At some point, every company that works with an external development team asks the same question: should we hire our own developers?
It is a fair question. Agency fees feel expensive when you write the check every month. The idea of having a dedicated team sitting in your office, fully focused on your product, is appealing. But the decision is more nuanced than most founders realize, and getting it wrong in either direction is costly.
We are an agency. We could tell you to always use an agency. Instead, here is the honest framework we share with our own clients when they ask us this question.
The Real Cost Comparison
Most people compare agency rates to developer salaries and conclude that in house is cheaper. This math is wrong because it ignores 40 to 60 percent of the actual cost.
Agency cost: $150 to $250 per hour (or $20K to $50K per month for a dedicated team). This includes developers, project management, design, DevOps, QA, and infrastructure knowledge. When someone goes on vacation or quits, the agency handles the replacement. You pay one invoice.
In house cost for a single senior developer: $150K to $200K salary, plus $30K to $50K in benefits (health insurance, 401k, PTO), plus $5K to $15K in equipment and tools, plus $10K to $20K in recruiting costs, plus 2 to 4 months of reduced productivity during onboarding. Total first year cost: $200K to $285K for one person.
And one person is not a team. A single developer cannot design, build, test, deploy, and maintain a product alone. Not well, anyway. To replace what an agency provides, you typically need:
- 2 to 3 developers ($300K to $600K)
- 1 designer ($100K to $150K)
- A fraction of a DevOps engineer ($40K to $60K allocated)
- A fraction of a project manager ($30K to $50K allocated)
Total: $470K to $860K per year for a functional in house team, before accounting for turnover, management overhead, and the ongoing cost of keeping skills current. Compare that to $240K to $600K per year for an agency engagement that comes with all of those roles built in.
The math only favors in house when you have enough sustained work to keep a full team busy 50 weeks per year, and enough management capacity to lead them effectively.
When an Agency Makes More Sense
You are building your first product. At this stage, you need speed and breadth of experience. An agency that has built and shipped dozens of products will make better architectural decisions, avoid common pitfalls, and ship faster than a newly hired team still figuring out your domain.
Your development needs are cyclical. Many companies need intense development for 3 to 4 months (new features, a product launch), then lighter maintenance for the rest of the year. Paying a full team year round for cyclical work is inefficient. An agency scales with your needs.
You need specialized skills temporarily. Your product needs AI integration, a mobile app, or a DevOps overhaul. These require specialized expertise that does not justify a full time hire. Agencies maintain diverse skill sets across their team so you get the right specialist for each phase.
You do not have technical leadership. Hiring developers without a CTO or VP of Engineering to manage them is like hiring construction workers without an architect. They will build something, but it probably will not be what you need. An agency comes with technical leadership built into the engagement, handling architecture decisions that individual contributors are not equipped to make alone.
When In House Makes More Sense
You have product market fit and sustained development needs. If you have paying customers, a clear roadmap for the next 12 to 18 months, and enough work to keep 3 or more developers busy full time, in house starts to make economic sense.
Your product IS your technology. If you are a pure software company where the codebase is the primary competitive advantage, long term institutional knowledge matters more than short term speed. The developers who built version 1 should ideally build version 5. That said, many software companies successfully use agencies for version 1 and transition in house once the product is proven, which is exactly what we helped Traderly do.
You can attract and retain talent. This is the part most companies underestimate. Good developers have options. They want interesting problems, modern tech stacks, competitive compensation, and competent technical leadership. If you cannot offer all four, your in house team will be a revolving door, and every departure costs you 3 to 6 months of lost productivity.
You have management capacity. Developers need direction, code reviews, career development, and someone to resolve technical disagreements. If your plan is "hire developers and they will figure it out," you are setting up for an expensive disaster.
The Hybrid Model
The best approach for most growing companies is neither pure agency nor pure in house. It is a hybrid.
Phase 1 (0 to 12 months): Agency builds the product. Focus on getting to market, validating with real users, and iterating based on feedback. The agency handles everything from architecture to deployment.
Phase 2 (6 to 18 months): Hire your first technical lead. This person works alongside the agency, learning the codebase and gradually taking ownership. They should be senior enough to eventually lead a team, not a junior developer who will need hand holding.
Phase 3 (12 to 24 months): Build the core team. Your technical lead hires 1 to 2 developers. The agency transfers knowledge, documentation, and operational responsibility over 2 to 3 months. Avoid a hard cutoff. Gradual transitions preserve institutional knowledge.
Phase 4 (ongoing): Agency for surge capacity and specialization. Keep the agency relationship for specialized work (AI features, mobile apps, security audits) or when you need to ship faster than your in house team can handle. Many of our clients use our ongoing management service for exactly this purpose.
The Transition Checklist
If you are ready to bring development in house, do not just stop working with your agency and hire replacements. That is how codebases become unmaintainable.
Before you hire:
- Document the entire system architecture, deployment process, and operational runbooks
- Ensure CI/CD pipelines are fully automated (no tribal knowledge required to deploy)
- Clean up technical debt that would confuse new team members
- Set up monitoring and alerting that does not depend on the agency's tools
During the transition:
- Overlap the agency and in house team for at least 8 to 12 weeks
- Have the agency conduct code walkthroughs and architecture reviews with new hires
- Transfer all credentials, accounts, and access gradually with a documented checklist
- Keep the agency on a retainer for 3 months after transition for questions and emergency support
After the transition:
- Schedule an architecture review at the 6 month mark to catch any drift
- Maintain documentation discipline (the agency was doing this, now your team must)
- Budget for ongoing training to keep your team current with evolving tools and frameworks
The Wrong Reasons to Go In House
"It will be cheaper." It usually is not, once you factor in the full cost. Run the numbers honestly before making this decision.
"We want more control." A good agency gives you full visibility and control through regular demos, shared project boards, and transparent communication. If your current agency does not provide this, the answer is a better agency, not necessarily in house.
"We had a bad experience with an agency." One bad engagement does not mean the model is broken. It means you chose the wrong partner. The criteria for choosing a development partner matter far more than the model itself.
Make the Right Decision for Right Now
This is not a permanent choice. The best companies fluidly move between agency, hybrid, and in house models as their needs evolve. The goal is to match your development capacity to your actual needs at each stage of growth.
If you are trying to figure out the right model for where you are today, let us talk through it. We will give you an honest recommendation, even if that recommendation is to hire in house.