I run a one person studio, so take all of this with the appropriate grain of salt. But I would rather tell you the truth and lose the job than talk you into something that does not fit.
What you get from a solo shop
You talk to the person doing the work. That is not a small thing. There is no account manager translating what you said into a ticket and then translating the result back into an update email.
You get one opinion, consistently. The site does not look like three people fought over it.
And the overhead is lower, so more of your money goes into the actual thing. An agency has rent and a sales team and a project manager. Somebody pays for that, and it is you.
What you give up
One calendar. If I have three projects going and you need something in a week, that might not happen. An agency can throw a second body at it.
One skill set. I do design and I do WordPress and I do reasonably well at both. I do not shoot video. I do not run paid media. If your project needs those, you need more people than me.
And one point of failure. If I get sick, nothing moves. I am honest about that up front, which is why everything I build is documented and handed over in a state where somebody else can pick it up.
When to go hire the agency
Big scope with a hard date. A rebrand plus a site plus a campaign plus packaging, all landing on the same Tuesday. That is a team job. Go get the team.
Work that genuinely spans disciplines at the same time. Not sequentially. At the same time.
A board or a committee that needs formal process. Some organizations need the weekly deck and the status report and the change order paperwork. That is a legitimate need and a solo shop is a bad fit for it.
The question that cuts through it
Ask whoever you are talking to: who is actually going to build this.
If the person selling it to you cannot answer that clearly, or the answer turns out to be somebody offshore they have never met, that tells you what you need to know. Same test applies to me. You are talking to me, and I am the one building it. That is the whole pitch.