
Ask HN: Should I lower my rates for small startups? - goldscott
I've been freelancing for over a year now (doing embedded software engineering). I raised my rate a few months ago from $52 to $64 per hour. Things are going well and I plan on raising them again soon.<p>Recently, I've had some very small, bootstrapped start-ups contact me for quotes to do projects. They can't afford my normal rates. I ended up doing a very small project for one company for what came out to about $25/hour.<p>Recently another small start-up contacted me about doing a project which I estimated would take about 4-6 weeks working part-time. A fixed rate of $2000 (about $20/hour). This is for building/programming the first prototype/MVP. It's an exciting project and I think it will be successfully launched, but I can't work for that little.<p>How can I get more compensation for my work? Cash - they don't have much. Equity - no idea. Promise of future work - I have no problem finding work. Share in future profits - that would be nice.<p>Any advice or recommendations?
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pc86
A few points:

You're not charging nearly enough. If you're good enough to build a startup's
MVP there's no reason for you to charge less than $80-100/hr. It doesn't
matter where you live, either; code written in New York City works the same
way as code written in Omaha.

I'm going to second the general consensus and say that no, you shouldn't,
unless you're getting something else out of it with a potential upside above
your current rate. If you're going to risk getting paid nothing more than a
fraction of your already low rate, the upside needs to compensate for that.

Personally, I don't think you should take equity. Too many startups fail and
even for successful startups equity generally means squat unless you're
raising a ton and can take some off the table, or you're profitable and can
get a disbursement.

If I were in your position, I'd agree to the $2k flat rate, capped at _n_
hours (100?). If it goes over, $20/hr thereafter. Ask for a royalty off the
top of every subscription/widget/sale, something like the lesser/greater of
_$x_ or _y%_ depending on their model. Instead of someone skimming profits
that will most likely never materialize, you're a cost of doing business
_before_ they become profitable.

Asking for equity guarantees you a slice of what will most likely be nothing.
Asking for a royalty gets you a small sum with every sale. And you've still
got the $2k.

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gexla
This is an easy one. A big part of freelancing is saying "no." This is a good
opportunity to exercise that skill.

Freelancing is a partnership. Much more so than so many other client -
provider relationships (getting your oil changed for example.) In many cases,
a bad client can put a serious hurt on my earnings and I could put a serious
hurt on the client as well. There is a lot of trust there, and each party
needs to be highly professional. This isn't a lemonade stand.

If someone approaches me asking me to do something for far lower than my
normal rate, then their ability to be a good partner takes a serious hit from
my view. It's not about the money, it's the fact that they could make the
offer comes off as them being clueless. Not good for a partnership.

At 20 / hour they would be lucky to find someone from a developing nation who
barely speaks English.I would direct them to Elance.

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cschmitt
I totally agree.. In the end all you are doing is devaluing your service. You
are basically saying.. sure I want $64/hour but the work is really worth
$20/hour.

Take the extra time you would have spent on those clients to beef up your
skill set so you can start offering more services or charging more.

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keywonc
At a startup, every contractor work counts.

Two cases where I'd accept reduced rate are:

1) You're into who we are and what we're doing, and potentially want to become
a part of us. In this case we are testing each other out, and there is a
mutual risk and cost as the startup will have to make extra effort figuring
out how to work well with you.

2) We're mutually doing a favor, concurrently, or in the future. e.g., we're
in the same field or town and we want the both of us to succeed to increase
our pie; we're personal friends who've been helping each other.

Otherwise, I would not want anything other than your best work for my startup,
and will pay the fair price for it.

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moegdaog
There's exceptions i guess, if you like the startup founder's ..the idea and
feel that your contribution as tiny or as big as it may be will put this great
product out to market quick, then why not drop your rates. Other than
friends/family referrals, ide stick to your normal rates. You never know what
your " serendipity" karma may come back to you and that small startup you
helped remembers what you did for them and does something awesome for you. i
dunno i guess my two cents.

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brudgers
At scale, volume can offset a lower price. One person consultancies don't
scale that way without adding staff.

I would add that low rate clients are the worst type of repeat business. And
word of mouth advertising (aka "telling all their friends") about your low
rates isn't particularly beneficial.

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kls
Personally, I would not do it without some other form of agreement, either
equity or an agreement that future work will come to me and that the rate will
slowly rise to your preferred rate. This also really depends on the start-up
and how comfortable you are with them. I have seen many small businesses abuse
the "we are small, can you help us out" card, so you really have to get a gut
feel for if they are on the up and up or will they expect that lowered rate
for the entirety of your relationship and them move on once you will not
provide it. Equity is obviously the most secure way for you to allow them to
defer cost will still ensuring your compensation, other than that, you really
have to ask yourself if they are truly just cash strapped.

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codewright
Small startup CTO and ex-contractor here:

Raise your rates and don't make a special exception for small startups.

Equity/royalties for contract-work is awful dodgy. Equity/revenue share is
generally reserved people who want to make a long-term investment in the
company, either through money or time.

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dgunn
The issue here is that you aren't a candidate to work for small bootstrapped
startups. You can tell this is the case by the unfavorable results you get by
working for them. Startups get talent by partnering with the right people. I
can't imagine a good excuse for a startup involved in embedded systems not to
have an embedded dev on the team.

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olalonde
Same problem here. I usual offer a small discount on my rate for startups and
suggest simply reducing the scope if they can't afford paying me too many
hours. Thinking about it now, I think next time I will offer to work at a
lower rate in exchange of having the possibility to open sourcing (parts of)
the project.

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gms
Take equity if you think they are a promising startup. If you don't think they
are promising, then you're effectively doing charity work.

