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I think a mixture of both
is the best. Sometimes it pays to let the client know that you are over your head. Honesty in the matter will improve your reputation with the client. Also, if the client sees you sub-contracting out the work when you are the one who is supposing to be doing the work, they may conclude that you are trying to sham them. However, if you let them know why you are bringing in the sub-contractor then they are more likely to contract with you again since they know that if the project covers areas out of your expertise, you will find someone who can handle those areas.