Note: this article is still under development.
Although I rarely compare Loud Dog to freelancers, I occasionally compare Loud Dog to myself as a freelancer. Although I may be rare, as a freelancer my overall rates were lower than Loud Dog’s overall rates, and I think the quality was almost the same. Why would a company hire a firm over a freelancer? And why are firms more expensive?
## How we set our rates.
Our rates are really determined by three factors:
* Our overhead (we have offices, phones, accountants and attorneys, etc., computers);
* Our labor cost (either full-time or contractor);
* Trends in the market.
### What are “trends in the market”?
“Trends in the market” really simply means that if we expect that salaries are going to rise in a month or two, we’ll try to adjust early so that we can afford to staff new projects. If we hire a new employee, it’s usually two to three months before we see a return. If someone’s being paid $50,000, for example, we have to invest $15,000 in salary and new equipment before we see a return.
### Why do we have an office, etc.? Couldn’t we pass on savings to our customers if we ditched all that?
Even though our work could theoretically be done from anywhere, we’ve found that teams work better together when they know each other and have frequent face-to-face contact.
We believe that a nice work environment with the latest equipment enables us to provide better service and better work than we would otherwise be able to provide.
### Do you pay your team a lot?
Yes and no. We try to pay them median to somewhat above median rates in the industry. We believe that our location and atmosphere allows us to attract better employees and in turn, provide better service. Workers in our industry have many options: freelancing, large companies, startups and other consulting firms. Each has their advantages and disadvantages. Because we can’t match the freedom of freelancing, the pay of enterprise or the financial potential of startups, we have to offer better salaried pay than startups, more variety in the work (and a more fun environment) than enterprise and more stability and fewer hours than freelancing. Then we start to compete with other consulting firms.
**We believe that well-paid employees are happy employees, and happy employees provide better service.**
## Why would a company (large or small) want to use a firm over a freelancer or independent contractor?
Some projects are large enough that they _require_ a large team. These projects are relatively rare. Instead, many projects could be completed by a single talented and experienced individual (and perhaps one or two expert contractors working on very specialized parts), and in many cases, they would be significantly less expensive and of equal or better quality. I could personally complete every single project Loud Dog is working on now.
Given this, why would anyone want to hire a firm? In short: reliability and consistency. Even shorter: risk management.
Freelancers are notoriously flaky. They have to be. A project is frequently one hundred percent of their income – if it’s not good, they need to move on and find one that is good. Even if a project is very good, they still tend to just vanish.
Some freelancers do good work, some don’t. Some do awesome work. Some that usually do awesome work get distracted by other projects and don’t do awesome work on yours.
If your project is critical and you can’t afford it not to happen, then you can’t afford to not hire a firm. This isn’t anything against freelancers; I’ve been one. This is simply the reality: a firm won’t vanish tomorrow, and will provide consistently high quality work that freelancers aren’t able to on their own.