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.

The relationship between you, as a service provider, and your subcontractors is beneficial on both sides. The fact that you’re making your clients happy and your subcontractors are getting work is just the tip of the iceberg.

Growing Your Business with a Team

One of the most important lessons you learn as a home business owner is that you can’t grow your business alone. If you’re working alone and you can’t outsource projects to others, than all you have is a job. If you get sick, have an accident or just want to go to Disney World, you’re stuck, because you’re the only one who can run your business.

Additionally, if you’re the only one doing the client work in your business, you’re not going to have enough time to do the marketing necessary to bring in more clients. You need more clients to replace those that move on and to continue to grow.

When you hire a subcontractor, you can hand off portions of your projects, or even the whole project and take a management role, freeing up your time to grow your business, while still maintaining quality and timeliness.

Increasing Profits and Capacity

As you become more comfortable working with subcontractors, you’ll be able to add more people to your team. The more you help your clients, the more services they will hire you for and the more income you’ll be able to bring in.

Not to mention, you won’t be tied down by the number of hours you can work in a week. You may be able to only work 60 hours a week, but if you hire three subcontractors and each of them works 20 hours a week for you, you’ll be able to complete 120 hours of work per week.

Because more than one person is working on the project and each person is focusing on what he/she is good at, the project quality is better and the deadlines are easier to meet.

As your business grows, you can serve clients that you would have had to turn away if you were working by yourself and your subcontractors will have more opportunities to grow their businesses under your tutelage. A win-win for everyone.

As a successful home-based service provider you will soon realize, if you haven’t already, there are not enough hours in the day for all the projects you could be working on. You also may have discovered that you don’t have the skills necessary to complete every task your clients – or potential clients – need.

You may have already turned away clients when your project calendar filled up, sent clients to a colleague or tried to meet their needs with disastrous results. Have no worries, it’s happened to the best of us, but that doesn’t mean you’re stuck with too much work, not enough time. And there is a better way.

1. 1. Subcontractors Can Take the Extra Work

By hiring subcontractors, you can increase your workload exponentially. For example, let’s say you schedule twenty hours of work in one week for two clients. By hiring a subcontractor, you can schedule in two more clients for another twenty hours of work that week.

Because the subcontractor charges less than what the client is paying, you still make a profit on those extra hours, even though you did not do the work yourself. In this situation, you serve as a project manager, quality control officer and client liaison. In other words, you hand out assignments, inspect the work to make sure it’s up to standards and communicate with the client and with the subcontractor.

1. 2. Subcontractors Can Add New Skills

Hiring subcontractors with a complementary skill set can also help you expand your services. For example, if you are a web designer, you could hire a ghost writer to help those same clients add great new content to their websites and blogs in order to make the most out of their online presence. This way, the client can continue to work with you, and you can meet more of the client’s needs. This means more money for you, money for the subcontractor and happier clients.

1. Subcontractors Mean Less Paperwork

Subcontractors also come with a special set of benefits that you wouldn’t get from hiring employees. A subcontractor comes with their own office, their own equipment and their own training. She/he often is running their own service business and therefore has a stake in making a good name for herself – and for you. The subcontractor is also responsible for their own taxes, sets their own hours and is usually self-motivated. You only pay them for the actual work they do and you are also usually not their only client.

On the other hand, an employee needs space in your office and you need to provide them with equipment and training. While there are good employees available, you could easily end up with someone who simply wants a paycheck, regardless of whether or not they worked for it.

You would also need to set hours and pay for the hours they are “on the clock” even if they don’t have a full list of tasks that day. In other words, if there is no work, you still have to pay the employee. And then there is the whole business of withholding taxes and Social Security and other paperwork that goes along with employing someone.

Growing Your Business with Subcontractors

Hiring subcontractors can be a relatively inexpensive way to grow your business quickly and efficiently. It’s a win-win situation for you, the service provider who gets the help they need, and the subcontractor gets the work she/he needs.