Scale By Outsourcing to Subcontractors
Outsourcing to Build Your Team
How do you begin to outsource to subcontractors to build a team? Managing any business takes time, focus, hard work, and the ability to manage many things at once. If you have a team (using subcontractors) or hope to add a team there is even more to manage. I am asked frequently about how to build a team or how to manage a team? I am discussing a ‘team’ in terms of outsourcing your team by adding contractors or subcontractors to a business. These are not employees but would receive a 1099 form at the end of the year versus a W2. Building and Managing a virtual team of subcontractors can be challenging, yet also very rewarding.
“…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.”
-Rosalind Resnick in Entrepreneur Magazine
This Article Will Cover
I will cover a number of items in this article including the following:
- Differences between subcontractor vs. building a team
- Summary of a subcontractor
- How to Outsource to Subcontractors
- Summary of a team member
- Subcontractor versus Team Member
- Characteristics to Look for in a Subcontractor
- Characteristics Not Helpful in a Subcontractor
- Team Members = Business Owners
- Steps to Building Your Team
- First Step – Where to Find the Right Subcontractor
- Interviewing a Prospective Subcontractor
Our Team is very diverse but each has their own strength.
One of the first things to note is that there is a difference between hiring a subcontractor once in a while and building a team.
Subcontractor – When we need a person to help with the overflow of work on a short-term basis. If we can bring on a subcontractor it can help with this burden. The other possibility is that you may be asked to provide services for a client that you are not comfortable with or know you cannot provide. This is also a good time to bring on a subcontractor to help on specific short term task that is not your specialty [Usually for someone who does not plan to add on more subcontractors and will more than likely only use them as needed for specific work or overflow.] The work can be sporadic and usually is very temporary.
Summary of a Subcontractor
- Short term
- Overflow work
- Contractor (1099) not an employee
- Services not offered (short term)
- Work assigned sporadically, not given ongoing client tasks
- The owner often serves as the Project manager
- Variety of subcontractors may supply need
Building a Team – when someone intentionally brings on a subcontractor(s) to help with client work that can be longer-term (as long as the client continues) and the person hiring will possibly also use the subcontractors for other work. This is done with a plan and goal in mind, to build the business with the help of subcontractors who will work with their clients on a regular basis.
*DISCLAIMER – PLEASE CHECK THE IRS WEBSITE FOR THE DIFFERENCES BETWEEN EMPLOYEES VS CONTRACTORS (SUBCONTRACTORS) FOR THOSE IN THE U.S. AS THERE ARE SPECIFIC GUIDELINES AND TESTS TO MEET. [IRS GOV]
How to Outsource to Subcontractors
When we discuss outsourcing to subcontractors to build your team, we mean that you hope to continue to use these subcontractors in the future. They are not employees, but will work on your client projects on and off usually. Sometimes switching between projects as well. You want them to be on your team on a regular basis, but not full-time. Because they are not employees you will not provide benefits, nor will you deduct taxes or pay any taxes on their behalf. Taxes are up to the individual to submit as they are considered a business in their own right. Most subcontractors operate as a sole-proprietor.
Summary of a Subcontractor On a Team
- Work with on a regular basis
- Will often switch between tasks or projects
- Enable a company to offer more diversified services to meet client requests
- Provides more consistent help for clients
- Usually, a subcontractor is assigned to work on one client & their tasks or multiple clients on a one project type
- Offers less disruption with less turnover
- Contract basis (1099) – not an employee
Subcontractor vs. Team Member
“Although some aspects of hiring a subcontractor and building a team are similar, the principles and goals behind it are very different.”
When bringing on a subcontractor temporarily to assist with overflow or a project, the business is considering it short term and the subcontractor will not be a part of the company’s daily life. The opposite is true in bringing on or building a team. An outsourced team has high-end skills that companies can count on subcontractors performing for their clients on a regular basis.
“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.”
Although you hope to keep a team member longer, do not confuse them for an employee. Make sure you have a contract that stipulates they are a (sub)contracted worker (or 1099) and that they are not an employee. Be sure your contract lays out that they alone bare the liability for their taxes. Many other parts go into the contract, these are just a few.
“If you begin to treat your subcontractor(s) as an employee the IRS will have something to say about it. They will have you begin to withhold taxes (of course you will have to add in your half of the Social Security for U.S. businesses) as well as provide additional benefits, which can include health insurance, sick pay, vacation pay, and more.”
From this portion forward we will be discussing subcontractors as team members. The following will discuss outsourcing to scale your business by building your team.
Characteristics to Look for in a Subcontractor
It is important when considering someone to add to or begin your team with that you keep a few things in mind, including the type of character you desire to represent your company.
Characteristics NOT Helpful When Building or Managing a Team:
- Defensive manner
- Control freak
- Hovering type
- Inability to trust
- Looks for faults
- Is Not involved in continuing their education
- Does Not see potential in people
- Not an encourager
- Knit picky
Well, you get the idea, right? By showing the opposite of the type of character you probably want on your team, it is easy to recognize the type of characteristics that are more desirable.
Team Members = Business Owners
Steps In Building Your Team
First Step – Where to Find the Right Subcontractor
One of the first steps to building your team, once you are ready, is to find the right subcontractor for your company and/or to add to your existing team. Where can the right person be found? I have listed a few resources to help you with your search.
- FreeU Community – I will tell you, having brought on many subcontractors, as well as, making & learning from my many mistakes, going to a good source to look for the right person to add to your team is one of the biggest challenges. Freelance University’s community is one of the best places to find great freelancing subcontractors! I have a few from this community actively subcontracting on my team today and they are Awesome!
- Referral – The second best place is a personal referral from colleagues in the industry. Although this is probably the BEST at saying how you are doing your job for them, it is where I often receive referrals or submissions from others because a ‘friend’ or ‘colleague’ is trying to get into the industry. Be cautious here especially if they are coming from an employee/employer position to freelancing. This can be a great fit just be sure to interview, check references (if no website is available), and offer personality testing if possible.
- Other Online Communities – There are also many great VA & Freelancing communities with great talent as well.
- Online Directories – There are a number of directories online that have lists of amazing VAs and Freelancers. Some of the online directories include the FreeU in #1, Freelancer,
I do Not request resumes. Keep in mind also that freelancers are business owners themselves and often either do not have a resume or do not want to send one. I do things a little differently.
Second Step – Interviewing a Prospective Subcontractor
Although the subcontractor is not an employee the candidates should be considered carefully and interviewed to make sure the right one is chosen. Personally, I request they send an email with a list of their skills and to mark next to each their level of skill (beginner, intermediate, or expert). I prefer not to sort through a dozen (or more) resumes that are not necessary. If I am requested to send one to a prospective client, I simply send my website with an explanation. You are NOT hiring an employee.
A Few Important Questions
Although I do not request a resume, I do ask some specific questions.
- Ask for References – Always ask for at least 2 to 3 references from the last few years.
- What is your favorite work-related task that you love doing? Something you would not tire of and could do all day long.
- What is your least favorite thing (work-related task) that you would love to never have to do again?
These questions serve to help sort out the candidates that will best fit with you and if you have one, your existing team. References are obvious as you will want to speak with others who have worked with the candidate previously.
The last two questions I ask because we offer a variety of services including, Social Media Management, Email Marketing, SEO Blogging, and Graphic Design. If I need a writer to join the team to produce articles for a new client it does us no good if the subcontractor really dislikes writing. My experience has taught me that she or he will not be content and therefore will not stay long. If on the other hand, I need someone to do email marketing for a new client and the candidate loves setting up processes and doing email marketing than I have a good fit for not only the new client but also our team.
Third Step – Contract
Some contracts are standard, however, when it comes to subcontractors working with your clients there are a few things to be sure have you covered. These amendments will help, but do your own research. I also always recommend a lawyer’s review of your contract or to write the contract (or a template) for you.
- Non-Compete Clause
- Intellectual Properties – For Your Company & Your Client
- Confidentiality Agreement
Remember to include these important pieces of a subcontractor’s contract.
“Subcontractor agreements can prevent your subcontractor from taking a job with one of your clients, as well as protect your business’ intellectual property. Agreement forms also can clarify that your subcontractor is responsible for paying her own taxes — one of the many benefits hiring a subcontractor entails. Have a lawyer or business consultant help you draft up an agreement form.”
–Marnie Kunz on Chron
Fourth Step – New Subcontractor
Try Your First Subcontractor
The Fourth Step is to bring on ONE subcontractor for extra work you need help with soon. Consider the following after a few weeks (or at the end of the project):
- Are you able to hand off the work (without anxiety & worry) after a few weeks of working with your subcontractor?
- Are projects being completed in a timely manner without your reminding them?
- How are you managing your time now? (It will take more time in the beginning than it did before your Subcontractors joined you because it takes time to set up and manage it all and begin your processes.)
- How do you feel when you give projects/work to your subcontractor? Do you have some feelings of relief or the opposite? If the opposite consider why?
- Review the work in your mind, mistakes are normal for everyone, but continuous mistakes should not be (you should not have to remind over and over again).
- Is the work up to the level you desire to represent your company?
- [feel free to add more questions to help you consider and review how it is going on a regular basis]
Systems – Project Management
I could probably write a book about setting up and managing remote teams as there are so many aspects to consider (as well as mistakes I made along the way). One other important thing I must leave you with is one tool that is a must (I’m not suggesting a specific brand). Having a Project Management System in place to help you and your team is essential. You must find a system that will work as you work. One that you do not need extensive training but rather one that is easy for you to use and understand with your team.
QUESTIONS For You to Answer
What Is Your Best Tip Working with Subcontractors or Building a Team (if you have one)?
What is One Question You Have That Is Not Answered In This Article?
Thank you for stopping by again (or for the first time). I really do appreciate it. If this article helped you or you think it can help others, please share it. Also, share your thoughts and other topics that you would like to have answered. I love hearing from you.