When You Need to Subcontract
Subcontracting can be useful for a freelancer: maybe a client wants a complete website and expects you to handle everything from design to content. If you’re primarily a web designer, you can subcontract the parts of the project dealing with content to a writer. You can wind up with some extra income from the project if you do it right. But how do you know just what is necessary to subcontract? Where do you find a subcontractor? How do you pay him?
Finding a Subcontractor
Most freelancers know a few other freelancers they’re comfortable handing projects off to, but what if all of your connections are booked or above the project’s budget? You may have to go looking for a subcontractor. A good starting point is typically the sites where you go to find work yourself, if you rely on job boards and the like. You’ll need a brief description of the project — think about what you would want to know before submitting samples of your work for a particular project — as well as some basic information, like how much the budget for the project offers.
Once you’ve posted a project on a site or two, you’ll start getting responses. Some will match your needs and some won’t. You’ll likely be able to filter out those responses that definitely won’t work, although narrowing the field to one specific freelancer you want to work with can be much harder. Take the time to ask questions and look at samples. Hopefully, if you knew that you would need to subcontract part of this project, you were able to include enough time to find a subcontractor in your schedule, as well as money to cover the time you’re spending on finding another freelancer.
Paying a Subcontractor
When you’re putting together an estimate for a project that will require you to subcontract certain project elements, it’s important to make sure that there is not only enough room in your budget to pay another freelancer but to cover your time and effort in managing that freelancer’s contributions to the project. You should have at least some profit for agreeing to take on something normally outside of the work you do.
In most subcontracting arrangements, the freelancer that you’ve brought in on the project will send you an invoice for his or her work. You’ll add that amount to the invoice you send to your client. When you receive your payment, you’ll turn around and pay your subcontractor out of the amount you’ve received. This can create a few problems if something goes wrong, unfortunately. Since you’re in the middle, if something happens that leads to a client not paying you, you can still be liable for paying your subcontractor. It’s important to make sure that you’re working with a client you can trust or take steps to protect yourself, such as making sure the initial deposit for a project is enough to cover your subcontractor’s fees.
It’s also useful to keep detailed records for any work that you subcontract. Not only should you ask for itemized invoices from any other freelancer you’re working for, but you also have an obligation to keep an eye on their work to ensure that your client is getting his money’s worth. In the event that something doesn’t work out, having good records can go a long way towards fixing most problems.
Making Sure Subcontracting Is Worth Your While
There are some projects that just have timelines or special requirements that mean one freelancer can’t do it on her own. Subcontracting is one way to get projects finished and turned into the client, but it’s worth taking a good look at the specific situation before subcontracting. Many clients do have resources that allow them to manage projects involving multiple freelancers and it may be better to let your clients do just that. It’s not always worthwhile to add management and subcontracting to your duties when you’re working on a difficult project or with a hard-to-satisfy client. Take a close look at the circumstances and then decide if the additional money you can charge is worth your time.
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I disagree with your choice of the word “can”. You are still liable for paying your subcontractor. S/he works for you, not your client. If your client fails to pay you that is not your subcontractor’s problem.
Good post again here Thursday (great name btw).
I’m going out of town in a week, and thanks to my old friend Murphy’s Law, all of the projects that were up in the air over the last month have suddenly become “urgent!”. I’ve always thought of myself as being practical when it comes to expanding my freelance design business, and it seemed like the perfect time to bring in some subcontractors to help cover the workload before I go.
I have to say, that so far the experience has been terrific! I recommend everyone start finding people you can effectively “outsource” to, EVEN if you don’t NEED it RIGHT NOW.
So far, I’ve managed to find an amazing Web Programmer / Computer Engineer to work with on all of my Web Design projects. Now all I worry about is the design and branding of the site, while my programmer deals with everything “under the hood”. I’ve also found a willing and talented design student from my former design program, to help handle projects that are more technical and less creative. Both have allowed me to focus more on the aspects of the job I truly LOVE – namely: Interacting with my customers and finding creative solutions to their problems.
My only advice for people looking to do the same would be the following:
- Start small. Make sure for your first collaborative task, that it’s a “low-risk” project, so that if something doesn’t quite work out, you haven’t suddenly pissed off your biggest client.
- Communicate. Make sure you have several ways of being in touch with your subcontractors. Phone – mobile – email – IM – gmail chat – skype. The last thing you want is the client saying “where’s our finished product?” and having to scramble to get in touch with them or worse, suddenly not being able to get in touch with them.
- Make sure they’re GOOD. This may seem obvious, but don’t hire just any kid off the street who claims to be a real “Photoshop Expert” and is willing to work for $10/hour. (If i had a nickel for every time i’ve heard that…). Look at samples of their work (and not just that project they spent 7 years working on in college!). Ask them what they like about design? Are they passionate about it? What aspect? What kind of projects do they WANT to work on? Remember, the work they’re doing will have YOUR name on it.
- Non-Compete Agreements & their Niche. Lastly, try and find subcontractors that aren’t exactly in the same “space” as you. My web programmer is not a designer and he doesn’t claim to be. We never step on each other’s toes because we each know our own roles. Same with my design intern. I don’t have to worry that in a year from now they’ll turn around and steal my clients from under me. (If you’re really worried have them sign a standard Non-Compete agreement http://bit.ly/87EZud or http://bit.ly/5zYOLV )
Good luck!
ez
Yep, I agree with David…
There is no silver lining to a non-paying client, or for that matter a sub that fails to deliver, that I can see other than the fact that you will never need to pay for another haircut, cuz you will have ripped all your hair out…
Its a difficult dance to do, the wearing of two hats at once, that of the ‘psuedo-employee’ and the ‘on-the-hook-employer’. One has to walk that tightrope very carefully. As mentioned, keep absolutely detailed records of what you have asked from your sub, and what they have delivered.
As well, two statements that will make you look bad instantly to one or the other side of the fence…
To your client… “Sorry, I cant deliver that milestone today, cuz my subcontractor isnt finished it.”
To your sub… “Sorry, I cant pay you, as my client hasnt paid me yet.”
And keep this in mind , most freelancers cuz that is what your sub is, if they have been doing this a while, know other freelancers, at least digitally. If you trip up, I guarantee that it will spread thru the community like wild fire, making it difficult to get that next sub/freelancer for a large job.
On the other hand, to look at the positive side of things, if you are a great record keeper, and pick and choose your clients/subs very carefully, your workload will be greatly reduced while keeping you in money. Now THATS what we all strive for, right?
I’d be interested to know how many freelancers are actually comfortable working as subcontractors. It’s great for making some quick money, but it also doesn’t always match your focus for career development, and the payment thing can get tricky.
I believe that subcontracting is in direct opposition to the core skills of most freelancers. Freelancers tend to be creative types, not management-heads, and business comes into play strongly with subcontracting.
Here’s the deal – subcontracting usually completely sucks for both parties because it’s a zero sum relationship with little upside for either person.
The freelancer who owns the project has to deal with possible risks of the sub running up a bill without good output, and/or not understanding the deliverable scope and producing less than useful work. Also, he must figure in his own time and attention burden in managing the sub – meaning, communicating with him and correcting his course as needed.
Basically, the freelancer is completely responsible for the work being done. Also, he generally has to fit a a sub into his own billed rate.
I see this kind of relationship as *potentially* profitable to me *only* if I can pay 50% or less in rate for subcontracted work comparable to what I can do myself.
In other words if I charge my client $80/hr, I need to pay a sub no more than $40 an hour AND he has to be as productive as me per hour worked. A less capable person should earn even less. Otherwise, the subcontracting is not worth my while, because then I am working my @$$ off in extra management duties that are not chargeable, and then I am better off either doing the work myself or referring it out.
Of course, this sucks also for the subcontractor, who is working for flunky, insultingly low rates, while the “main” contractor, the freelancer, supposedly is raking in the moola. So the relationship is not only a difficult way for the freelancer to earn extra money but it breeds resentment. The freelancer has extra hassle and the sub is looking for any way out and to find better paying work.
So, I do not see a place for subcontracting for the vast majority of freelancers, simply because our rates are usually not high enough to support a subcontractor and make it worth our while to do so. And, most freelancers lack the business skills to make it succeed.
PS: I want to add that “everyone” expects that you can sub out contracted work for a tiny discount under your own billed rate and do OK. And subcontractors themselves will expect that this “should” be the case.
I am saying that this is a classical naive newbie mistake.
Example: you could pay the subcontractor $5/hr less than you bill for his work.
Well, of course, there’s almost no profit in this.
So would you be happy with, say, earning $10 per hour free and clear that the subcontractor works for you?
That is not nearly enough to compensate for the extra bookkeeping of payments, the new management tasks that result from the relationship, etc.
Most consultants who use subcontractors wind up arriving at the 50% rule that I described above.
And even at that, it’s a much harder way to make your daily bread than simply doing all of the work yourself, or referring the work out.
You should write this up as an article and submit it to FreelanceSwitch; it’s valuable information!
This is good advice. But as you say, if you have a client who refuses to pay, you may still need to pay the subcontractor.
Also, it’s important to make sure you collect money in from the client quickly. There’s nothing worse than having to pay out a lot of subcontractors then waiting for weeks, or longer, to get paid yourself.
Subcontracting works for me. It’s good business.
For example, though I can do photo correction for print, I don’t enjoy it as much as I enjoy typography and layout, writing or photography. Nor is it my strongest suit. So, even though I can do it if I have to, I prefer to subcontract that work out so I can focus on what I like more. Ideally, this is good business, as it leaves me more time to seek more.
I don’t mind being a subcontractor either and am glad to help a peer who wants me to help with a smaller piece of a larger project.
Subcontracting is always a tough call. Since I hold myself accountable for the results of my copywriting projects, I feel compelled to handle all parts of the assignment – copywriting, graphics, even technical details. In this case I must subcontract but hold a strong management role.
In the end, I believe it’s critical for freelancers to hold themselves accountable for the “client’s end result”. This may push your comfort zone but it has worked for me.
I’ve been on both sides of this fence. I write web content. It used to be that when I had a client with no design department, I’d introduce them to a designer. The trouble with that arrangement is that the client still holds you accountable for the designer, and the designer still counts on you to guarantee payment. Add the time for project management, and you’re better off subcontracting. I switched to hiring the designers myself, and it was an improvement.
There are also design firms that hire me to do their content. I like that — no project management and limited client contact for me means that I can do the work faster and charge them less — it’s win-win.
Admittedly, we’re talking here about cases in which subcontractors are doing different work than the people hiring them.Still, I think the key to success is a good working relationship, clear agreements on how (and if) credit is given, and open discussion of fees.
Don,
Good call on the 50% rule. I think it takes quite a bit to make it worth it to subcontract work, and this might be just the rule to figure out when it is and isn’t worth it. Thanks for the tip.
Thanks.
I have no mathematical or analytic basis for this “rule”. It’s purely a gut feel and experience thing. I arrived at it after hiring a sub to do some programming work for my s-corp. And then observing all of the time, care and “feeding” on my part that went into the relationship.
A colleague of mine (in software development) has stated that his ceiling on payment to the sub is more like 30 to 40% of the billed rate. He’s probably closer to the mark than I am.
The reality of this “rule” of mine is that it makes subcontracting appear very “zero sum”. Someone has to work for very cheap in order for me to sub out the work profitably. Or, I have to negotiate a separate, relatively high rate to my own customer for this subcontracted work which I then manage.
Again, the easiest solution is usually to refer the work out. If the client wants me to take responsibility for the entire project and manage it, it will cost them. So there, you’re getting out of carefree freelancing. You’re now a business owner/operator with the accompanying heartburn.
Subcontracting is stressful and more work than it seems like it should be.