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Hire people or outsource?

Discussion in 'General Entrepreneur Discussion' started by Jeix, Nov 2, 2018.

  1. Jeix
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    Jeix New Contributor

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    Hi guys, I have an app idea I'd like to develop. It's something I'd like to keep supporting as time goes on, not a one-time thing.
    Should I contract a developer agency to do all the work but then having to pay for each update and/or maintenance?
    Or is it better to hire people so that you can share your vision with them and grow alongside them? It will probably cost more.
    Keep in mind that I can't code apps so I would have to resort to other people anyway.
    What are your thoughts?
     
  2. Scot
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    Scot Ductus Exemplo Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    I'm going to tag @Ravens_Shadow in here. As I said to him the other day, "Dude you're going to have to teach me some day how you convince all these people to work for you for free"

    I don't know software, but he does, so my advice wouldn't help as much. For my product based business, I plan on outsourcing as much as possible to agencies and freelancers to keep expenses low and run lean. But, I don't need to ship updates constantly to my food products.
     
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  3. Ravens_Shadow
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    Ravens_Shadow I'm sorry... I couldn't resist. Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass Summit Attendee

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    @Scot Here you go.

    I run a software company that is now paying my programmers salaries (one market value, the others $500/m each). However I started it by getting people to work for "free" for 2 years, mind you, they have PHD's in computational physics or rendering, so their market value is definitely within the 6 figure range for what I have them do. I gave some programmers royalties. I gave others equity. It all depends on the situation and what they bring to the table.

    Here's how you can do it too:
    Step 1. Figure out what your idea is and create some documentation on it. Write out all of its core features that you'll need for an MVP.
    Step 2. Go find programmers who have created things that you like, be it an app, or SaaS, whatever.
    Step 3. Strike up a conversation with that programmer via text or voice, doesn't matter.
    Step 4. Ask them if they're looking for work. If they say no, move onto the next one without wasting your breath. If they're still interested for whatever reason, pitch the idea.
    Step 5. Pitch the Idea if they're free to work or have time.
    Step 6. Get them excited about it during your pitch.
    Step 7. Tell them you have no cash but you'll give them royalties on all sales, or equity within your company.
    Step 8. They agree to join you because you have good leadership
    Step 9. Get them all setup on github and tell them to get to work.
    Step 10. Manage the project and stay on them.
    Step 11. Release an MVP
    Step 12. Make your first dollars and split the profits.

    Some pointers here, don't immediately give up royalties. Sign a contract saying you'll give them royalties once their vesting period is over. The vesting period for an app should be however long it'll take to make the app. You also need to say that they have to stay on the team and do maintenance to continue to receive royalties over time. As soon as they leave, royalties stop 1-2 months later from that date.

    Everything is negotiable. Some programmers, even with PHD's, just want fun projects to work on. If you work hard and show that you provide value to them by running the business, you too can get apps programmed for free.

    If i need new programmers, within 2-3 days I can talk to 10 programmers, vet them, and bring at least one of them on for a testing period. If they fail our tests, they don't get to stick with us. If they pass, we welcome them aboard.

    I will mention I occasionally threw $100 their way for beer money/play money just to show that I wanted to grow this thing. Little dollars go a long way sometimes.
     
  4. George Appiah
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    George Appiah Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED Speedway Pass

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    Great advice there... thank you for sharing, @Ravens_Shadow!

    I guess the unspoken assumption here is that the app idea is transformative and the potential upside big enough to make it interesting to accomplished developers who know their sh*t.

    Sadly, I've been pitched so many "killer" app ideas by so many people... ideas that even when all the stars align perfectly in their favour, the potential upside would not be interesting enough to even me, let alone to an experienced and accomplished developer.
     
  5. Jeix
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    Jeix New Contributor

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    Thanks for sharing, I have a couple of questions.

    1) When you bring your first programmer on board but you might want a second or a third one, how do they get to work on the same project? Does GitHub allow them to? Because it would mean that there are no geographical limitations to where my programmers are. However, if they couldn't, I would have to stick with people from my area or at least country.

    2) I need some clarifications on some of the terms you used (sorry, I'm very new to this and English isn't my first language either).
    By equity, do you mean shares of your company? Or do you mean shares of your profits?
    What do you mean by royalties? I thought the term only referred to franchising networks.

    3) You mentioned that people can keep earning royalties as long as they keep supporting and doing maintenance on the software. Let's assume there's no limit to this time they stick around. What percentage should they get? I assume it should be low so it doesn't hurt you in the long run but a low percentage wouldn't attract them early on.

    4) Suppose I want to make an app that works like a social media platform, thus requiring constant updates even for small things like changing our advertisers or something like that.
    Through a quick research online I've found that most apps or software websites (stuff like sweat a coin for instance) have an 8-10 people team.
    How many do you think are needed to start out in general? Less than 5? Less than 3? The more the merrier?

    Thanks in advance, you are helping me out a lot just by telling me this simple stuff.
     
  6. Ravens_Shadow
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    Ravens_Shadow I'm sorry... I couldn't resist. Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass Summit Attendee

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    1. Multiple people can work within the same github repo yes. All of my team is remote and they work together nicely for the most part.

    2. Equity means a percentage of my company. For instance if we decide to distribute $100k to all equity holders at the end of the year, someone holding a 10% share would get $10k. If we don't pull money out at the end of the year, no one gets anything for that year (distributions wise). Royalties for example means say someone creates the app. You decide to give them 40% of all profits that comes in from that particular app. In this case for every $1.00 you make $0.4 cents would go to them regardless of if you take money out at the end of the year or not. If you create another app in the future they won't get a portion of that app too since they don't have equity in your company.

    3. The percentage you give is up to you. It could be 40% for life or you do a progressive pay schedule. 70% of profits up to $50k in payouts, once they get paid $50k, it moves to 50% until $200k in payouts. Once they've recieved $200k in total payouts, maybe it goes to 30%. So over time you end up making more as the app is more into maintence mode. Many ways to structure this, these two are just examples I have.

    For one plugin I had coded, I give 80% of all profits to the creator and we make more money on the backend by selling another piece of software that goes with it. He gets no part of the backend sales, but gets a lot of the front end.

    I've also structured a progressive royalties deal where the guy is guaranteed $300k up until say 65% royalties, then it drops to 10% and then we start taking 90% of the cash.

    4. I have a 4 person team, operated for over a year with 1-2 coders off and on. Up to you. With 2-3 good guys you can get by I'm sure. I don't know your situation so I couldn't say.
     
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  7. Jeix
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    Jeix New Contributor

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    Thanks, but do you think that these remote devs that you meet online can be trusted? They know the inner workings of what I'd like to do whereas I have little experience with GitHub and such.

    I also know there's a lot of Indian people working in the industry, I've personally never worked with them but some people told me to be wary.

    What are your thoughts? You don't really need to make them sign an NDA before telling them about your app now, do you? Would they really sign it anyway? And abide by it too?
     
  8. Jeff Noel
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    Jeff Noel Bronze Contributor Speedway Pass

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    Don't fall for racism/stereotypes. There's a lot of really competent Indian programmers and developers. I know a ton of sh*tty Canadian developers too for what it's worth.
     
  9. Startup Steve
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    Startup Steve Contributor

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    Google "Agile Software Development"
    As the product owner, you define product features into a product backlog on a kanban board.
    The outsource product development, they will build product feature from the product backlog.
    As the product owner, you demo to users and collect their feedback and update the product backlog.
    I only ever get started for $100s and most solutions top at $10-$20k investment before I exit for 10x.
     
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  10. jesseissorude
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    jesseissorude Bronze Contributor Read Millionaire Fastlane Speedway Pass

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    holy heck

    I'm not interested in creating an app myself... but the amount of help in this one post is staggering.
     
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  11. Ravens_Shadow
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    Ravens_Shadow I'm sorry... I couldn't resist. Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass Summit Attendee

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    I'd look up programming servers on discord and just try to understand the lingo from there and interact with others. Once you have all your features mapped out, start talking to a few coders casually and follow my process above. I'd personally try to get people in your OWN country to code for you if at all possible. For me I needed extremely specific programmers and the majority of them are not American, but European. The reason I say find people in your own country is it makes taxes etc much easier. For me I have partners in Czechoslovakia, Norway, Belgium and the US and this makes the business a bit more complicated than it should be.

    Give people tests to code on for a few features. If they code functioning things that you like, bring them onboard. If you don't like their work, find someone else.

    I'd personally wouldn't recommend Indian developers, even if there are good ones (unless you are Indian). Language barriers, miscommunication, moral grey areas due to an underdeveloped country and different belief systems, etc. Better off finding a non-sh*tty programmer in your country of residence.

    Just make them sign an independent contractor contract and state that your biz owns all the code that they code. Talk to a lawyer though.

    I don't really do NDA's for my business unless required by a 3rd party. The more talk and hype that's generated, the better for me. Could bite me in the a$$ one day, but I'm not doing anything super secretive as I've let the eggs out of the basket in public already.
     
  12. Startup Steve
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    Startup Steve Contributor

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    Use of offshore teams is most effective when you understand software development enough to validate the work product. If cannot do this find someone you can be an advocate for you. This is because some, not all, will take advantage of your ignorance. What you value is the outcome, not effort. Work on T&M basis with a not to exceed, and only pay for the delivery a working feature/function. Do not be afraid of rotating people out of the team. It happens a lot and you need to find people that are producing the outcomes you want in your budget.
     
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  13. Jeix
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    Jeix New Contributor

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    Can you tell me more about this? What's "T&M"? Would paying for the delivery mean not having an hourly rate with devs? What if they ask for an hourly rate (yet we agree on the total number of hours before starting)?
    Because rotating people out of the team implies that there was either no contract or that a contract was violated.

    I've contacted some developers and asked around. Those who proved to have some experience asked for about $30 an hour and a 7-10% royalty on the app profits, but they told me that it depends on many things and that a junior dev from the US can ask up to $60 an hour because the living cost is higher there.
    Can anyone with experience relate? Does anyone know "standard" rates and how to tell when somebody is asking too much or too little (meaning he lacks experience)?
     
  14. Startup Steve
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    Startup Steve Contributor

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    T&M means time and materials.

    I would never profit share with an off-shore team. Offshore rates are dependent on experience and technology. I target developers for $20/hr. But again I focus on outcomes, not rates.

    In the US, I use interns and have creative ways to compensate them.
     
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  15. Jeix
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    Jeix New Contributor

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    Do you mean that an off-shore team could be using outdated technology? I think I'm missing something because as long as we're talking about coding there shouldn't be any limitations related to location.

    Could you name some of these creative ways?
     
  16. Startup Steve
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    Startup Steve Contributor

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    I would Google Outsourcing software development offshore and read a bunch of blogs. You're getting tripped up with the terminology I'm using which is really Basic 4 this topic

    Sent from my SAMSUNG-SM-G930A using Tapatalk
     

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