Separate the product from the packaging
When a business says it needs an agency, it usually means five specific things: campaigns that are built correctly, running on the right channels, watched by someone competent, reported in plain language, and changed quickly when the business changes.
Everything else an agency sells — brand workshops, quarterly strategy decks, dedicated account teams, awards-shelf creative — may be valuable, but it is not what a local service business is starving for.
Where the cost actually lives
Not in the five things above. Those are increasingly systematized. The cost lives in the human coordination layer around them: the meetings, the account structure, the handoffs, the new-business machine that has to be fed.
Buy the five things without the layer and the price changes by an order of magnitude, not a percentage.
What you give up
Honesty matters here. You give up a person who has internalized your business over years. You give up someone to hand ambiguous problems to. If your marketing question is "who should we be as a brand," you want a strategist, not a platform.
If your question is "get this offer in front of everyone within twenty miles by Friday," the strategist is the expensive way to answer it.
A sensible split
The pattern that works for most local operators: keep the strategy and the offer — you know your market better than any vendor will — and outsource execution to whoever can do it across every channel, quickly, at a clear price. Spend the savings on media.
That is not a compromise version of an agency. For a business under a few million in revenue, it is usually the better structure.