Hiring subcontractors adds a new dimension to your business. Not only are your clients paying you, but you’re paying your subcontractors. While this does create a bit more work for you – or your bookkeeper – the increase in your productivity will more than pay for the extra work.
In order to make your system to work though, there are a few things you need to keep in mind.
Pay Per Hour or Per Project
First, you need to determine how you’re going to charge for a project. Are you going to charge your client an hourly rate or a per-project rate? You’ll also need to find out if your subcontractor is going to charge you hourly or by the project.
Second, you’ll need to find out how much your subcontractors charge for the work you need them to do. Once you have this information in hand, you can determine how much you charge for the services you provide (project management, client communication, editing). Add these two numbers together, along with any other necessary fees, and you’ll have the amount you need to quote the client (although I recommend adding a small contingency fee as well).
In any case, it’s important that you make sure you charge enough to cover your subcontractor’s fees, the time you have invested in the project and any overhead that might be associated with the project. Once you have your numbers in place, you’ll also need to make sure you sign a contract with the client and with the subcontractor before anyone begins any work. Check with your lawyer to find out what needs to go in the contract.
Once the project is completed, some subcontractors invoice immediately. Other subcontractors invoice monthly or even weekly. You’ll need to speak with your subcontractor to find out what his/her policies are.
Also, some subcontractors may sell you a set number of hours or tasks per month and you pay a set amount. They work until you have used up your hours. This is a good arrangement if your subcontractor is completing tasks that aren’t directly related to specific clients or projects.
Check with your subcontractor ahead of time about specific payment arrangements. Typically though, with online subcontractors, you’ll be able to pay via Paypal. In some cases, you may be able to pay via credit card, or the subcontractor may accept checks.
With a smaller subcontractor, you will most likely be expected to pay your invoice immediately. Some larger operations though may allow you to pay your invoices 10 to 30 days after receipt. Find out for sure what your subcontractor’s polices are.
What If the Client Doesn’t Pay?
If your subcontractor is charging you for a specific client-related project, and the client doesn’t pay, you may be tempted to ask the subcontractor to wait for her payment.
That said this issue is something that should be covered in your contract with the subcontractor. But even if it’s not, as the project manager, it’s your responsibility to make sure those working under you get paid, even if you don’t. It will also be your responsibility to seek payment from the client.
Take care of your subcontractors, pay them well and make sure you charge your clients enough and your business will be much more successful for it.