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Why hiring an advertising agency actually costs less than hiring an employee or freelance designer

When determining the most cost-effective solution to meet your company's marketing needs, companies assume that it will cost them more to hire an advertising agency verses an employee or freelance designer. Learn how an advertising agency can actually save you money, as well as time, energy, and resources.

Reason #1: No Salaries to Pay.
When you hire an advertising agency you pay for marketing and advertising services only when you need them. This alone suggests that before you decide to hire an employee you should hire an agency for at least a year and review your annual expenses at the end of the year. This way you can intelligently determine what your spending habits are, how much you spent, how often you purchased, and on what types of services. From this information you can better decide if your advertising needs can best be met by an agency, employee, or a freelancer.

In addition when you have to pay an employee a salary, you likely won't have the same budget flexibility to run an expensive ad campaign one quarter and then reduce spending to minimal the next. Well, you may be able to, but you're paying an employee to sit there regardless.

Reason #2: No Software or Equipment to Buy.
A reliable and efficient workstation is essential for a professional graphic designer to optimally perform their job. They will need an up-to-date, high-end computer with a fast processor and upgraded storage and RAM. They will require a fairly large, high-resolution monitor that has been calibrated for optimum color control. Depending on the type of work you need them to do, certain types of professional design software will also be required. For graphic design, web design, and SEO the Adobe Creative Suite is the industry standard with many users also adding QuarkXpress for page layout purposes. The following software alone will cost you several thousands of dollars for each employee. In addition, you would also need to supply an office, desk, phone, UPS with battery backup, and possibly additional software such as Microsoft Office, Project, PowerPoint, and Entourage.

Reason #3: SEO doesn't fit the bill.
SEO marketers generally use SEO tools to assist them in optimizing their client's websites and internet presence. These tools are usually provided by web-based SEO companies that require a monthly subscription to use the tools. This can range anywhere from $79/month to thousands of dollars a month depending on the company and the limitations of the tools. In addition, SEO, internet marketing, and website statistical analysis is a much different game and outside the scope of the visual arena that graphic and web designers specialize in. This being the case, if you hire an employee or a freelancer, you will likely need to hire a SEO/marketing professional in addition to a graphic and website designer.

Reason #4: Save on taxes big time.
With an employee the IRS forces you to shell out additional taxes in social security, medicare, and unemployment that can be an additional 40% on top of what you're already paying for their salary! This should definitely factor into the decision process. But what if you were leaning towards hiring freelance? Often designers are brought on under freelance status when needs are minimal but as demands increase so does the amount of work given to them. I understand, it can be hard to find good help these days and if you find someone compatible that's great. The problem lies where when their work increases to the point where the line between contractor and employee gets blurred in the eyes of the government. It is not uncommon for the IRS to get a whiff of this and if they feel that what you currently have is more like an employee relationship you could be audited and you run the risk of being back-taxed on all salaries paid to the freelancer plus years of interest and penalties.

Employee time spent (working on anything) is heavily taxed, but all fees paid to an agency are 100% tax-deductible as an advertising-related expense. Not only are you saving money by not paying extra taxes for an employee, but you can write off the entire amount paid.

Reason #5: Benefits schmenafits.
When it comes to employment, this is pretty self-explanatory. Health, dental, life insurance, parental leave, disability, overtime, vacations, holiday, sick days, and retirement plans. I suppose you could hire part-time and not offer benefits but then you're just delaying the inevitable. Professional designers are going to be employed during regular business hours meaning they have non-paid days during the week and they're not going to be happy about it. You may get away with hiring them for a few days a week now, but as soon as your competitor offers them a full time gig they're gone and you're going to have to start all over. In addition, part-time designers are not going to put their all into your company because they know it's temporary. Your advertising, and thus your company, will be what suffers.

Reason #6: Ease of project management.
One of main downsides of hiring a freelance designer is project management. You may find a very talented graphic designer that can make a beautiful logo or business cards but what happens when you're ready to create an advertising campaign or a large, complicated, multi-faceted website? These projects require a wide range of inter-connected skills and abilities. Designers enjoy freelance work because they are true creative artists at heart. They love to design but tend to dislike the corporate, business side of advertising—sales, research and analysis, project organization and management, ROI testing, advertising management. This is the downside, because generally speaking, most designers would prefer to design and let the project manager do the "boring part." However this boring part is just as, if not more, important than the design aspect so unless you have a Creative Director on staff to do this part you will still get sub-par results.

Most freelance designers tend to specialize in certain areas. It can be hard when working on large projects that require multiple freelance designers with different specialties in order to complete the project. Another aspect to consider is completing projects within a projected time frame. It's difficult to meet deadlines when you have multiple independent people working on different schedules. Your project manager may end up spending an unreasonable amount of time trying to manage an effort to balance a cohesive "whole" with your project or your marketing program. With an advertising agency, all of this project management is done behind-the-scenes and you can expect projects to be completed by deadline and within project budget.

Reason #7: Save on printing and promotional products.
While an employee or a freelancer may have experience working with a particular printer, seldom do they have the connections or the print volume to negotiate more competitive pricing on your behalf. Where an advertising agency may get special pricing from the printer and charge you an already-discounted price (with it already marked up for their profit), a freelancer would likely sell it to you at an inflated price, or at cost (but then you would pay more hourly to compensate them for their time in setting up the print job, etc.) In addition, with an employee, your accounting department would need to be heavily involved which would take additional time and resources away from their other responsibilities.

Reason #8: Tracking time and billable efficiency.
You might think having your marketing needs fulfilled by an employee would make it easier to monitor what they're working on and how they're spending their time. Well, you would be right—but that doesn't necessarily mean you would be being more effective. With an agency, you get an estimate of project cost along with the projected schedule, timeline, expenses, etc. upfront. With an employee, someone in your staff would need to do this, set reasonable deadlines, expenses, etc. and manage the employee taking time away from their other responsibilities. It's also important to mention that just because an employee is constantly busy working, doesn't guarantee that the project will get done quicker or that it will cost you less. It may take the employee much longer to complete the task or you may have set unreasonable deadlines in the first place. Bottom line, regardless of how efficient a salaried employee is it is extremely hard to determine how much the project is actually costing you to complete it. With this being the case, you're likely not even tracking it to find out, or your not getting an accurate number on your ROAI (return on advertising investment)—which is the purpose of advertising in the first place.

Reason #9: You want to be in the loop.
Your advertising is important to you and you want to be involved in the process of its development. This is one of the main reasons why companies want an employee they can monitor, and having an employee relationship does provide an advantage in this regard. However, there is a caveat. This also naturally creates an environment prone to distractions and competing priorities. Designers often complain that they could get more accomplished if their managers understood the creative process. They want to be able to focus on the design and on completing the project at hand. Instead they're getting constant interruptions by their supervisors for project progress updates, explanations on why they're doing something that they saw on the monitor (before it's even completed), or to do "quick" less-important tasks that probably could have waited. These things impede the creative flow, and your advertising suffers.

You could argue that perhaps managers just need to work on not doing this, but then I could argue that if the main reason you want an employee is that so you can be in the "loop"—this will never happen. A good advertising agency promotes a teamwork environment with open communication between your staff and theirs. You'll still be in the loop, but there's a set time and place to discuss progress, deadlines, goals, etc. This way an agency can better meet the true needs of your advertising (results) as well as meeting the deadlines and budget requirements originally planned.

Reason #10: Hire freelance now, employee later.
You may think that as work increases you may just offer a current freelancer a full-time position. The thing to consider in this case is to outweigh the other points made in this article when determining to hire an employee or not. In addition, many freelancers are happy doing freelance and may not be interested in full time employment. If this is the case, you've spent much time building a relationship that has limited growth potential. The benefit of hiring a reliable advertising agency is that you can rely on the fact that they will be there for you as your company and your needs grow.

Reason #11: Quality.
Last but not least—quality. It would be very rare to hire one individual full-time capable of handling every aspect of your companies marketing and advertising program. If you were to find such a qualified individual they would certainly not be cheap. Expert or not, they would still only have so much time in the day so you would be forced to pick and choose the most important things for them to work on, perhaps avoiding less—but still important—tasks required for an effective program. For instance, someone would still need to set up the print orders, change the email address on the business cards, and design the simple promotional flyers. I wouldn't blame you if you didn't want to pay an accomplished Creative Director top salary to do this. Now, let's say you decide to hire a part-time employee. You might get away with this for awhile but as mentioned in #5, as soon as a full-time position is available they're gone. So, you're left with freelancers. You can get great quality with a freelance designer but they will charge a higher hourly rate than an employee and you're still left with the project management issues mentioned in #6.

When hiring an agency.
When you take your business' entire advertising and marketing program as a whole and think about not only what you need right now, but what you'll need in 6 months, a year, 5 years, it's clear to see that hiring an advertising agency is the best bet with the most all-around advantages. Keep in mind there are small agencies who work with small companies and large agencies who work with large companies. When looking for an agency find one on a similar playing field. Just call and ask if they work with companies (this size) and with (this size) of annual marketing budget. Click here to learn how to decide how much to spend. Also, while we touted the benefit of choosing agencies that offer many services, many agencies do specialize in one field as well. Unless you can afford to hire multiple advertising agencies/firms each with a different specialty choose an agency with a good balance of services that would fit your needs.

About the Author:

Brian S. Holmes is the President/Creative Director for Effective Advertising Solutions LLC, an advertising agency/design firm. EAS is a small, personalized firm that helps small businesses become successful by working with any size advertising budget to make strategic decisions for how to position and brand the company, decide where they should advertise, design effective results-oriented advertisements, and help manage their marketing program. Check out his web site at www.EASinteractive.com

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