regular communication is a requirement (which is true when deliverables/work efforts are constantly changing), an internal team is usually faster and more efficient than external consultants. And, likewise, if depth of education and knowledge about your market and customers is more important than expertise about the area of practice/work, FTEs are going to eventually have the edge here, too (with the slight caveat that fresh eyes can bring fresh perspectives).
Popular culture around entrepreneurship and scaling a business have left a lot of founders and executives with a not-entirely-rational bias against consultants and agencies. I hope that changes. My experiences and perspective, using dozens and recommending hundreds of agencies has been (almost) universally positive ROI. Don’t overlook outside help just because books and blogs badmouthed it.