Pop-Up Webinar: How to Minimize Risk When Hiring a Web Development Team Transcript

Join our CEO, Pete, as he discusses how to mitigate risk when hiring a web development team.

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Okay, everybody. Good morning. Thanks for joining me. If somebody could tell me if they can see the screen, I'm flying a little on the blind here today, working from home, unfortunately. Somehow I tweaked my neck and I can't drive, can't turn my head today, so this will be exciting in more ways than one. But thanks for joining. We have a great topic today. The topic today is how to manage risk when you hire a web development team. Give me one second here. Let me just try to open this on the other computer just to verify everything's good.
We're going to be doing these pop-up webinars a little bit more often. I write a blog post once a week, it comes out every single Friday or Thursday, depending upon how busy I am and last week's was something that was really exciting that I thought, "You know, I'm going to try this pop-up concept and see if we get any involvement from people," so here we are. I'm going to talk nonstop, only going to come up once in a while for a little sip of my coffee over here. It's going to take about 20 minutes. I'm not particularly going to open it up to Q&A. If anybody asks a question, feel free to contribute it through GoToWebinar. Not something that I really was planning on doing. I'm trying to get everybody out and enjoy their day as quickly as possible.
With that, let's get started and go over, oops, sorry about that. Let's go over today's agenda. First off, I'm going to introduce who I am, although many of you already know. We're going to talk about risk and how risk is associated with budget. I'm going to talk about the types of development teams that exist, and then talk about some of the common problems that'll come into play with the different type of teams that you'll have. Then we'll go into a wrap-up, so hopefully, I'll have you out of here by about, well, I started a little late, maybe 11:25 here on the East Coast.
This is the blog post that everything is based on. I put it up last week, I highly encourage you to check out our blog. Again, we do one blog every single week. I write every post myself. This is a great post. I got to tell you, I'm really excited to talk about it. Look at the first line. I said it before, I'll say it again. The web development industry is a weird and confusing space to be a consumer, so hopefully I can clear up some of those challenges that people face on a regular basis when acquiring these services.
Again, my name is Peter Czech. I'm the CEO of the New Possibilities Group, co-founded the company back in 2001. My background, in addition to being a sort of mercenary CTO, which is what I tell a lot of customers, my background is custom web development, custom web design, UI/UX. If you ever need to get me, that's my email right there. So who are we and what do we do? We're the experts in development of safe, secure, content management systems. We focus on custom web development and design to create websites and applications for customers, clients with complex requirements. These are some of our clients that we've worked with since 2001. Obviously, it's a huge list, but some of these names you might be familiar with.
So why are you here? Couple reasons, maybe you're going to undergo a design or development project, maybe you are in the middle of one, maybe you will be. Maybe you've had bad experiences in the past. Maybe you're confused about how agencies price and why there's such divergence between different types of agencies. We're going to talk about all these things because they're related. The key concept today, again, as your budget increases, your risk decreases. It's just the way that it is, and we have assembled this little chart here for you that shows the six different definitions of agencies or types of resources against what your relative risk is. We start from an offshore, sort of like a freelancer or maybe a development team as offshore in India, Pakistan, China, wherever it may be, progressing to freelancer or small agency, mid agency, large, and then to a niched agency, which is what we do here at the NP Group.
As you can tell, as your spending profile, as your budget increases, your risk is going to generally go down a little bit. A smart agency will actually even propose to you a service as high, medium, and low, wherein the risk is even different there. Whereas, if you do the smallest minimum viable project, you might take on a little bit more risk. If you do an all-out project, you might take on even less. So this profile can exist not just in a spectrum of all these different service providers, but also within a service provider when they issue a proposal.
Again, as I said, there's different types of development teams, the offshore, freelancer, small agency, straight though to a niched agency, and I want to tell you a little bit about each. First off are the offshore teams. These are the guys that are probably filling out, if you have a website, they fill out your contact forms seemingly every couple of days. I get maybe three or four inquiries a week from these places. These teams are, they're really meant to handle input. They're meant to be told what to do, and they need to constantly be told in a very verbose and clear manner what it is they're going to be outputting. 
So, you can't count on an offshore team to contribute original thought or concepts. You're very rarely going to get senior staff access, which is an owner or somebody that's been there for a long time. It's very hard to even gauge ability regardless, so you don't even know, even if you have a senior guy, you still don't know what his relative ability is. Pricing [inaudible 00:05:10] here is generally between $15 and $40 an hour. Again, this is really, if you have technical knowledge, this could work out relatively well, but you have to know what it is you're policing.
Now freelancers, this could be offshore, could be onshore, but typically they're an individual. They might do one or two projects at a time. Communication can vary, so there may not be a language barrier, but the person may not always be around, and that's where unreliability becomes a concern. Very hard to determine the quality of their work unless you have the ability to really dig in and understand specifics of what's going on under the hood. Their rates can vary between $25 and $50 an hour. And of course, these are all of our definitions. Been doing this since 2001, and so we're fairly accurate. But again, other people might, they might argue the size of small versus mid agency, so again, just is our perception.
Small agencies. Typically we would define this as being two to five employees. They might do three to four clients or projects at a time. Most likely this is is a new company because not a lot of people stay in this size. It's hard to maintain an ongoing concern when you're in this scale. There's a lot of uncertainty, so most people this size are trying to grow. Very rare you're going to get people on the way down that are going to be two to five people unless, when we get to it, we talk niched.
You're probably going to deal with the ownership. They may not be super experienced ownership, it might be people that have been doing this for three to five years. They were working for a company and then decided, "Hey, we're going to do our own thing." You'll be working with them, but that doesn't necessarily mean that they're experts in whatever it is the discipline that you're going to be hiring them for. The price ranges are going to be between $50 and $100 an hour. Again, these are estimations. Geography matters, overhead matters, so these are wide ranges, I'll definitely grant you that.
Then, you have the mid-size or boutique agency. Typically five to 25 employees. Geographically, they can be in second or third-tier markets. They can do many services in-house, but they might utilize freelancers themselves if they have to. The rates are typically going to be $100 to $200 an hour. Where a boutique in New York City, they might be on the high end of that range, but then somebody in Louisville, Kentucky, they might even be under the 100 an hour, it just depends on a variety of factors specific to their business.
But what can maybe you can see is that there is a huge diversity on pricing already. We've gone from $15 an hour up to 200 an hour and we're not even at the large agency yet. Speaking of the large agency, I call these guys also the Madison Ave Agency. They're typically going to be urban-based, New York, San Francisco, Chicago. Greater than 25 employees, oftentimes over 100. The problem that you have here, you're actually going down the risk profile. This is one of the least risky things you can do. It's going to be the most expensive, it's going to have the highest budget. The senior staff will come and go, so they may not be involved with you on a daily basis because of the quantity of work. 
But the big thing you got to be careful of with these guys is the employee turnover. You might be dealing with a junior project manager who wants to be a senior and can't get it at their agency. Two months into your project, they're gone, and then so on, that can happen with a developer, the front end, the designer. We've seen people who go to these agencies, they have a six-month project and they could have turnover of the project manager two or three times. This is what happens in this space, people come and they go. It's more prevalent in the large agency where they have so many people that if you lose one you can just easily throw another one in. That's very good for their business, it may not be good for your project, so something to consider there.
Then, we have a niched agency which is, again, what I would define us as being, where you specialize in one particular industry or discipline. Again, I said, "What is our claim?" But I said before, custom content management systems, that's our specialty. With niched agencies, the size very well may vary. There are niched agencies that have two people and there are some that have 30. It doesn't really matter as much. This will be the highest level of experience you're going to get within the discipline or industry that you're searching for. You'll most likely get guaranteed senior staff involvement. For example, I'm the CEO, but I do all of the sales at the NP Group, it's a consultative process, which I have as a last point here, so jumping head. Might be the highest rates, may not be the highest rates, but you will get the fastest turnarounds, so something to consider there.
We've made this chart here, which appears in the blog post, and if anybody wants it, feel free to email me. I'll send it to you. This, plus the previous chart as well. This breaks down rates per hour, what the overall risk factor is, what's your biggest risk, how long is the project going to take, assuming the same length project you go to all these different places, how long is it going to take. I talk about agency vision, which is actually contributing ideas and concepts to you. Communication, obviously with offshore I list it as difficult because these people are offshore and there might be a language barrier, might be a time [inaudible 00:10:21] issue, all the way through to a niched agency and large for communication will be excellent. 
Senior staff involvement is super important so I definitely list that out here. Staff experience, where we go from offshore, could be minimal, to experienced with a niched agency. I see the sales cycles is going to be very different, and actually, I'll talk about this a little bit because I don't really break into this in the next segment here. Your sales cycle for offshore, freelancer is going to be pretty fast. Again, you should only acquire those types of teams if you know how to manage them and you're technically adept enough to be able to do it. So that sales cycle is basically, "When can you start?" And agree upon a rate.
With a small, medium, and large, you're going to go through a pitched process. It will typically be a pitch on a proposal for the small to middle. It won't be multiple pitches and proposal for those guys because they simply can't spend that much time on the process. So don't expect a small agency to do the same process as a large one will do. They just can't really, from a fiduciary perspective, they just can't manage it, so it's not something that they're going to be interested in. 
The large agencies will obviously have dedicated sales people who just sort of, where I'm skipping to the last line here, they can handle this process of RFPs and 30 pitches and 50-page proposals. That's something that you'll definitely get there. With the niched agency, the sales cycle will be completely different. It's going to be consultative, you're going to be working with the principal or a high level individual. That's going to be a different type of relationship as opposed to any of these agencies where you're dealing with [Biz Dev 00:11:59] or a sales person. Again, if anybody is interested in this chart, let me know. I'll send it to you in a higher quality than it's on the blog, we do have to compress it a little bit to make it fit.
So, we're going to talk a little bit about the most common risks. How am I doing on time? Doing good. Some of the risks, and I'll go into detail in each one, poor work quality or an absolute loss of a project. That's the worse-case scenario you can always have. Finding a reliable partner, huge with offshore or freelancers. Managing scope expectations, budget overruns, finding a partner versus an order taker. And of course, the risk of evaluating the proper niched agency for you. We'll dig into each one.
Again, the first one, and I see this all the time, it's the worst thing that can happen. It's the absolute loss of a project. Unfortunately, again, a lot of people come to us after this has happened to them. Largest risk here is with offshore or freelance developers, the people that are going to jump from project to project. Hard to vet, hard to know quality. I hate to say and put it this way, but when you take the cheapest route, you're often going to end up paying for it later. Those teams, as I mentioned, they're not product specialists. These are not people that are going to contribute ideas to you. They're going to do as they're told. You don't know how they're going to get to that conclusion unless you're technically adept enough to look at what they're doing, and therein is the highest amount of risk.
So you have to accept if you sign up with these people, with a freelancer, the guy might go to Tahiti, he might disappear for a month. I've actually had someone who came to us who was a startup and she needed a new developer to do maintenance because the guy decided he wanted to go and spend two months in Thailand. It happens all the time, so that's the type of risk. You also have the risk that something that you get coded to meet a tight deadline might turn into nothing. It may be unusable, so you have to accept it. Acceptance is very important here. And again, you need some technical background or understanding of architecture. By the way, again, I am talking from a development project perspective. Design might be a little bit differently, that has its own risks. But you need to have some technical background to be able to succeed with those smaller freelancers offshore types.
Finding a reliable partner. Major issue with freelancers, again, I mentioned it before with the Thailand reference. The people who are freelancers are interested in the first part of the word, and that's freedom. We're in this new economy where people are out there and interested in working when they want to work and having a high level of autonomy is the uber economy. This is why people are freelancers, and you have to keep that in mind. The job is not just building your project, but there's also going to be ongoing work. You're going to need servicing, you're going to need maintenance.
My historical view from experience is that freelancers like to do the big job but they don't want to deal with the small requests. They're not equipped to do it. They don't have a systematic way to do maintenance. So that's something they have to think about in terms of reliability. And that's where, jumping to my last point, you might want to consider doing a cost-benefit analysis of hey, there's a smaller agency that can scale a little bit makes sense if you're looking at a freelancer.
The other thing you have to do with a freelancer, you have to talk to their other customers, and they're going to be very hesitant to let you do that. Probably because most of them are going to go through this problem of building up the project and then being stuck with it without having a helping hand. So again, just remember, what's the first four letters of freelancer? It's free, that's going to end up not being a benefit to you. It's only a benefit to them.
Scope expectations and budget overruns, another risk. It can happen with anybody on the whole scale. It happens less with the niched players and with the large agencies that actually go through discovery and architecture. I see a couple people on the phone [set 00:15:46] or on the meeting today, on the attending. I've heard this from me before, discovery is a super-important process and it could be as quick as a two-hour meeting with a deliverable, it could be a two-day meeting, it could take even longer. We've done discoveries that taken up to sixty days to deliver.
Most small guys, freelancers, small agencies, and every offshore team, they're not going to do this ever because a) they focus on hourly accruals like I'm saying in the next line, and b) they just don't have the time or the wherewithal to be able to contribute to that process. And c) on that list is they're not even going to give you any genuine feedback or creativity in terms of ideas regardless. So again, niched agencies, large agencies, we're the most adept at doing this and producing this document. 
Discovery findings and specification will detail your project from, as I say here, from start to finish and remove any doubts or gray areas. The benefit of that is knowing exactly what it's going to cost, how long it's going to take, and having a clear set of expectations between parties and what it is you will and will not be receiving. That means that at later on you come up with a new idea, you know, we know, this is new and we discuss how we're going to do it. Again, much easier on the high end of the agency spectrum. Ooh, [inaudible 00:17:03] just go to the next one.
Again, a partner versus an order taker and I've been saying this a lot. Order takers: offshore, freelancers, small agencies. Knowledge leaders: boutique, large, niched agencies. They're the ones that are going to give you feedback. Giving feedback as an agency owner is a very risky thing. If you don't have a level of expertise, you're not going to give that feedback. Offshore, freelancers, small agencies, mostly driven by hourly accruals, mostly driven by getting projects out the door. They would rather just get things done and tell you, "Hey, I think you should do it this way."
As I say here, premium teams are going to educate, they're going to consult, they're going to contribute. Niched players, my process is very different from everyone else, you know that from day one where we have an introductory call. And that process will go from there to discovery, delivery of findings and then to a project. There's a very unique process. Most niched teams are going to do that. They might give you a needs assessment. Those are the real, when you go through that process, you will know that you're working with the right team. And like I say here, it's a preview of what it is to work with that team.
And one thing. As you go up the line, and you'll see this with a large agency, even though they have a Biz Def guy, but they might bring in to a sales meeting some technical people, project managers, and you'll absolutely see this with a niche. Experts are going to challenge you, they're going to ask you difficult questions, and they're not being that way to be jerks about it or show what they know, but they're doing it to help you out generally at the end of the day.
Next point. How do you evaluate those niche agencies? Well, first off, they do provide the lowest risk provided you find the one that is the right niche for you. Again, we do custom CMS development. You can vet us instantly by searching almost any term about custom CMS. You're going to see me in the top five or 10 in Google results. The first thing is a niched agency, they might turn you down. And that's a good sign. They might say, "Hey, this isn't really a great. You should go talk to this guy, this guy, this guy," but make a referral. You can evaluate them through the sales process. Again, you should be talking to the highest person. It should be highly consultative.
One thing though about the niched agencies as you evaluate, again, they're going to have the highest rates, quickest turnaround. We do the same project over and over again. That's the expertise. Rate might be high, but again, we're going to work fast. But here's the thing about the niched, everybody now is claiming expertise. You have to look for proof. You have to look for a track record. Again, we work really hard creating content. This webinar, blog posts, ebooks, our social presence, the videos. All that is the consultative sales process, so if someone's claiming expertise but they're not putting themselves out there, that might be a red light.
From there, I'm going to wrap it up, and how'd I do? I did pretty good. 17 minutes. Didn't even have to come up for water yet. First off, understand, every development project there's always going to be a risk. It'll never be 0%, but you can definitely mitigate that risk by knowing what the landscape is in terms of development teams. And actually, I did two points at once. The other thing as I wrap up, I just want to tell you don't be addicted to hourly rates. They're a [inaudible 00:20:14] metric. Hourly rates are not a great way to evaluate who you should work with.
I made another chart really quick just to show that oftentimes, the person with the lowest hourly rate is going to take the most among of time and the person with the highest is going to take the least. So hourly rates are just, it's kind of voodoo economics in a way, to steal a former president's term. It doesn't make any sense. The best agencies on the high end, even the niched, they might even do something, they might price it on a different metric that's not even hourly rates. That makes a whole lot of sense, so you should not be afraid of that. Even if an agency says, "Well, we don't have an hourly rate," which is hard in development and easier in design and marketing, don't be afraid of that because those are the guys that are normally going to price against performance or some other metric of success.
When you look at hourly rates and you're like, "Well, you know, my cousin's friend can do it for 20 bucks an hour," and the agency is 150, what, you're getting into that entire risk factor of dealing with your cousin's friend who's the freelancer and also not knowing his experience level, what's the turnaround time going to be? So we need to get away from this hourly rate metric, and there's a lot of talk in the agency space about this, about different types of pricing. Again, where I play in web development, we're not quite at that point yet because it is still based on, you need some sort of metric. Unfortunately, hours are still pretty relatively dominant, but over time, I think we're going to get out of that, and more over into pricing based on project or value or things such as that.
So with that, I'm done. Again, thanks for joining us. If we get some good feedback from this, we might do more based on blog posts. I think it's a great ways to start the week. We do do pretty much every month, give or take, a longer forum with a Q&A format, so the next one will be July 6th after the holiday, and I'll be talking purely about making the case for custom software. If you read our blog, we talk a lot about how off-the-shelf software has limitations. It takes you 90% of the way, but not 100%, and that void, that's where custom software really fills the gap. 
There's a lot of noise and there's a lot of people out there that are selling enterprise software, off-the-shelf, open-source projects and everyone's like, "Oh, can you do this, this, and that?" But the fact is, the more you try to make it do 100% of what you want, the less stable the software becomes. So we're going to talk all about that. This will only be about an hour. I'll talk a little bit slower, but I hope you can join us. There should be a signup on our website. If it's not, there's going to be a mail coming out in a couple of days. 
Again, resources. I said before, I'll say it again, I'll say it over and over, it's a consultative process that we have here. So check out our blog or videos or ebooks. All this content is always available for you. We blog, I write the post myself at least once a week. It's out on Thursday or Friday. Haven't missed one yet, so definitely have a look. If you do need to contact us at any point, that's our location, northern New Jersey, about 10 miles out of Lower Manhattan. 
Our website again, npgroup.net, and our phone number, 855-NPGROUP. If you want to speak with me, call the number, ask for Pete. I'm generally pretty accessible. Leave a message [inaudible 00:23:23] I'll call you right back. So with that, hey everybody, enjoy your week. Thanks so much for joining me. It was a pleasure having you. If anybody wants the graphics, email me, reach out, and I hope to talk to you soon. Take care.

 

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