Building the Cost Case for Your In-House Agency
Cost analysis and cost comparisons form the starting point for most organizations wanting to justify implementing or expanding an IHA. As in-house teams chip away at agency spend by taking on work that was previously done by external agencies, a reduction of future spend against current spending occurs. Regardless of whether you call it cost savings or cost avoidance, calculating this metric makes cost efficiencies (and value) easy to quantify and share with the executive team, as well as your internal clients and procurement team.
Calculate the Spend Going Outside
The first step is determining the spend currently going to external agencies and their resulting output, either on an aggregate or product-specific basis. Once you know the current state, assess the reasonable types of work to bring in house or keep outside. Whether you lean into this task conservatively or aggressively will depend on risk appetites—yours and your organization’s.
Estimate the Flexible Costs of Bringing Work Inside
You’ll need to estimate the cost requirements for the people and technology needed to do the desired work in house, considering full-time employees vs contractors and/or contingent labor. In your proposal, be sure to emphasize the IHA’s ability to support dynamic budget allocations, dialing spend up and down as changes in marketing conditions occur. (This flexibility is often cited as a key advantage of external agencies, although it’s by no means exclusive to them.) Also you’ll want to factor in costs for a basic martech stack, team structure and size, etc.
Add Talent and Capabilities Without Adding Headcount
Staffing Solutions
Providing you with expert individuals for specific roles and projects on a temporary, temp-to-hire or direct hire basis. Our contract workers allow you to flex your team’s size without a long-term commitment. You can grow or reduce the size of your team to support volume variances and changes in capability requirements.
Managed Services
Want an IHA, but don’t want to own it as a core competency? A managed in-house agency provides all the advantages, plus the flexibility of contingent staffing. This model will appear as an indirect operating expense on your P&L. Plus, the management and operations of the IHA are provided by the service partner.
Your business case should not be all about costs. Executives will expect you to show how the dollars you’ll save could be invested back into the business. For example, what are the initiatives your team talks about but never gets started? Which nagging business problem never gets solved? Why do smart ideas originating within the company take so long to implement? How can you deliver more content, more effectively and quickly?
Quantifying the Benefits
The simplest way to quantify the benefits is to explain how saved dollars can buy more impressions. Then apply your historic customer conversion rates. Depending on your business, this will produce a combination of additional products/services sold and/or additional customers acquired. Multiply the gross profit of products/services sold by the additional impressions you purchased to calculate additional sales. Or the lifetime value of a new customer by the impressions purchased for new customer acquisition. Your finance business partner should be able to help with these numbers.
If your business is not in growth mode, quantifying the benefit of cost savings is super simple. The costs you save by shifting spend away from your external agency and into your IHA simply fall to the bottom line and boost profits.
Discuss the Qualitative Benefits
It can’t be stressed enough that quantifiable cost savings are just one of the many benefits to having a successful in-house agency. There are many softer, qualitative benefits you’ll want to document and enumerate – including some already mentioned in this paper. Among them? The close working relationship possible between business units and the IHA. The time you can save on developing marketing strategies and producing marketing assets. The very real value of keeping first-party data within the company. Institutional knowledge—including brand, corporate history, culture, deep understanding of products and services. Faster project turnarounds with no loss in quality . . . the list is solid and unending.
Other Factors to Include
Be prepared to discuss risks associated with executing projects, campaigns and other tactics. Consider internal business disruptions, change management requirements and other concerns that decision makers might bring up. You’ll also need to prepare an estimated time frame for standing up the agency or augmenting your current IHA. This information, clearly presented, will help set expectations with decision makers.
Seek Out Your Internal Partners
It’s a best practice to align and partner with your finance team members in all aspects of your analysis. They can be a valuable help in providing information such as gross profit and lifetime value numbers, as well as testing your other assumptions. To gain an initial buy-in from your marketing and product teams, reach out to them with your analysis and gather their input. Smart executives will generally want to know that the finance team has validated your analysis and that critical business partners are generally aligned with the proposal. And if there’s friction with internal partners, it’s best for you to know that and address it head on.