Hourly Rate Is Not a Good Benchmark

Recently, we received this question on our LinkedIn channel:

Since we get asked this question a lot, I thought it would be a great subject for a blog post.  Thanks, Todd!

The answer is, as I suspect Todd suspected, that rate is a very bad benchmark to be using to compare development companies. By way of a simple illustration: if the company with a rate half that of its competition takes more than twice as long to complete the app, then they are the more expensive choice.

There are factors that will determine the success of your project more than finding a developer with the lowest hourly rate.  For example:

  • How long has the company been in business?
  • Will they be around to support you in the long run?
  • What is the expectation of cost of support?
  • What is the experience level of the team?
  • Who will be writing the key technical documents?
  • What is the expectation on you to manage the team?
  • Is it a “staff placement” situation or a “full responsibility for the product” relationship?
  • Who owns the final product including the source code?
  • Do they have the right blend of skills for your project such a design, database, testing?

Software development doesn’t have to be intimidating, but it is complicated enough that you should be hiring based upon more than a simple rate comparison.  You don’t have to know everything there is to know in order to engage in a project, but your partner should.  Look for a partner that can prompt you to ask the right questions – the questions you didn’t know to ask – and then works with you to provide satisfactory answers to those questions.

One of the frequent challenges for entrepreneurs is in determining what their own needs are.  In our next post, we’ll be expanding on an analogy to help bring the discussion into terms that may be more familiar.