Recently, I had the privilege of chatting with Ryan Roberts, the founder of E1even, a web development agency. Ryan has hired a number of contractors, including freelance writers, and has given me permission to share his thoughts with our readers:
What is your experience with hiring contractors and negotiating rates?
“As someone who frequently hires contractors, I offer a rate for the work that is based on the person’s talent and skill set. It seems like most freelancers/contractors hit you by asking for the moon. Eventually they back down on the rate they are asking for in anticipation of getting at least some work. When I’m negotiating with the freelancer, I’ll offer a rate that is in keeping with our budget. I expect to meet the freelancer somewhere in the middle.”
How would you respond to a contractor who quoted what you thought was a reasonable rate from the outset?
“Unless they were below budget I would negotiate, regardless. Even if someone’s skill set directly reflects their rate, business is business and bottom lines are bottom lines. If we can cut costs in one area to free up finances for other things this is directly reflected in the end rate a client pays.”
If someone was easy to negotiate with and did their work well, would that would make you more inclined to hire them for future projects?
“Absolutely. I will be the first to admit that if you are on point when working with me, I have no problem offering a mid-to-high rate right from the start. Not only that, I’ll keep you busy.”
“However, the flip side to that is that if you are slow, not on point and your portfolio/interpersonal communication skills reflect this, any employer will be able to tell right away what you are worth.”
How would you respond to a contractor who told you that they aren’t prepared to work for anything less than, say, $100 an hour?
“Personally, freelancers who bill at rates like that I believe are focusing on their ego, not their skill set. Honestly, I only know two people that I’ve ever paid that rate to, and for good reason. They are the best in the world at what they do.”
“Simply put, freelancers, at least the majority of them, are not worth that kind of money. Their overhead becomes my overhead, which becomes our clients’ overhead. I’d have to bill at $320 an hour to consider that fair game and make a profit. Real world agencies don’t bill at these rates. You typically see agencies bill at $120 an hour, and making a gross profit of $20 an hour on a contractor/employee is just not enough to keep the lights on in most cases.”
Are there any surprises here, or did you already have a good idea about how clients set the rates they pay for the freelancers they hire?