In-House vs Agency Development Cost Calculator

Getting custom software built, and torn between hiring in-house, using an agency, or a freelancer? Sticker rates only tell half the story, hiring costs, ramp-up and coordination overhead swing the real total. Enter your project size and rates to see which model actually costs less.

§ · written guide

How to use the In-House vs Agency Development Cost Calculator

This calculator prices the same software project three ways: hiring your own developers, paying an agency, or paying a freelancer. It holds the work fixed at a number of developer hours, multiplies hours by rate for the agency and the freelancer, and builds the in-house cost from salary, hiring and ramp-up time. It is for founders and managers deciding whether to hire or contract out a build.

Step by step

Enter the project size
Type the total engineering hours into Project size (developer hours). The default is 1,200 hours, and the field is set up for 100 to 20,000. If you do not know the number, estimate the build first, then come back.
Set the agency rate
Enter the hourly price an agency would charge into Agency blended rate. Blended means one average rate across developers, designers and project managers. The default is $110 an hour.
Set the freelancer rate
Enter a contractor's hourly price into Freelancer rate. The default is $60 an hour. The calculator adds 15% on top for the coordination, specs and testing a solo contractor leaves to you.
Choose the in-house team
Under In-house developers you would hire, pick 1, 2, 3 or 4. The default is 2. More developers finish sooner, but each one adds hiring cost and a ramp-up month.
Enter the loaded salary
Type the full yearly cost of one developer into Fully-loaded salary per developer / year. That means base pay plus taxes, benefits and overhead, which the hint on the page puts at 1.25 to 1.4 times base salary. The default is $140,000.

Reading the result

The large heading under Lowest-cost delivery model names the cheapest option, and the line below gives its total. With the defaults it reads Freelancer, at $82,800 for 1,200 hours.
The line under that compares all three in thousands. With the defaults: In-house $147k, Agency $132k, Freelancer $83k.
In-house is salary for the build months, plus $15,000 hiring cost per developer, plus one extra month of salary per developer for ramp-up. Months are hours divided by 150 productive hours per developer, rounded up, so 1,200 hours with 2 developers is 4 months.
The colored box states the winner and how much it saves over the next cheapest option, $49,200 with the defaults. The three cards and the bars show each total side by side, with the cheapest card highlighted.

Tips and common mistakes

In-house time is counted in whole months, so a small change in hours can add a full month of salary. Try a few hour totals near your estimate.
The in-house figure only covers the build. If the team has nothing to work on after launch, their salary keeps running, and the calculator does not count that.
Use a loaded salary, not base pay. Typing a base salary makes in-house look cheaper than it will be.
A cheap freelancer result still carries the risk of relying on one person. Treat the total as one input to the decision, not the whole answer.

Privacy and limits

The math runs in your browser. Nothing you enter is sent anywhere or saved, and a reload brings back the default values. The totals are planning estimates built from the fixed assumptions above, not quotes.

Back to the tool

How it works

The honest way to compare in-house vs agency development cost is to hold the work constant and price each delivery model fully. This tool fixes the project at a number of developer hours, then costs out three paths: hiring your own team, hiring an agency, and hiring a freelancer. If the agency path wins, our US software development company rankings name ten firms to start from.

Agencies and freelancers are straightforward, hours multiplied by their rate. For a freelancer we add 15% on top, because a solo contractor shifts real coordination, spec-writing and QA work onto you that an agency would otherwise absorb. The in-house number is where the surprises live: it is not just salary during the build, but the recruiting cost to hire and the ramp-up month before anyone is fully productive.

Because in-house cost is fixed salary while agency and freelancer cost scales with every hour, small projects favour contracting and large, long-running builds tend to favour hiring, provided you keep the team busy after launch. The agency column assumes a team that owns the result against a written scope; what a software house delivers explains what that includes.

In-house = devs × (loaded salary ÷ 12) × months + (devs × $15k hiring) + one ramp-up month
Agency = hours × agency rate · Freelancer = hours × freelancer rate × 1.15
months = ⌈ hours ÷ (devs × 150 productive hrs/mo) ⌉

Not sure how many hours your project is? Estimate the build first with the software development cost calculator, then browse all our free tools for buyers of custom software.

FAQs

Is it cheaper to build software in-house or with an agency?

It depends on project size. For a one-off build of a few hundred to a couple thousand hours, an agency or freelancer is usually cheaper because you pay only for hours delivered, no recruiting, no ramp-up, no idle salary. In-house tends to win on large, long-running products where a full-time team stays busy and fixed salary spreads across far more work than an hourly rate would cover.

What hidden costs make in-house development more expensive than it looks?

The hourly rate you'd pay an agency is visible; in-house costs are not. Beyond base salary you carry payroll taxes, benefits and overhead (a fully-loaded developer usually costs 1.25-1.4× base), recruiting fees to hire, a ramp-up period before anyone ships, and the risk of paying salary during gaps between projects. This calculator prices in hiring and ramp-up so the comparison is fair.

Is a freelancer really the cheapest option?

On raw rate, often yes, and this tool reflects that. But a low hourly rate moves project management, spec-writing and quality control onto your plate, which is why we add 15% overhead. It also concentrates risk in one person: if they disappear mid-build, continuity is on you. A freelancer is a strong fit for small, well-defined scopes; larger or business-critical builds usually justify an agency's structure.