When you are building a startup and looking to grow your team, one topic that is bound to pop up is freelancers, also referred to as contractors or consultants. You might be thinking about hiring them, but aren't sure how to go about it, especially if you are a first-time founder.
Working with freelancers isn't complicated, but if you don't have prior experience you might not know what to expect, or even worse, you might have the wrong expectations. Good news is that you don't have to worry as we'll cover everything you need to know in order to start reaping the benefits of working with freelancers.
We'll spend some time talking about the financial benefits, covering what you can expect in terms of rates and where you can expect to save money, while also addressing some common misconceptions that might stop you from successfully utilizing freelancers.
After that we'll cover how they can help you with flexibility and scaling, how to structure your projects in order to get the best price, and what to expect in terms of contracts and terms. We'll wrap things up by covering some strategies for working with freelancers long-term.
If you already know some of these things, feel free to skip around and read the section that interests you the most.
Disclaimer: No part of this article should be considered legal or financial advice.
My Background
I've been a freelancer my whole career, more than 11 years at this point, and I've been working with startups from all over the United States. I've worked on projects big and small, I've worked on retainers that lasted months and even years, I consulted, I helped startups hire full-time employees, and I worked through a lot of different freelance platforms, so I've seen it all when it comes to freelancing.
This article is based on all that experience, while also being backed up with stats, surveys and studies wherever possible.
I've written this article to highlight some benefits of working with freelancers that you might not be aware of, that could help your startup, especially during difficult times, unfavorable market conditions or economic downturns. I also wanted to address some issues that stop startups from successfully working with freelancers, hurting both sides in the process.
Speed and Cost Efficiency
According to a recent report by A.Team, 92% of companies said that bringing on freelancers helped improve their cost efficiency. Additionally, 96% said that it helped them increase speed of project delivery / execution, while 94% also said it helped improve the quality of output. So it's pretty safe to say that you can save money with freelancers without sacrificing speed or quality.
Hiring freelancers helps you move faster and more efficiently, thus extending your runway. When you are in early stages of building your startup, your requirements will keep changing and a lot of things won't require a full-time employee. Going with freelance talent is an excellent solution to these everchanging needs.
Even when you do need a full-time employee, you might not have the budget to pay someone full-time for that position or you might only have enough money to hire a junior. Going with freelancers can often help you get around such budgetary constraints while also saving money in the process.
Some of the ways you save with freelancers:
- Reduced Overhead Costs
- Recruitment and Onboarding Costs
- Paying for what you use
According to Entrepreneur, you can expect to save around 30-60% by going with freelancers. However, knowing where the savings come from and where they don't is very important in order to utilize freelancers successfully.
You're hiring a one-person business
When you hire a freelancer, you don't have to pay their medical insurance, you don't have to buy them computer equipment, you don't pay them while they are on vacation or sick leave, and you don't need to pay them 40 hours a week, all year around. However, these don't just all turn into savings for the startup as the expenses don't disappear, they just have to be paid by the freelancer. We'll look at which of these you actually save on in the next chapter, but for now there is a mindset shift that you should make if you want to realistically assess freelance project costs.
It is useful to think of freelancers as a one person business, which they are because on top of personal expenses that a regular employee needs to worry about, they also have to worry about business expenses. They have to pay their own health insurance, buy their own equipment, pay for their office space and utilities, have enough money to cover downtime, and spend time and money on marketing and selling their services.
It's important to make this mindset shift or you might get surprised by that fact that freelancers charge more per hour than you pay your employees. The hourly rate that they bill represents their top-line revenue, so it has to be higher than the "salary" that they get to take home after all the business expenses are covered.
Calculating the rate
To determine how much you pay an employee, you might take their yearly salary and divide it by 2000 (approximate number of work hours in a year) to get an hourly rate. So far the math is correct, but the issue is that most people end this calculation here and start comparing rates directly.
If you want to know an hourly rate for a comparable freelancer with a similar level of experience, you first have to multiply the rate by a markup factor of 1.5x to 3x (i.e. 50% to 200% extra). For freelancers that you can hire for a lot of hours and a long time, like developers or UX designers, this factor will usually be closer to 1.5x, but for freelancers that can only bill a few hours per client the markup factor will need to be higher..
This formula will give you a better sense of how much a freelancer needs to charge to make a similar amount per year as the employee you are comparing them to. The higher rate is there to cover all the business expenses we previously mentioned as well as the fact that not all 40 hours a freelancers works per week are billable hours. On average it might be closer to 20 to 30 hours a week, and they still have to run a business and make a living with those hours.
However, even though you will be paying more per hour, you will often save money by working with freelancers. The freelance model also has a range of other benefits for your company. If this wasn't the case, all freelancers would have gone out of business long ago.
More money per hour, less in the long run
If freelancers charge 1.5 times more per hour, how can you save money by hiring them? There are multiple reasons why, let's break down the main ones:
1. Reduced Overhead Costs
The first reason are overhead costs. Employee's base salary doesn't represent the company's total expense for that employee. According to U.S. Small Business Administration , the total cost is usually 1.25 to 1.4 times the salary once you include things like taxes and benefits, so we are almost at that 1.5 markup factor and things don't end here.
Freelancers also tend to work more independently, especially the more experienced ones, so they well require less managerial time and HR involvement than a regular employee, further helping you keep your overhead costs low. On top of cost savings, this also helps your managers stay more focused and thus more effective at their jobs.
2. Lower Recruitment and Onboarding Costs
Second reason to consider is the cost of hiring. An Investopedia article on this topic puts the average cost of recruiting a new employee at $4,700, and an average cost of training a new employee at a small company at $1,420. These costs are much lower with freelancers as it's easier to hire and fire them, and they don't really need much training as they are used to switching project so they'll usually be ready to hit the ground running.
When you hire a new employee you also have to buy them equipment, which can be $1,000–$5,000 depending on what their role requires, and you also need to consider additional costs for office space, utilities and software subscriptions. All of these are expenses that you don't need to worry about with freelancers as they are the ones covering them.
When you add up the hiring, training and setup costs it comes out to $7,120-$11,120, but let's be a bit more optimistic and say $5,000-$10,000 per employee.
One scenario where this can be a big deal is when you are still small but you need to hire a lot of people all at once. If you need 5-10 new people these upfront costs can add up, and depending on your burn rate, avoiding them can mean months of additional runway for your startup.
3. Paying for what you use
Third and most important reason you save with freelancers is that you only pay them while they work. One smaller part of this is Paid time off (PTO) and similar forms of leave. Freelancers also take time off, the difference is that you don't pay them during that time.
Other, more important aspect here is the ability of adjusting to workload. This is the biggest way you save when hiring flexible talent. With freelancers you can adjust the number of hours to your current workload and save a lot of money that you would otherwise waste.
If you know you will need about 10 hours a week of work done on your website for the next 3 months, you can hire a freelancer for exactly that many hours and achieve a near 100% efficiency. On the other hand, if you have a full-time employee, unless you can come up with additional task for them, you are looking at a maximum efficiency of 25%.
In this scenario, if you have a $150/hour freelancer and a $200,000 a year ($100/hour) employee, you will end up paying the freelancer around $19,500 and get that much worth of work, or end up paying the employee $50,000 in base salary (not including other expenses or benefits) and get about $12,500 worth of work. In this scenario you can save more than $30,000 by going with a freelancer.
Another scenario is needing someone full-time but after a few months the workload changes and you only need them part-time. With a freelancer you can easily adjust the number of hours they are working per week. On the other hand, with an employee your options are to either fire them or leave them at their job hoping that the workload will increase again... and lose money while you wait for that to happen.
Third scenario are tasks that just don't require that many hours overall. If someone can solve a problem for you with 10 hours a month of work, it makes sense to pay them even $200+/hour. The money you will spend per month wouldn't be enough to pay even a minimum wage employee in California, let alone an experienced domain expert. Going with a freelancer and paying a premium rate can still save you money and allow you to have top-tier talent working on your project.
Adjusting to workload can be life saver and the interesting thing is the workload will change a lot for most startup employees, so you can often work with freelancers long term and still save money even though you're paying a higher hourly rate. If you want to dive deeper into this topic, TopTal built a calculator, accompanied by an in-depth articles, that you can use to compare costs between consultants and employees.
Avoid The Common Pitfalls
Being aware of the difference in hourly rates and knowing where the savings actually come from is important as realistic expectation are crucial to running successful freelance projects. Most issues come from unrealistic expectations regarding rates, so now that you know what to expect, and that you can save money even if you pay a higher rate, it should be pretty easy to avoid them.
Unrealistic Rate Expectations
A lot of companies decide to hire freelancers but they don't know what rate they should expect, so they do the flawed yearly salary / 2000 calculation with no markup to get an hourly rate. They then create a job post with that expected rate and they don't get enough quality candidates.
I've seen this pattern over and over on freelance platforms over the past decade. Properly priced jobs get filled quickly and end in success because they attract proper talent, while lower priced jobs stay open for a while and often go unfilled. It is possible to find freelancers that you can pay the same hourly rate as your employees, but this will usually mean that you are hiring someone less experienced than the employee you are comparing them to (unless you are paying your employees really high salaries that are above market).
If you are lucky you might run into someone who is freelancing while looking for a new job, so they might base their rate on their salary without accounting for other expenses. Even if this is the case, your luck probably won't last very long as they will probably have to drop your project once they get that new job, especially if the job is in the same industry and the contract includes a non-compete clause. So be careful in such situations and if you do decide to take advantage of one make sure to communicate expectation and timelines upfront.
Comparing to Your Own Salary
Another common pitfall is comparing someone's rate to your own salary. Investors don't like it when early-stage founders set their salaries too high, so they often ends up being in the $100,000 - $150,000 range, with the average for a seed stage startup CEO being $132,000 a year (with other executives and senior engineers actually making more, reaching north of $200k). When a freelancer tells you that they charge $100 per hour you might automatically assume $200,000 a year, which is higher than your salary so you cross them off as an option. Now that you know the right formula and that freelancers don't average 40 billable hours per week, you know that they don't take home that much and that they won't cost you that much per year (if you keep working with them for that long).
Here is a rundown of how much a freelancer needs to charge at different numbers of billable hours per year, in order to take home an equivalent of a $132,000 yearly salary:
You can also input any other base salary you want and see what hourly rates need to be charged in order to achieve it. Note that most freelancers average 1000-1500 billable hours per year, 1800 is a lot less common.
This table should also help you understand why the markup factor can vary from 1.5 to 3 based on the number of hours someone can bill per client and why long-term retainers come with discounted rates.
Flexibility & Scaling
According to the A.Team report we already mentioned, 94% of startups said that freelancers helped them improve team scalability and flexibility, and the same percentage of them said it helped them with access to specialized skills and expertise.
If you are a startup, this flexibility can be life-saving. Needing to adjust quickly and scaling your team size up and down are very common occurrences, especially at early stages, and working with freelancers can be of tremendous help.
On Demand, Kind of Like Netflix
Just like the progress of technology allowed Netflix to go from mailing you DVDs to letting your stream movies and shows at a moments notice, it also allows you to find and get in touch with on-demand talent all over the world. This makes the whole process much faster and allows you to find people with the exact skills you need at the moment.
Freelancer are used to jumping on new projects and starting to work with minimal onboarding. You can skip most of the usual training, get started much faster and complete the work much faster. This is especially true for shorter projects or over shorter time frames that early-stage startups tend to deal with.
You also get access to a wider pool of specialized talent and you can hire someone with just the skills you need. You might come across a task that requires very specific skills, but the amount of work doesn't justify a full-time employee at most companies so you might only find those skills among freelancers.
On top of that, hiring a freelancer is much faster compared to the interview process for regular employees. In general you will be able to find and hire a freelancer in as little as few days, and provided they are available, you could have them working on your project as soon as next week.
When you are smaller than your competitors, your main advantage tend to be speed and flexibility, so it's no wonder startups like to work with freelancers and that 92% of them plan to increase freelance engagements in the next 24 months.
Reduced Risk of Hiring
Risk of hiring a freelancer is much lower compared to traditional employees as it's much easier to replace them if they turn out not to be a good fit. If you are a first time founder this can be great practice for hiring employees as it doesn't carry as much risk. It will show you how good you are at assessing people and their capabilities without any long term commitments.
This reduced risk allows you to move much faster and spend much less time interviewing. For reference, most of my clients hired me after looking through my portfolio and having just one interview with me. That's how fast you can move with freelancers and you can afford to do this because if you do end up making a mistake, it's much easier and cheaper to correct.
Being late to market can often be worse than picking a less than ideal candidate, but you still might overanalyze who to pick for the job. With freelancers, you are less likely to get stuck in this analysis paralysis while deciding who to hire.
Adjusting to Workload
We already discussed how being able to adjust to workload can help with cost efficiency, but there is also the aspect of increasing your output when needed. With freelancers you can more easily increase that amount of work your team can get done without overcommitting to something by hiring full-time employees.
Additionally, at early stages some positions might not warrant full-time employees or you might not have the budget to pay them yet, so going with freelancers can be a great way to assemble a team of experts you need even when your budget is limited as you are able hire them for just 10-20 hours a week or on per-project basis.
Blended teams, comprised of a mix of full-time employees and freelancers, are becoming more and more popular as they allow you to reap the benefits of both types of talent. They essentially allow you to give your team super powers by supplementing it with specialized talent while also staying flexible.
Great For Testing The Waters
Freelancers are especially great when you have brand new products you want to test and see if you can find product-market fit. This can be either if you are a brand new startup working on its first product, or if you are a startup with established offering trying to launch a new product. Assigning flexible talent to that new project can mitigate risk as you don't need to make any long term commitments.
The flexibility can be especially useful during economic downturns and unpredictable periods as you maintain the ability to scale down your operations and put projects on hold without having to fire anyone.
Keep Your Team Focused
Another benefit of bringing on freelancers is that you don't have to pull your full-time employees off of their projects when some additional work pops up. Staying focused on their work will help them maintain or improve quality while also avoiding burnout.
For example, you could have your in-house product designer work on redesigning your website, but this will require them to split their focus between website and product for a few weeks which could mean that the next version of your product will take longer. Since the website redesign is a temporary spike in workload, it's often much better to hire a freelance web designer to handle it. That way your full-time designer will be able to focus on their usual work and you will also get a more specialized person working on your website.
Same goes with the aforementioned testing of waters with new products as you don't have to pull employees off of their current projects, potentially hurting existing products.
Different Models of Work
There are different ways you can structure your project with a freelancer and this will affect how you go about time commitment, milestones and payments, among other things. Most importantly, different models can yield different hourly rates and being aware of this can be really useful when trying to optimize expenses.
Knowing what options you have will help you optimize project cost and getting the project started will take much less time if you have a clear idea of what you want even before your first meeting with the freelancer.
Three main ways of working with a freelancer are projects, retainers and hourly engagements. There are also a couple other interesting variations and hybrids that we will also cover. As you'll see, a lot of them are based on an hourly rate but that rate may vary based on which model you go with.
Projects
Project based work is very common for one time needs where you can define a clear scope. This may include things like branding, packaging design or web design. This model can help you better predict the overall cost of the project, just be wary of potential scope creep. Having a clearly defined scope is very important so that the project can be priced accordingly and so that you can avoid any surprises.
However, with startups a lot of things change very fast, especially at early stages, so project based pricing might not work as well for certain types of work because scope might change due to external factors. Things like your product and your website will keep changing and evolving all the time, so project based work isn't ideal. Maybe your MVP or your initial website build can be priced on project basis, but you will need to pick a different model for ongoing work.
For other cases, like branding, where the freelancer has a clear process and the scope is pretty much the same with every client, project based work can be great and you should be able to take full advantage of its predictability.
If you go with a project based approach, you will define project milestones and payment will usually be tied to those milestones, and you will also be paying a deposit before the project starts. If the project goes beyond it's original scope, you will either get an estimate for the additional work or it will be billed per hour, depending on what you agreed on with the freelancer and the amount of work that is being added.
Retainers
Retainers are a great way to work with freelancers when you know you will need their services over an extended period of time. Let's say you just finished an initial project with a freelancer, and you know you will need their services for the next 6 months - this might not be enough to consider taking the contract-to-hire route and offering them full-time employment (which they might not even be interested in), so a retainer is a perfect solution.
Retainers are usually based around a fixed number of hours per week or per month, depending on how you structure it. Freelancers tend to like retainers because they make their income more predictable, so they will often discount their hourly rate when signing one, but keep in mind that this will usually require a contract with a commitment of at least 3-6 months. Month-to-month retainers with no commitments also exist, but they might not include discounted rates as one of the benefits or the discount might not be as deep.
Going back to the cost comparison, the discounted retainer rate will be even closer to what you pay your employees per hour, making freelancers an affordable option even for long-term projects. You also retain the option to hire the freelancer for less than 40 hours per week, further optimizing your spending.
Retainers and similar models can be great when hiring senior, staff or principal level people as their tasks tend to be more complex and more ambiguous, thus much harder to estimate. With this type of work model you are giving them time to figure it out without burdening them with an impossible task of precisely estimating a project with many variables and unknowns.
Hourly
Straight up hourly work with no commitments or expected weekly hours is the most flexible option but it will usually command the highest rate because this model is usually used for services where freelancers can't sell that many hours in bulk. Hourly projects also tend to be less predictable compared to other work models so freelancers don't love them and they will tend to charge a premium for this reason.
Hourly makes sense if you are hiring someone to consult, where they provide a lot of value in little time so a higher price makes sense. For other types of work, like when you are hiring someone to design or develop your product or website, all the other model will usually be a better choice than hourly.
The reason I'm not recommending hourly work for most projects is because there are two variations on it that will usually get you a better deal.
Day Rates
Paying per day is a great alternative to hourly - as a client you will retain a lot of flexibility but you will usually be charged a lower effective hourly rate as the freelancers get to sell you more of their time in one chunk. I said effective hourly rate because you won't actually be paying per hour, but the actual day rate will be based on some hourly rate multiplied by 8 work hours.
A day is still a relatively small unit of measurement and it will provide you plenty of flexibility for most types of work a startup might need. This model would be my recommendation if you have a small project where the scope isn't as clear - you could agree on 10 days to start with and add more days as needed.
Hybrid Retainer
There is a model, I don't know if it has a specific name but I like to call it a hybrid retainer. It is very common on freelance platforms and it looks something like this:
- The billing cycle is either two weeks or twice per month.
- You agree on the number of expected hours per week, 20 for example, and the freelancer works that many hours.
- Few more hours can be added during the week as long as you approve them and the freelancer is available to work them.
- If you want to change the number of weekly hours for the next cycle, or end the project altogether, you just give a 1-2 week notice of the change and that's it.
This model tends to work quite well for startups because it provides a lot of flexibility and they can very easily calculate it into their burn rate. When you decide to change something about the project, which almost always happens with a startup as you adjust to user feedback and changing market conditions, there is no need to renegotiate anything, you just keep going.
Since the model is based on an hourly rate it is quite flexible and easy to estimate. Your managers can easily estimate costs per task, per week or per month, so that you can include them in your calculations, like determining how much runway you have left or how close you are to reaching profitability.
You will get a better rate than if you go with hourly and you can easily turn things into a long-term retainer to get an even better rate while keeping the same billing cycle. Once the retainer ends, if aren't sure that you will need them for another 3 or 6 months, you can just go back to this hybrid model. Once again, the billing cycle and other aspect of the engagement don't need to change, you just change the commitment duration so it's all quite seamless.
Mostly Remote
Most of the time, a freelancer will be working from their own office instead of coming to yours. If you hire someone to do a workshop with your team that has to be on-site they will of course come to your office, but if you are hiring a designer, developer or a QA engineer to work on your app then they will most likely be remote.
Aside from what is common practice, in some places, working predominantly from your office can jeopardize a freelancer's status as an independent contractor. If they look and act too much like an employee, it can be seen as employee misclassification. It's generally safer to have them work remotely, but if they do have to work on-site for an extended period of time it's a good idea to consult a lawyer about your local laws an regulations.
Global Workforce
Unless your are adamant about everyone working from your office, the remote work arrangement has two big upsides. The first is that your office space will be less expensive and it will be easier to scale it. The second one is that you can hire globally - since they will be working remotely anyway, their preferred work hours matter much more than their physical location. Hiring globally also has two big upsides, a larger talent pool and lower rates compared to US.
Hiring globally can be especially interesting if you are looking to create a 24/7 coverage. By hiring from different countries you can achieve this without any night shifts.
Payments & Legal Compliance
If you decide to hire freelancers from all around the world, services like Remote can serve as an intermediary to help you handle payments and legal compliance, making the whole process quite simple.
Another option is Contra, a freelance platform charging 0% commission. They also handle payments and collect tax information from freelancers so you don't have to worry about any of that. If the freelancer you want to hire is already on Contra, starting a project with them is very easy and you can be up and running in less than an hour.
Async Communication
If you are already a fully remote startup then freelancers should fit right in and you shouldn't notice much of a difference when communicating with them. On the other hand, if your team is on-site and you are augmenting it with remote freelancers, you might need to make small adjustments.
A combination of Slack or email for daily communication, and a tool like Zoom for meetings should be more than enough. Just agree on the communication channels and cadence early on and you shouldn't have any issues.
Contracts
When working with freelancers, the contract usually defines scope of work, timeline, compensation and payment terms, IP ownership, confidentiality (NDA) and their status as an independent contractor, among other things.
Good to have, but not always necessary
In most cases contracts are a good thing to have as they protect both sides and clearly defines what is expected from each of them. However, if you are hiring a freelancer for a very simple task that will only take a few hours, it might not make sense to also spend a few hours on a contract. In those situation most people either use a contract template or skip the contract altogether.
An analogy might help here. If you go to the dealership to fix your car, they will give you an invoice and you will pay it, but you won't negotiate and sign a contract with them. However, if you want them to handle maintenance and repairs for all your company vehicles, and you want to negotiate some additional terms, you will likely need a contract.
For short, one-time services invoices will usually be enough, but for longer working relationships contract are usually a good idea.
As stated before, none of this is legal advice, I'm just sharing what I've observed as common practice so you know what you can expect. It's always best to consult a lawyer when it comes to legal matters like contracts.
IP Ownership Transfer
Biggest reason you would want a contract is IP ownership transfer as you want ensure that you have all the rights you need to use what the freelancer has created.
Freelancer may transfer either limited or unlimited rights. For example, in case of an illustration you might only get the rights to use it on your website, but not to print it on t-shirts - this will cost you less than buying the full rights as it leaves freelancer the opportunity to make additional money in the future.
On the other hand, when it comes to software you usually get the freelancer to transfer you all legally transferable rights to what they created - if you are a software company, your IP is your value, so transferring all rights makes most sense. Not having this sorted out can scare away potential investors.
Portfolio Rights
When working with freelance from creative fields, like a freelance designer or illustrator, the contract might include a clause stating that they retain the right to use the work in their portfolio. This is common practice and it doesn't limit your rights in any way. It shouldn't cause you any issues as the NDA ensures no sensitive info can be included, but it helps the freelancer get more projects in the future by showing their work.
Keep in mind that these rights are non-monetary value they are getting from the project, so if you want to remove this clause be ready to pay more as the freelancer loses all chance of winning new work through that portfolio piece and they now have to invest in other efforts to promote their services.
Payments & Deposits
We've already covered some aspects of payment when we discussed different work models, like projects and retainers, but there are two more things I would like to cover - importance of deposits and of timely payments.
Deposits
Unless you are working through a third party, like a platforms that guarantees payment to freelancers, you will be asked to pay a portion of the money upfront. Deposits are there to reserve your slot in the freelancer's calendar and insure them from being left with nothing in case of a last-minute cancellation.
In case of project based work, the deposit is usually 50% of the entire project value. Larger projects can be broken up into more than two payments, so you might end up paying less than 50% upfront. On the other hand, it's not uncommon for a contractors to ask for 100% upfront for smaller projects.
For retainers the deposit amount will based on time, so you might end up paying for the first two week or the first month upfront, depending on the retainer length and billing cadence you agree on.
For hourly work, deposits aren't as common because you don't usually know how many hours you will have on the invoice.
Timely payments
Just like your employees wouldn't tolerate their salary always being late, neither will freelancer so if you want to keep working with them, make sure to pay them on time, otherwise they will start looking for other work.
Another thing to keep in mind is that freelancers aren't like big companies who can afford to get paid 30/60/90 days later, so you will likely need to pay the invoices within 7 to 14 days of receiving them. Since startups usually pay this from investments there should be no reason to delay payments. Try to pay the invoices as soon as you receive them and you will make your freelancers very happy.
If you treat freelancers right they will be happy to keep working with you, so you won't have to spend time trying to hire someone else, and they will be much more likely to do you a favor or cut you a deal when you need one.
Long Term Collaboration
With the rise in popularity of blended teams, fractional roles and remote work, using freelancers long term is more viable than ever. We already covered benefits of working with freelancers, like flexibility and cost savings, so only thing left to do is discuss some strategies of using freelancers long-term.
In What Capacity to Include Freelancers?
Early on in your startup journey, things will be unpredictable and budgets will be limited, so you might find yourself using freelancers for most roles in order to stay flexible and on-budget. Even going with fractional leadership roles might be a good idea or even necessary if you have to fill a certain role but can't afford to pay someone full-time.
As you grow you will usually want to move the leadership roles in-house for any area where you have ongoing needs. You can slowly move from a mostly freelance team to a blended team, comprised of a mix of in-house personnel and freelancers, so you never have to give up the benefits of using flexible talent.
There is nothing stopping you from giving freelancers the same level of responsibilities as your employees. You can have a couple extra developers or designers that work alongside your in-house team on the same projects, but you intentionally go with freelancers in order to maintain flexibility. Another scenario could be augmenting your team with a highly specialized person that you couldn't afford to pay full-time.
Employees tend to be a bit more predictable and more likely to stick around in the long run as you can incentivize them with future promotions and vested stock options, but there are actions you can take in order to ensure freelancer your work with don't leave because of another project.
Keeping a Freelancer
If you find a freelancer you like and you want to keep working with them long-term, make sure to keep them busy. Giving them a steady stream of work will make you a more attractive client and it will ensure you don't lose them to other projects. It's usually not a as much about volume, but about consistency.
Additionally, including them in key meetings and decision making, as well as treating them like a part of the team will go a long way. If you also let them know you appreciate their work and make sure they get paid on time, you'll have someone who is happy to keep working with you.
Doing these things is usually much easier than having to replace someone who is deeply familiar with your project or product.
Contract-to-hire & Retainers
In case you find yourself in a situation where you know you'll need a freelancer long term and you want to keep them on your team, two routes you can take are contract-to-hire or retainer.
With contract-to-hire you are offering them to become a full-time employee so there is no need to go into what happens if they accept, but the thing is that a lot of freelancer like their freedom and they are freelancers by choice, so they might not be interested in becoming an employee. You can always ask them before making any big plans.
In case they aren't interested in becoming an employee, a retainer can be a great solution. We already covered retainers earlier, but basically you will just be agreeing on a fixed number of hours per month and if you commit to several months you will usually get a discounted rate. Aside from helping you keep the freelancer, retainers can also be great of optimizing cost so try to use them whenever it is suitable.
Closing Thoughts
Hopefully you now have a clearer idea of what it's like to work with freelancer and how you can get the most out of it. This articles was meant to be an overview and we only scratched the service on some topics that deserve full length articles, which I intend to write in the future. If you are a startup founder and you have a question that this article didn't cover, feel free to reach out to me at hello@ljubomir.design and I'll do my best to help you.
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