Use Subcontractors to Build Your Business Create a scalable business without additional overhead by hiring subcontractors to handle your extra work.
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When New York City public relations consultant Nancy Tamosaitis wanted to pitch Yosha! Enterprises' Momints to the beauty and lifestyle press, she knew she needed to bring in reinforcements. Through a colleague's referral, Tamosaitis found Carolyn Marquez, a PR professional with a database full of contacts in the fashion and lifestyle media. Armed with a campaign showcasing Momints as the "caviar of mints" and dozens of mint-filled containers designed to look like Chinese take-out boxes, Marquez marched off to call on editors nationwide. The result: an award-winning PR campaign that got their client placement in W Magazine and on The Today Show."Often a client wants a PR professional with a particular background," Tamosaitis says. "When this occurs, we seek talented public relations professionals who meet the criteria the client demands."
Like Tamosaitis' Vorticom public relations and marketing agency, many small businesses are subcontracting work to individual service providers and other small firms in order to leverage their in-house capabilities without adding extra overhead. In some cases, the firms are looking to bring in professionals with additional expertise; in others, the firms need a skilled pair of hands to help them keep up with seasonal demand. For some companies, hiring subcontractors can be a stop-gap measure to handle big projects or get through busy periods; for others, it's a long-term strategy designed to create a scalable organization at minimal cost.
This year, Brad Taylor, a Springfield, New Jersey, CPA, whose one-man business provides tax, accounting, bookkeeping, payroll and consulting services to his clients, hired a part-time accountant to help him shoulder the load during tax time.
"[Subcontracting] frees up my time to concentrate on other projects and to bill out more hours," Taylor says. "The bad news is that I need to spend time managing, monitoring and reviewing another person's work."
Of course, subcontracting isn't for everyone. Unlike outsourcing and off-shoring, which typically make headlines when big corporations shift manufacturing or back-office operations overseas to reduce costs, subcontracting is more common among small professional services firms such as public relations and advertising agencies, accounting firms, interior design firms and consulting practices. Typically, the owner or principal of the business meets with the client to develop a solution to the client's problem, recommends a plan of action and estimates the cost of the job. The subcontractor generally handles the day-to-day work of the engagement, whether that means writing press releases, coding HTML, drafting blueprints or preparing tax returns. The business owner typically oversees the work while it's in process, checks it for quality and accuracy when it's completed, and then presents it to the client. The business owner is also usually responsible for collecting the fee from the client and disbursing payment to the contractors who worked on the job.
If you think subcontracting might be the answer to your "work overload" woes, here's a five-step primer for using subcontracting to grow your business and sidestep the pitfalls along the way:
1. Find the Best People for the Job
When your phone is ringing off the hook and all your clients want their projects done now, it's tempting to reach out to just about anyone who's willing to help you. But a snap decision now could cost you later--both in dollars lost and a smear on your company's reputation. The best kind of subcontractor is someone you already know--a co-worker from your old job, a consultant who worked with you on a client's project or a classmate from college or grad school. If none of these people are available, your next best option is a referral--someone who comes recommended by a co-worker, colleague or college buddy.
If you need to go outside that circle, the internet offers a wealth of resources for finding consultants and service providers with the skills and experience you need (see the "Hiring Resources" section at the end of this article for specifics). But before you hire anyone to help you with your client's project, be sure to check their references and, if necessary, test them on their technical skills and know-how. It's also a good idea to try out any subcontractors you want to use on a small project before assigning them something bigger.
"We've worked hard to create a company that counts client referrals as its number one way of generating new business," says Tamosaitis, the New York City PR consultant. "Because every action implemented by our contracted professionals represents our company, we aim to ensure that the professionals we work with are truly outstanding."
2. Put the Contract in Writing
While many subcontractor relationships begin with a handshake, it's important to put each specific project in writing before you get too far down the road. One reason is obvious: taxes. Unless you're spoiling for a fight with the IRS, you need to specify in writing that your subcontractors (whether they're individuals or other businesses) aren't employees and that they're responsible for paying their own taxes and benefits. (For more information about the differences between employees and independent contractors, check out the IRS website at here .)
You'll also need to spell out the subcontractor's responsibilities, payment rate (project or hourly), and deadlines. Your agreement letter should also contain a provision allowing your company or the contractor to terminate the contract upon giving a certain amount of notice--30 days, for example. If the contactor doesn't carry his or her own liability insurance, you should call your own insurance company to see if he or she can be added to your policy.
3. Take Charge of Quality Control
While it's tempting to think that you can bring in a project, hand it over to a contractor and collect your check, subcontracting is rarely that easy. Any client who hires your company is going to expect you to stand behind your work--and that means putting a quality control process in place to make sure the work is done accurately and completely.
At Axxess Business Centers, for example, I work with several business writers to subcontract the writing and financial modeling of our clients' business plans. After I meet with the client to refine the company's business model and strategy, my senior business plan writer, Richard Wooley, and I interview the client to gather the information we're going to need to develop the plan. Over the next four to six weeks, Richard creates a series of spreadsheets containing the business assumptions and financial projections and works closely with the client to make sure the plan reflects the strategy that we put in place. If Richard has more work than he can handle, I sometimes bring in other business plan writers as well. As the consultant and owner of the firm, I supervise Richard's work and review the spreadsheets with him while the plan is in process. Once the plan's finished, I review it, edit it and discuss it with the client. While no plan is perfect, Richard and I believe this type of collaboration produces high-quality plans at an affordable price.
4. Be Honest With Your Clients
At Axxess Business Centers, I've always been upfront about introducing Richard to clients and letting them know that he's a subcontractor who runs his own small-business consulting firm, too. Other firms handle things differently. Saul Benton, a partner at Agile Outsourced Solutions, a New York City-based software development firm that also acts as a virtual CTO for small to midsize businesses, subcontracts programming work to developers as far afield as California, Israel and India. While the firm's partners meet with clients here in the United States, the clients rarely meet the developers who are coding their software thousands of miles away. As long as the software works and the project gets done in time, Benton says, his clients don't have a problem.
"It's a lot of hours in a day, and I rely heavily on the project managers who deal with our team leaders," says Benton, who divides his time between New York City and Israel and often works into the wee hours of the morning to communicate with developers in different time zones. "You have a lot of balls in the air, and you need to make sure that nothing hits the floor."
5. Build a Team You Can Count On
Once you find a group of subcontractors who do good work, meet your deadlines and make themselves available to you on a regular basis, do everything you can to keep them happy. While online classifieds sites like craigslist make it easy to bid out projects at the lowest price, it's usually worth paying a little more to build a long-term relationship with a subcontractor who knows what you and your clients are looking for. Hiring an untested contractor who drops the ball could cost you far more in the long run. As Agile's Benton says, "Our business is like running a restaurant. You're only as good as your last meal."
Of course, subcontracting can only take your business so far. As your business begins to grow, you may need to take on partners to share the senior-level consulting and business development work that only someone at your own level can do. You may also need to hire full-time employees to service your clients' needs and provide the level of quality they expect. That's why Agile Outsourced Solutions employs four full-time developers in Israel in addition to its many subcontractors in other parts of the world.
But, for other firms, the trade-offs of adding overhead and management are just not worth the risk. "We feel it's crucial to maintain measured growth," Tamosaitis says. "We'd rather pare down on clients than hire people who don't have our work ethic, drive and talent."
Looking for subcontractors in all the wrong places? Check out these web resources to point you in the right direction:
- craigslist . One of the net's most popular classifieds sites, craigslist has become a magnet for bringing employers and job seekers together. The site boasts more than 6 million classified ads and attracts 10 million users a month. Craigslist charges $75 per posting to list a job ad in San Francisco and $25 per posting in New York City and Los Angeles. All other cities are free.
- Indeed . Positioning itself as a "search engine for jobs," Indeed indexes millions of job listings from online job boards, newspapers, trade associations and corporate career pages and makes them available in a keyword-searchable format. Employers can include their own listings on Indeed at no charge.
- LinkedIn . One of the leading "social networking" sites, LinkedIn offers employers the chance to recruit from a database of more than 4 million professionals and to check references with friends and colleagues they already know. Prices start at $95 for a 30-day posting. Volume discounts apply.