Agency Overhead Costs - What Should You Be Spending on Tools and Software
You're subscribing to everything. Asana for projects. Slack for communication.
Figma for design. Stripe for payments. Zapier for automation.
Adobe for creative tools. HubSpot for CRM. Email tools, time tracking, invoicing.
The bill is shocking. Hundreds of dollars per month. Is that normal?
Are you over-investing? Under-investing?
This post shares benchmark data on what small agencies typically spend on tools and software.
The Reality of Tool Spending
Small agencies spend more on tools than they should. Not because vendors are predatory, but because it's easier to add a tool than to evaluate whether you need it.
Everyone subscribes to tools they don't use. That's real. So the first step is recognizing that you're probably overspending, and that's fixable.
Benchmark Spending by Category
These are rough benchmarks for small agencies (10-20 people). Adjust based on your specific situation.
Project Management - 1-2% of Revenue
Budget: $1,000-2,000/year for a small agency
What's included:
- Asana, Monday.com, Linear, or ClickUp: $300-800/year
- Time tracking (Harvest, Toggl): $200-400/year
- Documentation (Notion, Confluence): $100-300/year
How to improve:
- Pick one PM tool. Don't run multiple.
- Use your PM tool's time tracking if adequate instead of buying separate
- Reconsider if you need dedicated documentation beyond your PM tool
Communication Tools - 1-2% of Revenue
Budget: $1,000-3,000/year
What's included:
- Slack: $300-1,000/year (depending on message retention)
- Zoom or Google Meet: $200-600/year
- Email (if using G Suite or Microsoft 365): $300-1,000/year
- Loom or similar video: $50-200/year
How to improve:
- Use one instant messenger. Don't run Slack AND Teams AND Discord.
- Most small agencies don't need Slack paid plan. Free or Pro often works.
- Email is included in G Suite or Microsoft 365. Don't pay separately.
Creative Tools - 3-5% of Revenue
Budget: $3,000-6,000/year
What's included:
- Figma or Adobe: $1,200-4,000/year
- Stock photos and graphics: $500-2,000/year
- Video editing (if needed): $500-1,500/year
- Prototyping: $200-500/year
How to improve:
- Design agencies spend more here. Dev agencies spend less.
- Figma often replaces multiple Adobe tools. If you're not doing professional print design, Figma is cheaper.
- Use free stock resources (Unsplash, Pexels) to reduce stock photo spending.
Development Tools - 1-3% of Revenue
Budget: $1,000-3,000/year
What's included:
- Code editors and IDEs: Often free (VS Code, etc.)
- Version control hosting (GitHub, GitLab): $200-500/year
- Hosting and servers: Variable, often $500-2,000/year
- Development databases: Often included, sometimes $200-500/year
How to improve:
- Most coding tools are free or cheap
- Hosting is where you spend. Evaluate whether you're over-provisioned.
- Use open-source where possible
Automation and Integration - 0.5-1.5% of Revenue
Budget: $500-2,000/year
What's included:
- Zapier or Make: $300-1,000/year
- Custom integrations: Sometimes free, sometimes paid
- API access and webhooks: Usually free
How to improve:
- Start with free tier of Zapier and upgrade as needed
- Many tools integrate natively. Use native integrations before Zapier
- Some integrations require custom development. Budget for that separately.
Client-Facing Software - 1-3% of Revenue
Budget: $1,000-5,000/year
What's included:
- CRM (HubSpot, Pipedrive): $300-2,000/year
- Invoicing (FreshBooks, Wave): $200-1,000/year
- Contract/proposal software: $100-500/year
- Client portal or website: $500-2,000/year
How to improve:
- Many PM tools include invoicing. Don't pay separately.
- Wave invoicing is free. Consider it before paid options.
- You might not need dedicated CRM if your PM tool has client management.
Accounting and Finance - 0.5-1.5% of Revenue
Budget: $500-2,000/year
What's included:
- Accounting software (QuickBooks, Xero): $300-1,200/year
- Bookkeeper or accountant: Variable
- Expense tracking: Often built into accounting software
How to improve:
- QuickBooks is standard but pricey. Xero is often cheaper
- Expense tracking is usually included. Don't pay separately.
- Consider a part-time bookkeeper instead of software if cash flow is tight.
Security and Compliance - 0.5-1.5% of Revenue
Budget: $500-2,000/year
What's included:
- Password manager: $50-300/year
- VPN: $50-200/year
- Backup solutions: $100-500/year
- Compliance tools: Variable
How to improve:
- Password manager is non-negotiable. Choose one.
- VPN is cheap insurance. Get one.
- Backup is critical. Budget for it.
Total Benchmark
Add these up. Small agency typical spending:
- Project Management: $1,500
- Communication: $2,000
- Creative Tools: $4,000
- Development Tools: $2,000
- Automation: $1,000
- Client-Facing: $2,500
- Accounting: $1,000
- Security: $1,000
Total: $15,000/year for a 10-person agency
For a 10-person agency doing $500,000/year revenue, that's 3% of revenue. That's reasonable.
If you're spending $30,000+/year on tools, you're over-invested. Start cutting.
How to Reduce Tool Spending
Audit everything. List every subscription your agency has. Check if they're actually being used. Credit card statements are often a surprise.
Consolidate where possible. Can your PM tool handle invoicing? Use it instead of separate invoicing. Can your PM tool do time tracking? Use it instead of Harvest.
Use free alternatives. Notion instead of Confluence. Wave instead of FreshBooks. Figma instead of Adobe if you don't need print design.
Negotiate. With volume or long-term commitments, vendors will negotiate. Slack, HubSpot, and others have negotiable pricing.
Automate with free tier. Zapier has a free tier. Use it before upgrading to paid.
Stop paying for unused tools. If something isn't being used, cancel it. Most tools have free trials. Don't auto-renew things you're not using.
Spending More Isn't Always Wrong
Sometimes paying more is the right choice.
If Figma saves you three hours per week compared to free alternatives, that's $3,000-4,000/year in labor savings. Figma's cost is recovered.
If Slack helps with remote team communication and prevents miscommunication worth $5,000 in corrected mistakes, Slack pays for itself.
Spend where it directly impacts your work. Cheap out on everything else.
Frequently Asked Questions
Is 3% of revenue the right target? For small agencies, yes. 2-4% is reasonable. Above 4%, you're probably bloated. Below 2%, you might be under-investing in efficiency.
Should every agency spend the same amount? No. A design agency spends more on creative tools. A dev shop spends less on design, more on dev tools. Adjust for your focus.
What if we're growing fast and need new tools? Budget for them. But also cut from somewhere else. New tools replace inefficient manual processes or replace older tools. Growth isn't an excuse to pay for everything.
How do we get team buy-in for tool cuts? Involve the team. Let people explain why their tool is critical. Often, you'll find consensus that some tools can go. People are usually reasonable about cuts if they're involved.
What if our team insists on having specific tools? Listen. But also explain the cost. "That tool costs $200/month. That's $2,400/year. Is it worth it?" Often the answer is no once people see the number.
Should we use specialized tools like Huddle? Tools like Huddle that aggregate multiple PM tools can reduce tool bloat by letting you use the best tool for each function (Linear for engineering, Asana for product, etc.) while seeing everything in one place. That can actually be cheaper than forcing one tool for everything.
How often should we audit spending? Quarterly is good. Annually minimum. As tools change and your needs evolve, spending should change too.
Most agencies can cut 20-30% from tool spending without hurting productivity. Audit your spending.
Cut ruthlessly. Invest in tools that matter.