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Something that I think will be often repeated throughout this challenge is the many advantages sharing will give you. By building up a small audience I had developers who were eager to help, which made it so I didn't have to use Elance or a similar site.

So, whether you are looking to hire a developer or not, I want you to remember this:

Start teaching and sharing as soon as possible. It will only make your life easier later on.

I can't recommend this strategy enough.

I run a weekly (free) newsletter, and spend a lot of time putting together the content, getting it proofread (something I suck at), etc.

But when I need help with something, I have a legion of people — many of which I consider friends — who tell me what I did wrong, offer to help with SEO questions (thanks, Charlie!), and provide honest feedback, often with purchases, for the products I work on.

Give away what you're good at for free, build an audience, deliver lots of value and the benefits will pour in.

What have you spent money on so far? 500 bucks out the door before development starts seems pretty large, unless I'm missing some consulting time, or tools?
I paid that to the developer for him to get started. :)
I wouldn't be surprised to see some up front cost to a developer as a deposit. I always collect them, especially if I haven't worked with the client before.
I'm happy that Nathan is sharing his experience here. It's an interesting project.

My development advice would be to get buildable, deployable (and deployed!) copies of the app early. A new developer's skill often peters out around the edges of the process, so working through those gotchas and hiccups early will pay off when it comes time to launch.