Where to find high quality (affordable) web designers?
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This is so true and what makes this designer recruitment process even harder. Finding that balance and even someone that is near my area that is good.
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I have had some experience doing this, like when shooting a video, I find an intern at a local TV station who has access to nice equipment and have them shoot some video for me, it worked out great!
I like the reminder!
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Email sent

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Very good points, I will take everything you said into consideration when going into this web development project.
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Any insight on the design contests? They seem interesting.
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Probably best to say where you are based, then get personal recommendations from that area and meet the designer in person.
I can give you great designers in London and I know Luke Jones is a great UK based designer and also contributes to SEOmoz a lot, so maybe get hold of him via DM www.seomoz.org/users/profile/139920
You could try here as well http://www.seomoz.org/marketplace/resumes/service/2 <- people who have tagged themselves with design (altho its a bit spammy)
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I've always had a great experience with 99designs but you want to make sure you give a lot of requirements and inspiration if you want to get exactly what your looking for. I've only used them for logo work though so i can't give much feedback for other types of projects. What are your price points?
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Around $500 for now. The project I am working on is a family one so I didn't charge them nearly as much as I normally would.
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I think it's about what you want to get and for how much.
It all starts from there.
For example:
budged : 1k - for a 8-10 page website with no complex features you should be able to find good designers.
budged : 300 - for a 8-10 page website with no complex features you should be able to find poor designers that could still do the job.
It's also about luck to find a quality and reliable designer. (depends on background, location, etc)
Hope it helps.
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Spec work is terrible and undervalues the industry. I say you get what you pay for. http://www.no-spec.com/