When it comes to building software, many US-based startup founders and company executives struggle with the decision of hiring talent full-time to work on their project or outsourcing by the hour.
Keep in mind that a bad decision at an early stage can quickly turn into a “hole in your pocket” and no product.
Over the years, I’ve talked to dozens of US-based companies regarding whether they should hire talent by the hour or full-time for a flat fee. The truth is, there is no right or wrong answer. It just depends on your specific scenario, like what you need to accomplish and if this is a short, mid, or long-term need.
So we can go deeper, let’s identify each of these types of engagements:
- Hourly: Typically, an hourly engagement is where you ask a freelancer or an agency to do a specific amount of work. They estimate the hours, and once they deliver the work, they invoice you for it. The number of hours may be agreed upon in advance or not. This is typically best for short-term projects, where your existing team’s bandwidth might be maxed and you need to add some quick velocity into the roadmap on less critical features.
- Flat fee: The most prominent example of a flat fee is when you have an employee. No matter their work, they always put in a predefined number of hours each month, and you pay at the end of the month. If you are looking to invest in and build a team that will be with you for a longer period of time, this model works well. You can consider them your in-house team, but ones that work remotely. This is how Ideaware operates with most startup and corporate clients based in the US.
So, which type of engagement is best for you?
In my experience building products and teams for the past 15 years, it boils down to the current stage of your product and your budget.
For products in the early stages, where you are building a prototype or an MVP either to validate or find funding, your best bet is to go with a company that offers you an hourly engagement. You will have to work with a specified number of hours to get the work product done as quickly as possible and within the available budget.
Beware, however, of scope creep. Keep your MVP to a base minimum of features.
Pros of hourly engagements:
- Quick to start.
- Easy to find talent.
- No long-term commitment.
Cons of hourly engagements:
- Lack of control over the people working on your product.
- Lack of commitment since some of them may be working on multiple projects.
- Liability.
- IP ownership might be an issue.
- It can get pricey by going over budget.
- You lose product knowledge once you move on from this short-term team.
- Potentially lower quality product.
So, when should you invest in a team with a flat fee?
Flat fees are usually associated with long-term commitments, such as adding a member to your team or building a new team from the ground up. This can be in the shape of a monthly retainer for a specified period of time, or a longer-term SOW that is ongoing. You will pay a monthly fee for each talent you’ve hired based on their expertise and seniority level.
Founders or companies with a long roadmap that includes building, launching, and growing their products are best to consider going with the flat, monthly fee model. This ensures you have talent that is 100% dedicated to you, which you can bring in as part of your team.
Products get built faster, and there is more commitment from the team.
Pros of flat fee:
- More team commitment.
- Handpicked specialized team.
- 100% dedicated to you and your product.
- Culture & retention.
- Knowledge is maintained in-house.
- Higher code quality.
Cons of flat fee:
- Onboarding at the start may take more time
- Longer-term engagement means you need to have a long-term vision.
- Not best for short-term projects.
It is a great idea to have a well-defined product idea and a roadmap off the bat in both cases. This will save you headaches along the way of rewriting entire parts of your product or diving into an endless pool of features and never launching.
For US-based clients such as bucket.io and getluna.com, they have benefited tremendously from the long-term, flat fee arrangement. Ideaware has been an integral part of their team for more than 3 years.
Why Ideaware?
Since 2010, we’ve helped US companies scale with top-tier tech talent, not just by filling roles, but by becoming long-term partners in growth.
- We handle sourcing, hiring, onboarding, and retention.
- Start receiving CVs as soon as 48 hours.
- You could meet your new teammate in as little as 8–12 days.
- Our retention rates are 2x the industry average.
Contact us here to discuss your hiring strategy, and we will get in touch with you within 24 hours or less.
