Ask HN: How do you scale up as a freelancer?

[notastartup]

My question is, how do I continue to sell my services and deliver them when my hours are completely booked and I can't take on any more projects?

The obvious thing is to outsource, but how do you distribute the earnings from a contract? For example, say you win a contract for $100,000, of what percentage should be paid to a subcontractor? Do you have to disclose how much the contract is worth and how much the subcontractor is getting paid? Would the subcontractor want to know how much he's getting paid vs the contract, would this affect his incentive? How many projects would an average subcontractor (web programmer) take on, and is it possible for them to work on more than one project at a time?

Or should you hire one subcontractor for each new project and put him on it?

Before I did freelancing, at my last job position as an developer, our boss told us to make sure our hours are close to 40 hours a week because he got a contract for 1000 hours and that we don't need to be pressured to rush through the project, is this cheating the client? Sometimes we would finish the work much faster (10 hours a week but bill for 40 hours), is the client getting ripped off? Should he be billed for less because we saved so much time?

When you are selling your development services, is it easier to sell when you have built a team of coders?

I actually really enjoyed getting prospects excited and explaining the technical details, and then asking for the sale. My long term goal is to sell development services and give work to a team of subcontractors.

There's so many questions rushing through my head because I am excited at the future of crossing the line that defines "engineer" and becoming "sales" or maybe a boss (whoa whoa whoa keep your pants on son!)

If anyone can answer some of these questions or in general how you dealt with such situations, that would be so awesome. I had these questions for a while now, wondering how agencies are able to take on many projects at once and charge huge fees. Of how much of that project fee is actually going to the people who do the work?

[luckystrike]

Patrick McKenzie (patio11) wrote about this topic in one of his newsletters. It is a must read.

https://training.kalzumeus.com/newsletters/archive/consultin... (You can jump to the section "Scaling A Consulting Business")

He also did a podcast with Brennan Dunn on the same topic:

http://www.kalzumeus.com/2012/10/10/kalzumeus-podcast-3-grow...

  Would the subcontractor want to know how much he's getting paid vs the contract, 
  would this affect his incentive?

Finding good & reliable subcontractors is hard. When you do find such a person, my suggestion is to be as transparent as possible with them. The most probable reason why this person (who we think is good) is subcontracting is either they can't get high value engagements on their own, or don't like the rigmarole of finding good clients. If that is the case, they should understand the markup being charged by you.

In the end, if it is a win-win situation for both, they would understand and be happy with it. Of course, the assumption here is that they are reasonable but that you'll have to judge after working with them for a while. I write this as a person who'd prefer working as subcontractor at this point of time.

[wikwocket → luckystrike]

Those links are really an excellent place to start. Patrick (patio11) and Thomas Ptacek (tptacek) have also talked extensively about this in HN comments, and as far as I know are open to questions by email.

Two things that I can emphasize off the top of my head are:

1) It is easier to sell features, or weeks of effort, as opposed to billable hours. Billing by the hour is asking for nitpicky accounting. Bill by the week, or by the project (if you are confident about scope and effort) and you can simply exchange money for delivered value.

2) If you "hire" someone as a subcontractor, they are effectively trading some of their earning potential for paycheck security and not having to deal with rainmaking. This is similar to the deal a day job offers. Hopefully they understand this, but you should definitely understand this. You will be absorbing the bulk of the risk and responsibility. Relative pay should reflect this.

[vtanase → luckystrike]

I have to agree here, transparency is key, trust is a very important part of human relations. You build this by starting with a couple of tasks where you pay the subcontractors hourly rate, to feel each other out, but you need to make sure you are clear about what you want after that: project based work, help on various tasks with an hourly pay model etc.

Since good subcontractors are hard to find you should not treat them as interchangeable pieces and try to get the lowest rate possible. Being transparent will go a long way towards building a professional relationship that will allow you to collaborate long term on multiple projects.

On this note, I would be interested in hearing what you are looking for as I would enjoy doing some subcontracting considering I do not really enjoy the whole client dance. You can find my e-mail in my profile.

[bebraw]

I agree selling hours doesn't feel right. Rather than bore you with yadda yadda, please go through the following slides: http://www.slideshare.net/AnttiKirjavainen/a-minute-of-our-t... , http://www.slideshare.net/juhailola/agile-contracting-killin... .

That might give you alternative ways to think about contracts. In short, because we aren't contracting right, all parties end up disappointed. I would say this is one of the main reasons why software projects fail. We sell too big projects (more likely to fail), buyers don't know how to buy (or what they need), we specify too much beforehand (and then stick with that...). There are so many traps.

Speaking of outsourcing it all depends on what kind of a relationship you want to build. I think some of this depends on legislation (ie. hire vs. buy). Construct incentives so that they are win-win.

[bebraw → bebraw]

Blog post related to the first slides: http://thehoustonway.com/2013/02/25/fixed-scope-fixed-price-... . Maybe that'll help.

[blackdogie]

I too have had to ask myself this question. But generally my conclusion is that I would try to hire contractors when I'm reaching capacity, i.e. consistently 50+ hours a week of work (don't forget you still have to spend some time that isn't related to generating income, i.e. invoicing, accounting, proposals, etc). Try to work with sub-contractors, who you know you can hire in an ad-hoc basis, but are still of a high quality.

Once you start to reach the next level of growth, i.e. consistently 70+ hours a week of work I would look at hiring someone full time, or at least first in a longer term capacity.

[sharemywin]

I had a friend who had a decent size consulting company and then a rather big name client didn't want to pay after he already paid the workers. When he started trying to collect they sued him. I'm not trying to discourage you but it's a whole different game. if there's a communication breakdown your stuck in the middle. What happens if your subcontractor codes something won't release the code until you pay him/her more. Also if someone is overseas what recourse do you have if they don't deliver? Are you going to sue them in another countries court system? Your first thing might be to consult a lawyer and a good accountant?

[brudgers]

Freelancing is essentially piecework. It always comes down to dollars for hours, though the rate may be high. People quit for better jobs or to start their own business. Computers don't.

Therefore it doesn't scale in the way SAAS or an application might.