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Managing Your Subcontractors

With a few tips from this "sub management" expert, you can create strong relationships that help your company grow.

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Let's say you're setting up a consulting practice orother service business. You realize that from time to time, yourclients will need you to perform services you yourself cannotperform. You don't want to hire employees, because they'retoo expensive. You're left with only one alternative: workingwith subcontractors ("subs" for short) on a job-by-jobbasis.

Pretty straightforward, right? Well, here are some of the thingsthat can (and often do) go wrong:

  • The client doesn't realize the sub is independent of you,then the subcontractor makes a mistake, and the client sues you asthe sub's "employer."
  • Your sub has finished her piece of the job and wants you to payher "net 30," your client is 90 days past due on your(combined) invoice, and there isn't enough money in yourchecking account to pay the sub.
  • You allow the sub to call and meet with the client directly,and all of a sudden, the client is giving new assignments directlyto the sub without giving you a shot at the business.

When working with subs, you're sometimes caught between arock and a hard place. If the sub performs below the client'sexpectations, it reflects badly on your competence (after all, youpicked the sub). On the other hand, if the subcontractor performsabove expectations, the client may fall in love with the sub andyou may lose the client relationship. How to navigate thisminefield?

Someone who's mastered the subtle art of "submanagement" is Lee Esposito of Lee EspositoAssociates, a public relations firm in Columbus, Ohio, thatspecializes in publicity and national media relations. WhileEsposito's firm has two employees, he uses subs (primarilywriters) on many if not most consulting jobs.

Esposito believes a lot of consultants get into trouble by notperforming enough "due diligence" on their subs beforehiring them. In their eagerness to delegate work, he explains,consultants often practice what he calls "dump and run":"They get assigned a project, dump the work on the subs andmove on to the next project, without really knowing if the sub cando the job or not."

So how do you "kick the tires" when dealing with a newsub? At a minimum, Esposito says, you want to see samples of thesub's work and talk with the sub's previous clients.Esposito also believes you should explain the client's projectto the sub in great detail at the outset "to make surethey're following you closely and understand what the clientwants."

The key to developing good relationships with subs, according toEsposito, is to make sure they know that you, not the client, aretheir customer. This means never allowing your subs to meet withyour client unless you yourself are present. Esposito also feelsyou should pay your subs directly within 30 days and not make themwait until your client pays you. While acknowledging that this maycause some financial pain if a client pays you more slowly than youexpected, this is the price you must pay if you insist that substreat you as the customer.

Here are some other sub management techniques Esposito says hasworked for him:

  • Guarantee your subs X amount of work each month from you.(Esposito says, "This makes me more comfortable letting thesub talk directly with my clients.")
  • Have business cards printed up for the sub with your companylogo and a title, such as "of counsel" or"independent representative," that clearly states toclients and others that the sub is not your employee.
  • Make sure the sub plans to stay independent for the long runand isn't just marking time until the economy improves and heor she can get a full-time job.

When dealing with subs, Esposito says it's important toremember your ultimate goal--making the difficult transition from a"practice" to a "business." In a practice,Esposito explains, you're involved in every sales pitch, andthen when you sell a client, you do all the work yourself, whereasin a business, you're managing relationships with clients andoverseeing project teams that can interface with the clients.Esposito feels it's impossible to make this transition withoutdeveloping long-term relationships with subs who can rely on you,not your clients, to provide them with a steady cash flow."Ultimately," says Esposito, "that's the bestway to keep your subs loyal to you. Nobody wants to kill the goosethat's laying golden eggs on a reliable schedule."


Cliff Ennico is host of the PBS TV series MoneyHuntanda leading expert on managing growing companies. His advice forsmall businesses regularly appears on the "Protecting YourBusiness" channel on Small Business Television Network. E-mail him atcennico@legalcareer.com. Thiscolumn is no substitute for legal, tax or financial advice, whichcan be furnished only by a qualified professional licensed in yourstate. Copyright 2003 Clifford R. Ennico. Distributed by CreatorsSyndicate Inc.

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