Ask YC: Hiring a Freelancer with High Rates

[iamdave]

I'm about to hire a guy to add to the team who currently lives in the world of high-end, expensive freelancing. Salary isn't very flexible since we're working on somewhat of a budget, and remaining conservative with our funds.

Currently his hourly rates are above what we're capable of meeting, but he remained optimistic about negotiations.

Have any of you gone through a circumstance like this, and if so what were your experiences in the long run?

[SwellJoe]

If he's fantastic and believes in what you're doing, what about bringing equity into the equation?

I ordinarily say, "Contractors don't get equity. End of discussion." But it sounds like money is tight, and you have deadlines to meet and/or goals to achieve that this person can help you achieve--that's what equity is for: The things that you can't get any other way. If you can't afford him, then you can't get it in the normal manner.

The other option: Trade equity to an investor for money--more than it takes to bring this person on board. It's still giving up equity, but it'll probably buy you more in the long run.

Or, keep negotiating. Rates are negotiable until one party gives a plain ol' "No". If he isn't having to juggle jobs to make ends meet, he may be willing and able to work on your project in order to do something fun. When I did contract work, I lowered my rate all the way down to 1/3 the normal rate to work on stuff I really liked. And when I could no longer give them my full attention at those rates, I left the job and helped them in the process of hiring a replacement.

[paulsilver → SwellJoe]

Agreeing with one of the options above - one of my friends who works with a lot of startups will take a lower hourly rate in exchange for equity, depending on the startup. I think the deal is he gets 1% of equity for X amount of hours worked, with an hourly rate a chunk lower than he normally works at. He seems happy with the deal and the client's happy with his work.

As a freelancer, I've been asked to work just for equity on various projects. Normally this is by people who have a poor business idea and often no real clue about how to implement their side (i.e. the business and marketing) side of the idea. So if you ask a freelancer about working for equity, even if it's a split deal with some money, please understand that you're going to need to sell them the idea just as you would any other investor. iamdave it sounds like you're not in this exact situation as you all ready know the guy.

[noodle]

as a freelancer on the side, myself, i'd say that you should consider asking him if he would be willing to scale back his hourly rate the more hours he works on your project or the more hours you can guarantee him contractually.

i do this, as if i have a longer-term, solid project to work on, i know i'll have that committed income stream, so i can afford to charge less since i know i won't be having a dry spell.

[mdakin → noodle]

I think there is a generalization here worth mentioning-- you need to understand what your contractor actually wants and figure out the best incentive for him. For example I value being able to work multiple jobs at the same time and/or on my own stuff. This implies when I give people a deal on a rate I give them a LOWER rate for the FIRST X hours and then the rate goes up after X. The client is happy because he knows he's getting a deal for the first X hours but more hours are always available if needed albeit at a higher rate. I try to make the average rate over 40 hours a slight deal for the client. This strategy seems to make clients happy as they wind up with a real deal on the first X hours. And I get diversity/freedom. Everyone wins.

[Tichy → noodle]

That seems common, but somehow I always feel exactly the opposite way: the longer the project, the more money I would like to get. After all, I am giving away lots of options for better opportunities that might come up. Sort of like if you invest your money, you can expect a higher interest if you "freeze" it for a longer timespan.

What I personally would be willing to lower my rate for would be the chance to learn something new or do something especially interesting. So far this has never happened in my consulting life, though.

[bjclark → noodle]

This is spot on. If you know he's your guy, offer him $$ up front or guaranteed billable hours per week for a lower rate. As a former freelancer for 10 years, I'd often dropped my rate if I was guaranteed $$ or hours.

[iamdave → noodle]

So far I'm liking this option the best, thanks for all the feedback. I'll be talking with the co-owner this week and we'll come to an agreement or compromise.

[witten → noodle]

Out of curiosity, what's the number of hours at which this discount kicks in?

[noodle → witten]

it really depends on the situation and the individual contractor.

in general, though, if you can offer at least 20 hours/wk for a period of more than just one week, try making a deal. the more hours you can offer, the better deal can be negotiated.

also, especially in situations like this, be nice/good to them. if you're easy to work for, that'll be a good influence in your favor.

[bjclark → witten]

For me, it was usually something like, guaranteed 40hr/week for 4 weeks or just paying for 80 hours up front. So, instead of working for someone for 2 weeks, and then getting paid, I was already paid and thus knew I had a 2 week bubble should something end the project.

Sort of like, first, last, and a deposit when it comes to rent, but for a freelancer.

[bkbleikamp]

I am on the other end (a freelancer who often quotes clients more than they were expecting) and I would say you get what you pay for.

Higher rates probably get you better work, but they also include better customer service, someone who is responsible, meets deadlines, etc. If the freelancer can't guarantee those things, then ask why he is charging so much more than his competition.

[iamdave → bkbleikamp]

I would say you get what you pay for.

QFT. I have seen the quality of his services, we've talked about our own personal ethics and approaches to development on the kinds of things my company works for, and he's the guy I want on staff.

[gexla]

You might consider just hiring someone as a w-2 or otherwise someone who has never freelanced (or is not currently a freelancer.) Even if you could not hire this person long term at least the person would be able to gain some experience and cash.

The problem with freelancers is that they have lots of overhead. They may not have to pay a lot for equipment or a building but they have limited hours and many of those hours are spent doing non billable stuff. The overhead is in the lost time keeping the business going.

A freelancer with a long term gig could lower rates a bit but many of those overhead items still remain. Even with a long term contract a freelancer still has to do marketing, keep sending out invoices, "maintain" the clients and many other things that a non freelancer doesn't have to worry about.

[luciodribeiro]

bjclark right on spot