Freelancers are like terrorists – you don’t negotiate with them, because it just doesn’t work. The proper way to handle a freelancer is to ask them how much money they would be delighted with, and then you give it to them. And if you can’t give it to them, you don’t hire them.
We work with about 6-8 people depending on the week, who helps us code, design, and write stuff. We pay them anywhere from $25-150/hour, and the common thread in how those rates came about is we just gave them whatever they asked for. And if it was too low, we even gave them more.
You may think that this is going to lead to high costs, and you should be negotiating down the rates. You may think – I should negotiate everything. But this is just wrong, because you may shave a few dollars off the cost in the short term, but you are doomed in the long. Here are the many likely failure cases you will hit:
You hire bad people – People who work for whatever you are willing to pay aren’t in demand, and therefore probably suck.
Any good programmer will tell you there are a vast array of cushy, high-paying jobs that they can have. In this terrible economy, it’s not the software developers that suffer (it’s insurance salesmen, parking lot attendants, toll-takers, and other irrelevant jobs that suffer if I were to guess).
It’s easy to suffer a delusion of grandeur here and think that you have such a killer project that you can get rockstars for less than they want or need, but who are you kidding? Unless you have as much caché as Kevin Rose or something (just to name a random famous guy), then your money is the only thing talking.
You lose good people – Congratulations, you have just hired the architect of Facebook’s photo sharing site for your Flickr-killer. Somehow, it just happened – maybe you had a connection, or he saw some spark in your company, or maybe he just needed some rent money because of strange circumstance.
Welcome to two months later – your start-up is thriving on the back of a rockstar engineer, and it’s looking like Series A is just around the corner. And hey, what do you know – things are looking up for your programmer too – he got his mojo back, sent a resume to Google now that the he’s forgotten the annoyances of Facebook – and your 60/hour (he wanted 100), with a max of 30 hours per week, is both not stacking up very fast and a little embarrassing.
One day, he comes to you and lets you know he’ll be going to Google soon, and he just didn’t want you to be surprised. At this point, you have your $2.2M in funding, and you offer to match his salary, plus stock (plus even more when he shoots you down). Maybe he would have left anyways, but it would have helped if you hadn’t over-negotiated in the first place… if you were as interested in his needs as you want him to be in yours.
You get billed anyways – Even if you negotiate down the project cost or hourly rate, let’s face it – you are liable to get billed whatever the freelancer cares to bill you. Your minor changes, which he would have accommodated with gusto at the rate he asked for, now become major changes in the spec. Outside of scope. Extra hours needed. Savings down the drain. Who is really to say whether certain behaviors are features or bugs? Well, I guess you, as the project lead should say, and he’ll be willing to listen for just a few more bucks.
The work sucks – Let’s say you even manage to hire a good person, but maybe you are the lowest paying gig of 2-3 he has. Do you think your deadlines, requirements, bugs, or user needs are going to rate? Think again. You’ll get your code, eventually… maybe.
So that gets me back to how I hire freelancers. We just give them whatever they want, sometimes more. The caveat is you have to pair this strategy with both a knowledge of what you are getting, and a willingness to fire people who are doing a good job, but not a good enough job. Not everyone we have ever tried to work with did not work out – some were not fast enough, some not good enough, some didn’t care enough. And each one of those people cost us a few hundred or a few thousand dollars to find out.
In the end, it’s not about getting a good rate, it’s about getting a good value. And you do not get a good value from underpaid, unhappy programmers working on other people’s dreams.
So, if you’re a founder, find someone who you have enough money to excite. And if you are a freelancer, we’re hiring.