Ask HN: Freelancer Agency Commission | Hacker News Reader

Ask HN: Freelancer Agency Commission

2 points3princip5 comments

I've recently started part-time work via a freelance developer agency, a relatively popular one but the name is not important for this question.

I live in a somewhat poor country and the rate I agreed to is ok for this location. It is peanuts in comparison to the US, but that's not a problem.

Anyway, one of the mantras of this agency is "don't talk rates with clients", pretty standard I would guess, and it's clear why that would be a rule. Nonetheless I respect that and don't discuss it. I am curious of course and would want to "maximize" my share and rate before taking any longer engagement via them, but I'm in no rush.

So, today I mistakenly received a contract from a client, without requesting it, and it turns out this agency is charging them double what I make for the work, effectively taking an almost 50% cut of the total.

This seems crazy to me, granted I would make none if they had not arranged the contact, but 50% seems excessive. Is this normal?

50% sounds pretty normal to me. A firm can charge more because (not an exhaustive list):

- Freelancers tend to be flaky and just stop answering emails, but a firm is more likely to stick around. Businesses are often more risk-averse than price-averse, so they are happy to pay the firm's higher rates for lower risk. As a freelancer you suffer from a "market for lemons" phenomenon, where your rate suffers because there are lots of bad freelancers out there.

- A firm does more than programming. It does project management, design, communication, etc. Also they are experts on software development (not just implementation, but the whole thing), and their clients usually are not, so clients pay for their assistance and judgment.

- A firm has a "deep bench" (to use a sports analogy). Again this is a risk thing. Hiring a firm means that (in theory) your project won't fail because someone gets sick.

- A firm has wider expertise than one programmer. A client can use the iOS expert for their app and the Rails expert for their API.

There are probably more things than that but that's what I can see.

Of course this is just the theory. In reality by hiring a firm you often get one mediocre developer working with 2-3 junior ones, and quality might be passable but best. But at least with firms you are more likely dealing with a normal distribution, whereas freelancers seem to be bimodal: really good or really bad.

Anyway, I don't think 50% is unfair. But if you want to make more, you should partner with a few others and start finding your own clients!

50% is not unheard of. More importantly for you it shows what the market can bear for your skills with a small premium for brand name. Also keep in mind that your agency is doing a number of business related tasks that all cost money including at a minimum marketing/sales, invoicing and recruiting developers with the right skills.

> I am curious of course and would want to "maximize" my share and rate before taking any longer engagement...

What could be more 'fair' than a 50/50 deal? You could of course learn to prospect, pitch, and negotiate directly with clients. But that process requires a great deal time and tremendous soul sucking rejection. Do you really want to do that?

There's nothing intrinsically fair about 50/50. It all depends on the work split. This guy is spending hundreds of hours of professional time with the client. The agency is spending an hour or two. They absolutely do not 'deserve' half the take. Get another job, or negotiate directly with the customer for a contract.

Why do you think they took someone from a poor country? I'm not discussing your skills here, just your cost of living.

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