Seattle Small Business Blog

You’ve decided to jump in head first and hire a subcontractor. So, you ask a couple of colleagues for recommendations and they suggest Susie Sub. They say Susie is a hard worker and she’ll do a wonderful job for you. She’s very talented.

So you contact Susie Sub and agree upon a rate for your client’s project, sign a contract and you hand over the specifications, expecting Susie to have her work finished by the next week.

The next day, you email Susie for an update, thinking she might have some questions and knowing that you need to be a supportive project manager. By that night though, you have heard nothing back from Susie.

You figure she’s probably working so hard on your project, she’s forgotten all about email. She’ll answer your email the next morning.

Except that’s not what happens. Three days later, you’re frantically trying to contact Susie. You’ve called her, emailed her, done everything short of hop a plane and fly out to her house to make sure she hasn’t been kidnapped.

Another day passes and the client is asking questions, wanting to know how the project is going and asking for a few changes to the original project. You still can’t reach Susie, so you start working on the project yourself. If you work straight through the next day and night, you might be able to meet the deadline.

And then Susie emails. She’s been off at her sister’s house, which has no Internet. She did work on your project though and it’s all complete, right on time. You go through it, and the work is excellent. But you’re so worn out at this point, you almost don’t care.

The moral of this story:
Make sure you give your subcontractor a trial period before you give her any really important client work.

Had you put Susie through her paces first, you’d discovered that she has a habit of not communicating during a project, even though she does the work, does it well, and does it cheerfully.

This situation may or may not be a deal breaker for you – either you can handle Susie’s silence because of her excellent work, or you’re going to be so stressed out by the lack of communication during the project that you can’t possibly work with her.

A trial period can also bring out other issues:

1. Inability to do the requested work.
2. Busting deadlines.
3. Negative attitudes.

Some problems may not arise during the trial, but you can take quick action to address those that do, and possibly save yourself some headaches.

When you do run a trial period, make sure you are paying your subcontractor for her work. You may go ahead and sign a contract, including a provision for the trial period.

You’ll also want to be sure and give your subcontractor constructive feedback after the trial period is over. After all, Susie may have worked for your colleague for years, and the colleague never worries because Susie always comes through. If you ask Susie to be available for communication throughout the project, she may be more than happy to do so.

Hiring subcontractors adds a new dimension to your business. Not only are your clients paying you, but you’re paying your subcontractors. While this does create a bit more work for you – or your bookkeeper – the increase in your productivity will more than pay for the extra work.

In order to make your system to work though, there are a few things you need to keep in mind.

Pay Per Hour or Per Project

First, you need to determine how you’re going to charge for a project. Are you going to charge your client an hourly rate or a per-project rate? You’ll also need to find out if your subcontractor is going to charge you hourly or by the project.

Second, you’ll need to find out how much your subcontractors charge for the work you need them to do. Once you have this information in hand, you can determine how much you charge for the services you provide (project management, client communication, editing). Add these two numbers together, along with any other necessary fees, and you’ll have the amount you need to quote the client (although I recommend adding a small contingency fee as well).

In any case, it’s important that you make sure you charge enough to cover your subcontractor’s fees, the time you have invested in the project and any overhead that might be associated with the project. Once you have your numbers in place, you’ll also need to make sure you sign a contract with the client and with the subcontractor before anyone begins any work. Check with your lawyer to find out what needs to go in the contract.

Sending Payment

Once the project is completed, some subcontractors invoice immediately. Other subcontractors invoice monthly or even weekly. You’ll need to speak with your subcontractor to find out what his/her policies are.

Also, some subcontractors may sell you a set number of hours or tasks per month and you pay a set amount. They work until you have used up your hours. This is a good arrangement if your subcontractor is completing tasks that aren’t directly related to specific clients or projects.

Check with your subcontractor ahead of time about specific payment arrangements. Typically though, with online subcontractors, you’ll be able to pay via Paypal. In some cases, you may be able to pay via credit card, or the subcontractor may accept checks.

With a smaller subcontractor, you will most likely be expected to pay your invoice immediately. Some larger operations though may allow you to pay your invoices 10 to 30 days after receipt. Find out for sure what your subcontractor’s polices are.

What If the Client Doesn’t Pay?

If your subcontractor is charging you for a specific client-related project, and the client doesn’t pay, you may be tempted to ask the subcontractor to wait for her payment.

That said this issue is something that should be covered in your contract with the subcontractor. But even if it’s not, as the project manager, it’s your responsibility to make sure those working under you get paid, even if you don’t. It will also be your responsibility to seek payment from the client.

Take care of your subcontractors, pay them well and make sure you charge your clients enough and your business will be much more successful for it.

A common tip given to service providers who are growing their business is to outsource those things that you don’t like to do – like accounting or cleaning your house.

While that’s good advice, it’s often not going to be what grows your business. Instead, you need to look at hiring people whose skills are the same as yours or complement yours.

Hiring Service Providers Like You

Hiring a bookkeeper will free up your time – but there are still only so many hours in your day and you can only multi-task so much before your work starts to degrade.

Subcontracting out your work to someone who does the same work you do is as close as you’ll get to cloning yourself. You know the work like the back of your hand, so you’ll have a very specific idea of what you want done. This will help with communication and help insure consistent quality for your clients. And it will allow your company to take on more work.

For example, if you are an affiliate manager, you may have enough time to write 3 promotional articles, create two graphics and answer 200 questions in a week. Hire a subcontract who does the same things you do and suddenly, you can write 9 articles, create 6 graphics and assist in answering 20 questions in that week.  At the same time, your subcontractor is answering the rest of the questions and creating articles and graphics as well.

Add another subcontractor to the mix and you can see how much more work you can get done.

Hiring for Complementary Skills

On the other hand, what happens if you hire someone with complementary skills?

For example, if you’re a virtual assistant who specializes in website management, you might hire a subcontractor who is really good at writing. Presto! She writes the content, you add it to the website and your client is tickled pink.

You could even expand your services to email marketing, article marketing and other areas of website management and Internet marketing. Expanding your available skill set allows you to provide more services to your clients, who will then pay more for your work.

Hiring Process

Once you’ve decide what you are looking for in a subcontractor, you’ll need to find the right person. This includes:

1. Asking for recommendations from your colleagues
2. Reviewing portfolios of potential candidates
3. Interviewing subcontractors
4. Asking for and following up with referrals
5. Evaluating how your personality works with the candidate’s
6. Determining the subcontractor’s work ethic

After you’ve decided you want to hire someone, make sure you go through a trial period. Sometimes you don’t know how well someone will work out until you’ve actually worked with them.

Then make sure you both sign a contract. A contract is important because it spells out exactly what is expected from both parties. It also gives a professional and fair way for either party to exit the contract.

You can find several sample contracts online – but always make sure you have an attorney who specializes in contracts review it for you. Following these guidelines will help you make the right choice when hiring a subcontractor.

Communication is the foundation on which any business relationship is built. This is especially true with your subcontractors. Fail to communicate effectively with them and you risk the success of your project, your business and your ability to work with that subcontractor.

More than Just Giving Instructions

Working with subcontractors requires that, not only can you give instructions, but you must also be able to give and take feedback and constructive criticism. It’s the give and take across the spectrum of communication that makes for a successful working relationship.

And that’s not all. As the project manager, you’ll need to be able to communicate with your client as well. You’re the middle man and if you can’t communicate back and forth, then the project is likely to fail.

For example, when you subcontract out a web design project, you will need to make sure you understand your client’s goals and you want to make sure you can communicate this to your subcontractor. In essence, you’ll need to be able to speak your client’s “language” and your subcontractor’s as well.

There are several ways that you can improve your ability to communicate with your subcontractors and your clients.

Clear and Organized

The first thing you want to do is make sure that all communication is clear and organized. While verbal communication may seem easier, written communication is more professional and more easily tracked, especially if you and your subcontractor never meet. Ways to communicate in writing include:

1. Email. While email is the most familiar form of conversing in writing, it’s also one of the most unreliable. If you haven’t already, you’ll realize this the first time a subcontractor fails to complete a project, and states that she couldn’t because you didn’t answer her questions in the email she sent three days ago – but you never received.
2. Project Management Software. One of the best solutions out there is a project management software called Basecamp. This software allows you to brainstorm ideas using an online whiteboard and also allows you to communicate via messages with your subcontractors and your clients. Each party in a particular conversation receives email notifications of updates. Even better, you can login at any time to see if there are updates. And everything is kept on the Basecamp website for you to access anytime, anywhere.

Once you have a system setup for maintaining communication, you’ll need to develop a communication policy for your company.

Staying Professional

When we work closely with people, it’s easy to get frustrated and sometimes even angry. We’re all human and sometimes we don’t think. One way to help you remember what to do in these situations is to have a communications policy. The policy needs to outline appropriate methods of dealing with various situations in which you might be overly emotional.

For example:

• How do you handle a subcontractor disappearing for a few days, right in the middle of a time-sensitive project?

• How do you handle a subcontractor who completely misunderstands the instructions that you gave her, even though they are clearly written in your project management system and she read them and said she understood them?

• How do you handle a subcontractor who wants to talk on the phone, and is very chatty about non-business related topics?

These policies can also apply to how you treat your clients and how you allow your clients and subcontractors to treat you.

Follow Through

Making sure you follow up on your communications is just as important as a batter following through on a swing. If the batter stopped her bat as soon as she hit the ball, the ball would barely pass the batter’s box. (It’s called a bunt!) Likewise, if you don’t follow up on your communications, you often won’t get much effort from your team.

So, give your team instructions and then request feedback. And when your team has followed through on your instructions, give them feedback. If necessary, throw in some constructive criticism. And then follow the process in reverse with your client. Follow through will make or break or relationships and ultimately your business.

You’ve spent your blood, sweat, tears and time growing your fledgling service business into a successful, blossoming company. But you’re at that point where you’re going to have to make a hard decision – either scale back the growth, or bring in more people.

Deciding to go ahead and bring in subcontractors or hanging onto your “baby” for dear life is one of the hardest business decisions you’ll make. After all, you’ve poured yourself into the business and you really don’t want someone else messing it up.

But businesses are like kids. You can’t keep them in high chairs forever. Eventually, they’re going to go to school, get invited over for sleepovers and generally get taken care of by other people.

Likewise, you’ll need to learn to let go and let other people handle some of the tasks in your business, including some of your client work. Of course, that doesn’t mean you just drag over the first subcontractor you see and throw some work at them.

10 Smart Ways to Subcontract

1. Understand that building a subcontractor relationship takes time. You need to get to know your subcontractor and they need to get to know you.Before you even consider hiring someone, ask your colleagues for recommendations.
2. A great recommendation will go a long way towards insuring that you’re hiring someone who is good at what you need them to do.
3. Hire the best subcontractor you can afford, not the cheapest one you can find. You may pay more than you think you can afford, but you’ll bank on a fine reputation instead of throwing money down the drain on a bad situation that could hurt your reputation.
4. Get references. And actually call those references. If the references all give glowing reviews, you’re ready for the next step. If the references are less than glowing, you may want to find out why.
5. Check the potential subcontractor’s portfolio and website. If their own site isn’t up to your standards, chances are, their work won’t be either.
6. Consider a trial project. Contract them to do one small project and see how they handle it. If you ask them to edit a 500 word article that you wrote and they take 3 weeks, you know they’re probably not going to be a good fit. If they return 30 minutes later and have truly made the article better, you’re golden.
7. Make sure you both sign a contract. Include how much they will be paid, allowances for increases in rates later on, a point at which the contract will be re-evaluated and specific instructions on what will happen if either one of you wants out of the contract. You’ll also need to include specific information on what happens if either one of you breaches the contract. You’ll also want to include a confidentiality clause. In any case, make sure you consult an attorney before signing any contract.
8. Communicate effectively. Make sure that you provide clear instructions and that your subcontractor understands what you are wanting. If a mistake does happen or there is a miscommunication, review the situation with your subcontractor so that both of you understand what went wrong.
9. Always review your subcontractor’s work. The only way you’ll be able to ensure your company’s quality is to review the work yourself (unless, of course, you’ve hired someone to serve as a project manager and that person knows exactly what you’re looking for).
10. In the event that a subcontractor doesn’t work out, follow the instructions in the contract for termination. Don’t take it personally, don’t tell them they stink, but do give constructive feedback if they want it. Also, don’t let one bad experience turn you away from subcontracting.

Follow these ten tips and you can grow your business from a solo entrepreneurship to a company run on teamwork that handles several clients and many projects with ease.

Most business owners subscribe to the thought that you “must spend money to make money”. This can be true, but you also must know exactly where that money is going and the results it brings.

Some ways that your business might waste money includes the following:

1. Manage your credit cards – If you have several cards, develop a computer program that will show you the exact balances, due dates, and the interest rate you are paying. Always be aware of other solicitations that save you money and possibly change your balances over to a new company. If you have any employee cards, see if you can set a limit on them. If not with the credit card company, make sure that the employees know their limits. Manage your credit cards wisely and never, ever miss a due date.

2. Develop an annual plan so you know where you will spend money. This helps you in several ways. The business person will be aware of what portion of the profits are going to advertising, towards incentives, towards accounting and other internal expenses, etc.

3. Do not over-purchase any products or services for a business. If you buy in bulk, the money is tied up and a place must be provided to keep the extras. That might be an unnecessary expense.

4. Developing an advertising budget and knowing just what resources to use is key to keeping money under control in a small business. You must advertise, but you also must get value for your money or you will soon be out of business. Keep a record of how much is spent, can you get payment terms, when is the most efficient time to advertise your particular product or service to get the most value for the dollar. Every dollar must be accounted for in advertising because the lifeline of your business depends on new and paying customers. Advertising is the way to get the word out to the community or the Internet.

5. A small business owner will sometimes be under self-induced stress to manage all aspects of the business. Sometimes, leaving the control and decisions to others that are qualified is the best way to manage the business. Releasing control may be hard to do sometimes, but in a lot of businesses, money can be wasted because the owner cannot possibly be as efficient as the person who has studied or is knowledgeable about a particular field. For instance, if a business owner does not know accounting, many mistakes in reporting income and taxes can be made. A qualified accountant can possibly save more than the cost of their services in reduced taxes.

Take a hard look around your business and do not let anything be set in stone if saving money is the goal. Challenge everything that will cost money and see what can be done to change the situation. Any money that is saved is money that can be put back into the business either in profits or in growth.

A business owner wants their business to be successful and will work hard to sustain growth. A business owner wants a way to continue making and growing money from a product or service that is interesting to them. After growing a business and being smart with cash flow, many business owners will sell their businesses only to start another business.

The reason is that business owners are independent types and challenges are rewarding when met and faced. Saving money through every day operations will help the business owner to meet their financial and emotional goals.

Outsourcing is when you hire someone from outside of your business to perform certain necessary tasks.

Different business owners have different reasons for outsourcing their business tasks. It all depends on what they want or need to accomplish, how much time they can personally devote to particular tasks, and how they value their time.

One mistake that many small business owners make is thinking they have to do everything themselves, either for reasons of creative control, or because they think outsourcing is not a justifiable expense.

The truth is, if you can outsource part of your business workload, you will be able to devote more of your time to tasks that hold more value and importance for your business.

In some cases, businesspeople outsource some of their work because they do not have the equipment or resources, or they do not have the expertise to do it themselves. Or they may simply need help through a busy period.

Whatever the reason for outsourcing, if planned with purpose, it can contribute to the productivity and ultimate success of a business.

One advantage of outsourcing is the fact that it is much more efficient than hiring, training and supervising new employees. Simply hire a professional, tell them what needs to be done and let them go to it. A side benefit is you won’t need more office space to accommodate more people. Not only does outsourcing leverage your time, it can also help to leverage your resources.

Additionally, when you outsource some of your workload, you won’t need to worry about additional paperwork involved with hiring an employee, such as tax forms and scheduling. And you won’t have employee costs like taxes, vacation time, workers compensation and so on.

Another advantage is that you won’t need to purchase or lease new equipment or go through the ever-challenging process of learning new software or new skills.

The key benefit to outsourcing is the time it frees up for you to concentrate on more important business-building tasks.

You can focus on your marketing efforts; work on improving your customer service; devote some time to new product development; speed up your delivery system; develop new markets; land some bigger customers and larger orders; expand your services to take on any overflow your competitors can’t handle.

Some small business marketers may look at outsourcing as a burden of expense rather than a benefit. “How can you justify the expense,” they ask, “when sales and income are low?”

The thing is, if sales are low, that is exactly why you need to outsource some of your tasks – so you can devote more time and attention to your marketing and advertising in order to generate more sales, faster.

The key is to have a solid marketing plan. Know what you need to do to achieve your sales and income goals; identify the tasks that are critical for you to pay personal attention to, and determine which tasks can be delegated to an outside service.

Outsourcing is just one of many resources at your disposal. When used wisely, outsourcing can definitely contribute to your business and marketing success.

Whether you own a small or large business, chances are very good that you can benefit from outsourcing some of your business functions to outside vendors. Ideally, you want to be in a position where you are working on your business, rather than in your business.

Running and operating a business positioned for growth requires many different key functions. For starters, you must handle accounting, administration, customer service, as well as sales and marketing. Many new small business owners attempt to tackle all of these functions on their own, and find that they work long hours and can begin to burn out quickly. By outsourcing some of your routine tasks, you can leverage your time to spend on the functions that you do best in order to grow your business.

When trying to determine whether outsourcing will benefit your company, you need to determine how much money your time is worth. A simple way to figure this out is to estimate how much money you would like to make in a year, and divide that into productive work hours. Most of us are only productive about 2-3 hours a day. For example, if you’d like to make $200,000 this year, and you work 3 productive hours each day, 5 days a week, then your time is worth roughly $260 an hour. With this scenario, you could benefit from outsourcing any function that you can pay someone to do for less than $260 an hour.

In order to outsource effectively, you must understand your own business and processes. Take some time to write down job descriptions for different functions, as well as the processes you use in your business to accomplish certain tasks (like how you enter your invoices and receipts, how you generate new leads and clients, etc.). As part of this exercise, include clear expectations of what you hope to accomplish. A clear vision and business plan is key to setting up clear expectations. Once you have written down the job descriptions, you’ll have a better idea of what you would like to outsource first.

There’s no hard and fast rule as to which job functions you should outsource first, but many business owners like to hand off the functions that they enjoy the least. If you really dislike customer service, you may want to find a customer service rep first.

You have many options when looking for companies or services that will handle your outsourcing needs. Check with others in your industry to see who they use to outsource their functions. Many outsourcing firms not only specialize in certain functions (like customer service), but also in certain industries (like real estate). You can use freelancers, virtual assistants, or any number of outsourcing firms.

Many business owners hesitate to outsource some of their functions because they want to have complete control over their business, or they believe that it will be too difficult to train someone to do what they need. If you fall into this category, you may want to try outsourcing some very simple, routine tasks to get started. It will be well worth the effort!

When choosing an outsourcing firm, or freelancer, make sure you set clear expectations up front. Share your vision about how you see that function growing your business, and offer incentives for work well done, or work done under budget, or before a deadline.

In addition, take time to properly document how the work should be performed. This can be done easily with screen capture video software, and/or written processes and procedures.

Taking the time to properly train and motivate your outsourced personnel will benefit your business greatly. By now, you will see that outsourcing some of your business functions will help free up your time to work on your business, rather than in your business.

For many people, working from home in an online “virtual office” can be a tedious chore with many jobs being very technically challenging.

If some jobs are out of your comfort zone why struggle trying to accomplish them when you can outsource the work and better spend your time working on the things which you are most competent at doing. You will also enjoy your work much more.

If your talent is for writing but building websites is an utter mystery find someone to build the sites and you can supply them with the content for the sites or at least source and rewrite plr articles to make them your own. Similarly you can find people to promote and market your web site and probably far more effectively than you ever could yourself.

Cost can be off putting but then how many hours can you waste trying and often failing to get your site up and running correctly. Especially when you want all the extras like videos and pop ups and all the rest. Probably your time is much better spent on producing good quality content and ideas.

The cost does not have to be great though. An advert in your local paper will very likely uncover a teenage genius who is a whiz on computers. They will probably be happy to jump at the chance to earn more than they earn working at the local fast food store. The advantage of using somebody local is that you have easy access to them and the chance of good face to face communication.

There are of course all the online resources with contractors from all over the world looking for work in every aspect of online business. The prices can vary hugely and English may not be their first language but you can generally question their competence and ability to understand English well enough for you to communicate with them. Try to get some testimonials from previous employers and if you do employ them be sure to watch the progress of your project to see that your instructions are adhered to.

A quick Google search should uncover a number of outsourcing companies with very reasonable rates.

Well if nothing else it is an idea worth exploring because so many people get bogged down in all the technology that they do not achieve anything. This is just part of getting yourself organized. Being organized is essential for getting action.