Building software is expensive either way. This guide helps you decide between hiring in-house and working with an external studio.
Hire In-House If...
You have 18+ months of runway and a clear product vision. In-house engineers are an investment—6 months to onboard and become productive. If you're pre-seed with 6 months runway, you'll run out of money before they're useful. You expect to hire 3+ engineers. The management overhead of 1–2 engineers is brutal. With 3+, a tech lead can scale the team. Your product is complex and requires deep domain knowledge. Healthcare, fintech, or AI-native products benefit from domain experts. Training external developers takes time. You're scaling past Series A. You need dedicated people who care about your product's success and long-term quality. Cost: $100K–$200K/year per engineer (salary + benefits + equipment + overhead). Add 30% for recruiting, onboarding, and management. Total: $130K–$260K per engineer per year.
Work With a Studio If...
You're pre-seed or early seed and need to prove PMF before hiring. An agency or studio gets you a MVP in 4–8 weeks for $20K–$60K. You can test the market without committed overhead. You have a bounded project (redesign, landing page, specific feature). Agencies excel at fixed-scope work. They mobilize a team, ship, and move on. You need flexibility. Headcount up/down based on project. In-house is inflexible—layoffs are hard and expensive. You want to own your codebase. We (and most studios) deliver full source code. You own it. You can hire in-house later or work with another studio. Your product is standard (B2B SaaS, e-commerce, marketing site). No exotic requirements = faster delivery from experienced teams. Cost: $15K–$100K per project. Fixed timeline, fixed scope. No recurring overhead.
The Hidden Costs of Hiring
Salary + benefits is just 50% of the cost. Add: Recruiting (30–40 days of CEO time), onboarding (1–2 months of ramp-up), management (5 hours/week for your CTO or VP Eng), equipment ($2K/year per engineer), taxes (30–40% over salary in many countries). Real cost of a $150K engineer: $150K + $45K benefits + $20K recruiting + $15K equipment + $60K management overhead = $290K/year. That's the true all-in cost. Most founders think "$150K salary," then are shocked when it's double. Also: Hiring mistakes are expensive. You hire the wrong person, spend 3 months, realize it's not working, have an awkward conversation, and hire again. That's 6 months of productivity lost and $50K wasted.
The Real Cost of Working With a Studio
Studios charge $100–$300/hour or $15K–$100K per project. On the surface, expensive. But: You get a team (design, frontend, backend, QA). One engineer in-house = $100K/year. A 3-person team on a project = $60K/project. If you save $40K on hiring + benefits, studios break even or save money. Also: Quality. Studios hire senior engineers (they cost the studio money to afford). Your first hire in-house might be junior. Junior engineers are slower and make more mistakes. Also: Speed. A studio ships in 4 weeks. In-house? Hire (1 month) → onboard (4 weeks) → first real progress (week 8). You're 2 months behind before code starts. Also: No risk of layoffs. If the project ends, you don't owe severance. You move on.
The Hybrid Approach (Usually Best)
Start with a studio: Build MVP in 4–8 weeks for $30K. Learn from users. Validate PMF. Then hire in-house: Once you've raised ($500K+), hire 1 senior engineer + 1 junior. They own the product and long-term vision. The studio handles big feature builds. Benefit: You validate before committing to headcount. You hire the right person (for a proven product) instead of gambling on a hire for an unproven idea. Second hire (engineer #2): Now you can start scaling in-house. Hire a second engineer, build the team. For most SaaS: Studio for MVP, in-house at Series A scale. This is the fastest, lowest-risk path.
Red Flags When Hiring Agencies
Red flag: "We'll build your app for a fixed price." Translation: We'll scope creep you or ship low-quality work to meet the deadline. Red flag: "We handle everything, including your business decisions." You're abdicating product decisions to vendors. Don't do this. Red flag: "You won't understand the code we write." If they can't explain it simply, it's overengineered. Red flag: "We'll handle deployment and maintenance." Translation: vendor lock-in. You depend on them forever. Good agency signs: They ask 50 questions before estimating. They deliver source code and documentation. They involve you in design/spec. They're transparent about risks and timelines.