Growth, Scaling, Outsourcing, and Employees are terms you recognize when building your business. You may not understand them all, but they are recognizable terms. I approach growth and scaling differently. My growth definition (based on my 16 years in the online service industry) is an entrepreneur who does this through hard work, attracting the maximum number of clients you (solopreneur) can work with by yourself. Scaling, however, is a strategic strategy to grow your business utilizing the skills of subcontractors alongside your own. Let’s discuss starting your virtual team by using subcontractors.
Outsourcing or Employees?
First, what is the difference between using outsourced subcontractors versus employees?
Employee – “a person employed for wages or salary, especially at nonexecutive level.” Oxford Languages
“Employee – a person working for another person or business for pay.” Dictionary.com
Outsourced Subcontractor = “Subcontracting involves outsourcing specific tasks, projects, or functions to external vendors or subcontractors, typically to leverage specialized skills, resources, or capacity not available internally.”
Speed Commerce
“Subcontracting is a process which involves a company hiring another individual or firm to complete a specialised task or function that the internal team is not equipped to perform. It does not involve allocating out entire departments or jobs on a permanent basis. It is just a contractual agreement between the two parties for a limited time period….
byjuy’s
“Outsourcing is the practice of hiring a party outside a company to perform services or create goods. In some cases, these were traditionally performed in-house by the company’s own employees and staff. Outsourcing is a practice usually undertaken by companies as a cost-cutting measure or a strategic management tool.”
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 frequently asked 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.”
This Article Will Cover
In this two-part article, we will cover the multiple pieces that go into building your subcontracted team :
- How to Outsource to Subcontractors
- Differences between subcontractor vs building a team
- Summary of a Subcontractor
- Summary of a team member
- Characteristics not helpful in a subcontractor
- Characteristics to Look for 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 its strengths. 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.
Differences
Subcontractor (sub/subs) – 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 a specific short-term task that is not your specialty [usually for someone who does not plan to add on more subs 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
- Project-based
- 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
- A variety of subcontractors may supply the 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 regularly. This is also done with a good contract listing the scope of work in detail.
How to Outsource to Subcontractors
When we discuss outsourcing to subcontractors to build your team, we mean that you wish 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. The reason is that they are not employees. You will not provide benefits, nor will you deduct taxes or 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 sole proprietors.
Summary of a Subcontractor On a Team
Subcontractors working on a team will share many of these characteristics.
- Work with you regularly
- Wil often switches between tasks, projects, or clients
- Enable a company to offer more diversified services to meet client’s requests
- Provides more consistent help for clients
- Usually, a subcontractor is assigned to work on one client and their tasks or multiple clients on one category or project type (ex. social media manager for all clients or the email marketing specialist on the team for clients)
- Offers less disruption for clients and less turnover for you
- Contracted 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.”
-Tammy
When bringing on a sub temporarily to assist with overflow or a project, the business is considering it short term and the sub will not be a part of the company’s daily life. The opposite is true in bringing on a sub as a team member or when building a team. An outsourced team has high-end skills that companies can count on the sub-performing for their clients regularly.
“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 want to keep a team member for long periods to provide services for your clients, do not confuse them with employees. Make sure you have a good contract that stipulates they are a (sub)contracted worker (or 1099) and they are not an employee. It should also lay out that they are the responsible ones for their tax liability. Many other parts should go into a contract, but these are a few. *It is always good practice to consult a lawyer and accountant when starting or making changes to your business.
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. Always consult the IRS website (irs.gov) for all the regulations regarding subs.
From this portion forward we will be discussing subs as team members. The following will discuss outsourcing to scale your business by building your team.
Characteristics NOT 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 Adding a Subcontractor
- Anger Easily
- Control Freak – organization is preferred but to the point of a control freak (it does not help anyone if you are a control freak or your subcontractor is).
- Defensive manner
- Does not see potential in people
- Dishonest
- Knit picky
- Hovering type
- Inability to trust
- Judgemental
- Cannot view a difficult time in a positive way
- Is not involved in continuing their education/skills
I think you get the idea here. By showing the opposite of the type of character you probably want on your team, it is easy to recognize and see the good qualities that are more desirable when hiring a subcontractor.
Team Members = Business Owners
Remember that they own a business as well and if you are not careful this will become a very temporary situation. Numerous virtual professionals do not want to be bothered with marketing, social media, and other aspects in running a business. They tend to make great subcontractors as they should stay longer with you, as long as you treat them kindly and pay them fairly.
“By respecting your team members and acknowledging that they are a business owner as well, will help your relationship get off on the right foot.”
tammy (fearless business boss)
Characteristics to Look for in a Subcontractor
As we discussed a person’s characteristics you would not want a team member to possess so you can guess many of the good character traits you do want based on the negative ones.
Good Character Traits a Subcontracted Team Member Should Possess:
- Good Contenance
- Honest
- Able to follow directions well
- Easily communicates with understandable information
- Able to keep a schedule and deadline
- Works independently
- Sees potential in people
- Quick replies
- Feel you can trust them
- Non Judgemental
- Has a Positive nature
- Is taking continuing education/skills courses
In part two of this article, we discuss we will continue discussing scaling with subcontractors and team members = business owners, steps to building your team, first step – where to find the right subcontractor, and interviewing a prospective subcontractor.
Final Thoughts
There is so much that goes into building your subcontracted team it is difficult to include everything. I suggest having someone who has been there and done it help you guide you along the way. I have built two agencies with subcontracted team members successfully. If I can be of assistance set up your free coaching session below.
Thanks again for reading. Feel free to tell us what questions are on your mind about growing your business.
