Comparing The Financial Costs And Value Of In-house Vs. Outsourced Marketing
There are various pros and cons to building an in-house marketing team and outsourcing to a B2B marketing agency, all of which should be carefully weighed. However, for small and medium-sized businesses that do not have a massive marketing budget, one crucial factor tends to trump all others: cost.
Making an informed decision requires you to compare the short and long-term financial costs of an in-house team full of FTEs (full-time equivalents) and a team of hired marketers outsourced from a marketing agency. With that in mind, the following is a detailed guide into the costs of both in-house marketing teams and outsourced marketing agencies:
What Is The Cost Of Hiring An In-house Marketing Team?
Building an in-house marketing team is difficult because the costs of doing so will be all over the place. For instance, different organizations have different marketing needs. A smaller startup may only need a handful of marketers to begin with; however, as your business grows, your marketing needs will increase.
Additionally, there are dozens of different positions that you could fill in a marketing team, all of which require various skills. The personnel who fill these positions will vary in cost based on their specialties, how much expertise they have, and what kind of experience they boast. Finally, there are a lot of associated costs to consider, as well.
Because of all of these variables, calculating how much a marketing team will cost you is practically impossible. However, understanding what factors will contribute to the cost will be very useful. Below are all of the different expenses associated with hiring the FTEs needed for an in-house marketing team.
FTE Recruitment Costs
The cost of hiring a single position of need within your marketing department can be quite expensive. Not only do you have to advertise the job, but your HR personnel will have to spend a significant amount of time going through resumes and interviewing candidates. Recruitment costs do vary based on where you’re advertising and for how long as well.
When you hire a new employee, you can’t just plug them into your marketing team. They will need to be trained. Even if they are highly experienced and skilled, they will need to learn what your processes and workflows are to integrate into your team more effectively.
Your existing internal marketing personnel will need to be trained any time you adopt a new strategy or implement a new software solution.
Marketing FTEs can be very expensive. Considering all of the different positions a marketing team consists of, you can expect to pay a substantial amount of money in salary over a year. We estimate that a core team of marketers can cost at least $500,000 a year in annual salary alone.
And the more specialized a marketer is, and the more experience and expertise they have, the more costly they are to retain. Not to mention that the longer your employees stay with your organization, the more likely they will demand a raise.
Read here for tips on how to assess your marketing and sales team, maximize your budget, and ultimately, achieve success.
At the very least, you will need to offer full-time employees a benefits package that includes health benefits and retirement benefits. Offering the bare minimum is rarely a good idea, either, since other businesses compete to attract high-quality job candidates.
A robust benefits package will improve the chances of having an offer accepted. Many companies will also offer fringe benefits (such as gym memberships, meal reimbursements, and more).
According to the Bureau of Labor Statistics, the average cost of a typical benefits package is upwards of 30 percent of an FTE’s total cost.
For every FTE you hire, you’ll need to pay employment taxes, including social security taxes, Medicare taxes, unemployment taxes, and workers’ compensation.
Software And Hardware Costs
Every employee you hire for your marketing team will need a computer and a phone. In addition to those hardware costs, you’ll have to pay for expenses associated with operating (such as electricity and phone plan costs), maintaining (repair costs), and replacing equipment.
Your marketing team members will also need access to various software solutions to do their jobs. Although you don’t have to purchase a software program for each employee, you will have to upgrade your subscriptions once the number of users exceeds the limit for your plan.
Office Space Costs
The more employees you hire, the more space is needed to house those employees. If you’re working out of a smaller office, then you will need to eventually move to a larger area if you’re planning to expand your in-house marketing team.
Not only will overhead costs, such as rent and utilities, increase, but you’ll also be responsible for the cost of moving everything from your old office into your new office.
Severance packages are another perk job candidates look for when seeking employment. If you’re forced to lay off workers due to budget cuts or miss-hires, you may have to pay them severance.
Paid Time Off Costs
Full-time employees usually take time off for vacation or sick days. Like most businesses, you’ll offer a certain amount of paid vacation days that employees can take. These days cost your business money because you’re paying employees for days they’re not working.
When employees take time off, productivity can suffer, especially if you have a smaller in-house team.
What Are The Financial Risks Of Hiring An In-house Marketing Team?
Despite the costs of maintaining an in-house marketing team, there are many advantages to having an internal marketing department. For instance, you have much more control over your marketing campaign due to managing and monitoring each team member.
The control that you have is why some businesses prefer to keep their marketing efforts in-house. If this is your main concern, then be sure to weigh the following financial risks of keeping your marketing efforts in-house to determine whether it’s worth it:
Hiring In-House Can Max Out Your Marketing Budget Very Quickly
As previously mentioned, a strong marketing team requires a handful of different positions. You can expect to pay roughly $500,000 in salary alone. Take into account all of the costs associated with hiring a single FTE.
You’re looking at dedicating a significant chunk of your budget to maintaining in-house marketing personnel. If you’re working with a smaller budget, you won’t have much money left over to invest in your actual marketing campaign.
You also won’t have a ton of financial flexibility.
Mis-Hires End Up Being Incredibly Costly
Hiring highly qualified marketers who are more than competent at their jobs is one thing. However, when you hire any in-house talent, there’s always a risk of a mis-hire. You’re more likely to make a mis-hire if you don’t have many recruitment capabilities in-house.
A mis-hire can be an employee who is poor at their job, whose skill set doesn’t align with the position’s responsibilities, who is a bad fit for your culture, or whose skill set you may only need in the short-term.
Mis-hires are costly because they can hurt your marketing efforts, cause low team morale, and eat up your budget. Not to mention that when you finally fire or let them go, you may have to invest in finding a replacement or provide severance pay (depending on the situation surrounding their departure).
In-house Specialists May Not Have A Lot To Do
Some projects may require skills that only specialists have. Hiring a full-time specialist may help you complete the project, but they may not have much to do afterward. Marketers who are generalists can move from one task to another with ease.
Although you may need a specialist sporadically (meaning that they are not necessarily “mis-hires”), you will still be paying them for periods where they’re not required and are not useful to your team.
The Need to Scale Down Can Be Incredibly Damaging
If you’ve been slowly building your in-house marketing team and suddenly have to make cuts to your marketing budget, you could find yourself in a tricky situation. You may be forced to let employees go. Not only will you hurt your existing marketing capabilities, but you’ll also need to pay severance fees.
If your current team was hard at work on a project, letting someone go can also cause delays and hurt team morale. Be aware that it can be a real challenge to scale back up once you scale down.
It Can Be Challenging To Scale Up
If your business is experiencing growth, you will need to scale up your marketing efforts. Scaling up can be difficult. You’ll need to evaluate what your exact needs are, then recruit candidates for the position.
The hiring process will take time, but it will also take time to train and integrate new employees and provide the necessary equipment and tools. Scaling up within a short period is rarely realistic for small and medium-sized businesses.
What Is The Cost Of Outsourcing A Marketing Team?
There is a common misconception among businesses that are hesitant to outsource that the price is too high. Why pay a substantial amount for a service when you can just put that money towards your own company?
However, outsourcing can provide incredible value for your money. When you work with a marketing agency, you’ll get a professional evaluation of your existing strategy and efforts, assistance with various marketing initiatives and resources, and access to a vast pool of hired marketers, all of whom have immense experience and expertise.
Typically speaking, most marketing agencies will provide different plans that consist of various marketing services. Higher tiered plans are more expensive because they provide more comprehensive marketing services. Agencies can also tailor your program to your needs so that you’re only paying for what you need, so the cost of outsourcing can vary.
Even though the cost of outsourced B2B marketing varies based on what plan you choose, how it’s customized, and who you’re working with, you’ll have no trouble budgeting for the service long-term. Marketing agencies charge a flat monthly fee, which only changes if you decide to scale up or down (something they can do with ease based on your budgetary needs).
Find out more about the costs of our marketing services here
What Are The Financial Risks Of Outsourcing A Marketing Team?
If you’ve spent most of your budget on internal marketing capabilities and efforts, then outsourcing might seem like a financial risk not worth taking. The worry is that if your budget is close to maxed out, then outsourcing some of your marketing won’t leave you with a lot of financial flexibility.
If you’re working with a limited budget, then outsourcing might not be on the top of your list of priorities. However, the financial risk you think you might be taking by outsourcing may not be a risk at all.
Outsourcing Provides A Financial Advantage Without Any Of The Risks
Even if you’re working with a small budget, making room in your budget to outsource some of your marketing efforts is well worth the investment. The reason being that outsourcing provides you with more financial flexibility even though you may have had to shift some of your budgets around to find the money you needed.
The following are three of the significant financial advantages of outsourcing vs. hiring FTEs:
None Of The Associated Costs Of FTEs
Despite having access to a large pool of talent via a marketing agency, you won’t have to pay for any of the associated costs of hiring an FTE. The agency you’re working with is responsible for those costs.
As a result, you can save a significant amount of money working with an agency instead of building an in-house marketing team. We estimate that you can source your marketing needs for roughly 15 percent of what it would cost in annual salaries to maintain an internal marketing team.
And that’s not including the amount of money you would save not having to pay for health insurance, worker’s compensation, employment taxes, and more.
The Ease of Budgeting Over The Long-Term
There are many variables to consider when hiring an FTE. While you can calculate some of their costs (such as salary, benefits, employment taxes, and the like), other expenses (such as the cost of mis-hires, equipment maintenance replacement costs, pay raises, and more) are much more challenging to forecast.
All of this makes budgeting for an in-house marketing team much more challenging than budgeting for outsourced marketing. After all, if you outsource, you’ll agree on a flat monthly payment that doesn’t change unless you decide to scale your services up or down.
Essentially, you’ll have more control over your budget, which makes planning for the future easier.
The Ability To Scale Up With Ease
Success depends on your ability to scale. If your business is on the upswing, your marketing efforts need to maintain that growth. If all of your marketing capabilities are in-house, it will be very challenging to scale up.
Not only does it take time to scale up internally, but you’ll have to take on significant financial risks to do so. If you’re working with a marketing agency, such a risk won’t exist. They already have the resources needed to scale your marketing efforts up with ease.
For instance, if you want to increase your marketing efforts, they can help you do so in a cost-effective manner. If you need more personnel to handle the increasing workload, an agency can augment your existing team with the talent you need at a moment’s notice.
Reduce Your Financial Risk by Supplementing Your In-House Marketing Team Using An Outsourced Marketing Service
Building and maintaining an in-house marketing team is expensive; there’s no way around it. Outsourcing can save you a significant amount of money while still providing you with the marketing capabilities you need.
Additionally, you obtain access to all of the marketing resources you might need in the future when you outsource. In contrast, if you’re limiting yourself to in-house marketing, you’ll have to invest heavily in additional resources as you need them.
Of course, this doesn’t mean that you should forgo having an internal marketing department in favor of outsourcing.
An in-house team can be very beneficial, after all. Instead, consider supplementing your existing in-house marketing by using outsourced B2B marketing services, thereby increasing your marketing capabilities and your marketing potential without stretching your budget thin.