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How Much Will It Cost to Hire a Development Agency?

Posted by: Mariya Parackal | On: 14th Sep, 2020 | New Business

Are you planning to hire a development agency for your business? 

It seems that hiring a development agency has become an integral part of any business. Think of the mobile applications that people use and how essential they have grown in our life. Hence, it is worth hiring a development agency.

Most agencies have a similar pattern of service offer like development and website design services with monthly payment. When you engage with a marketing agency, you will have to pay both retainer based costs and project-based costs depending on different variables. 

This article takes a look at how much it will cost to hire a development agency. These five considerations are essential when it comes to hiring a development agency.

Cost to Hire a Development Agency
  1. Your Current Assets 

It is essential to assess the current position of the company to understand if the company is ready to invest in hiring a development agency. While considering the assets, some of the common questions include

  • Is there any real requirement for hiring the development company?
  • What will be the primary function of the development company?
  • Does the company have enough budget to hire one?
  • How many visitors and leads do your website get for each month?
  • Does your company use CRM software?
  • How does the company plan on hiring or building one mobile application?

Finding answers to these questions will help assess the situation and also give you an overview of the cost involved in hiring a development agency.

2. Your In-house Capabilities

Many big organizations have in-house managers who specialize in developing an application. The cost of hiring a development agency relies on how efficient your in-house staffs are. You need to decide if your in-house team can extend helping hands to the agency or your agency would need to support the in-house staff. 

Many companies do not recruit any in-house staff and rely on outside development agency. If you are planning to hire a development team, you have to pay for them. Nobody’s come for free unless he has a stake in the organization. Hence consider your in-house squad before deciding on the hiring and the cost involved. 

3. Your Goals and Objectives

Your aggressiveness has to reflect on your marketing budget. Consider two different goals, 

  • In six months you have to increase 30% of sales
  • In twelve months you have to increase 20% of sales

You must have clear and focused objectives in your mind while assessing the cost of hiring a development agency. If your approach is more aggressive, then your budget will be slightly higher. It is essential to establish an alignment between the money that you want to spend and your expectations. 

4. Scope of Services 

While hiring a development agency, it is necessary to discuss the extent of their services as the same is going to reflect in your monthly expenses. A scope that involves 20 services every month is going to cost you more than a scope that requires 15 service visits. Hence, decide the extent prudently considering the in-house team, if any, and other aspects. A clear range of services will help you to stay within the company budget. 

5. Ancillary Costs

Apart from the monthly payments that you make, there are other costs like incidental costs associated with it that you must consider. It involves the costs of using software or staff training. Hence, the ancillary costs must be taken into account while considering the hiring costs of a development agency. 

Before working with an appropriate agency, you must need a clear vision of project-based services and retainer-based services. It is quite challenging to find out which model you really want to work with. 

Cost to Hire a Development Agency

Check: How To Manage An Outsourced Project Team Effectively?

What is Retainer-based Service?

A retainer-based service is an agreement with a company and agency. Here the company has to pay a fixed amount every month until the agreement expires. 

Every project comes up with a starting date and end date. If your project has a clear vision of the future, then the retainer model is the right choice for you. It is cost-efficient and you will get a dedicated team to work efficiently.

Pros of Retainer-based service

Fixed cost and less expensive: The benefit of a retainer model is its cost is fixed and less expensive for a long term agreement. 

Dedicated Team: As you have a dedicated team, You will get your work done at the right time. They will invest their time until your project reaches the goal completion. 

Cons of Retainer-based service

Transparency Issue: Sometimes, it’s not easy to track where your money is being spent or are they on the same page. You may don’t have the control to manage the team that works for you. Try to receive a detailed report of work completed by the team each month. 

Not enough work: There are chances like you may don’t have enough work for the agency to do, but still, you have to pay the fixed rate monthly. So, It is highly recommended for companies that have a lot of requirements and work. 

What is Project-based Service?

A project-based service is suitable for companies with short term business goals. In a project-based model, the rate is charged according to the type of project. If you need certain skills to complete your project, then project-based services are the right choice. You’ll be charged for additional services. 

Key differences between Retainer and Project-based services

  • Retainer service has a fixed monthly fee. Project-based services are charged as per the project. 
  • Retainer model offers a wide range of services. Project-based offers services for specific projects.  
  • Retainer services have a dedicated team for the project. Project-based services have to find the available talent to complete the work.
  • Retainer services are the long-term relationship between agency and company. Project-based services are for short-term business goals. 

Retainer-based services are not for everyone. Its benefits are certainly attractive and useful to companies who value a long-term plan between agency and company. 

Check: In-house or Outsourced – How to decide your team?

Let’s go through a rough calculation of the costs

For web and mobile app development, the charge of most US agencies anywhere:

For UI or front end development most USA agencies charge from $5K to 50K for mid-size agencies and in larger agencies, it goes up to 500K.

For web programming, the normal range is $10K to $100 K for web applications that require backend programming. It can easily go up to 500K for complex projects.

For mobile apps it’s all over the place. Simple mobile apps can be $10K to $25K. While complex ones can go to $250K with larger agencies.

Let’s analyze how much it costs for a team while you choose to outsource development or in-house development.

VariableCost of In-House Development In The US (320 hours)Cost Of Outsourcing Development To India (320 hours)
Cost per Hire$4,200$1,000
Overall Team Salary$160,000$40,000
IT Expenses$20$0
IT System$1,800$0
Technology Training$1,000$0
Paid Benefits$6,500$0
Software License$250 per person$0
Overhead$5,000$0
Total Cost$178,770$41,000

Agency cost varies based on the project type, complexity, and type of agency. I’m assuming that you are not a large company or hiring a large ad agency for these. Those engagements can easily run into a few million.

Check: Why do companies outsource software development?

Cost to Hire a Development Agency

As you see, outsourcing can help you to cut down your development cost. Also, learn How to communicate with your outsourced development team.

If you are using offshore agencies, the cost would normally be 30% to 60% lower than US agencies due to lower rates.

Hopefully, this article is useful to you if you’ve been considering hiring a development agency. Consider the above aspects and hire a development agency today! 

If you need to know more details regarding the services get a free consultation from our technical team. 

Check: Are There Any Extra Taxes for Outsourcing Software Projects?

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