Subcontracting is a lucrative opportunity to scale your business up without incurring the overheads associated with it. A freelancer who executes all projects by herself may only be able to take on fifty or sixty hours of work each week.
On the other hand, subcontracting these projects to other third party vendors can help her execute a larger number of projects. So while the margins in each of these projects may go down, it is possible to make this up with higher volumes.
But subcontracting can be tricky business. Clients work with freelancers who they trust and can rely upon to get work done. In a subcontracting setup, you may be the middleman between the client and a third party vendor and your reputation depends on how reliable and worthy your vendors are.
Pick a vendor who is better than you
Classic economics theories suggest that the quality of a product or service being offered is directly proportional to its price. Outsourcing your projects to a third party vendor (whose prices are typically lower than yours) leaves you with two choices — you may either have to lower your quality while keeping your charges fixed, or you have to increase your prices to sustain the same quality of service.
Freelancers seeking to scale their business up often tend to pick the first option. This is never a good idea since clients do not tend to stick around with a service provider who delivers low quality work. This brings down customer satisfaction and loyalty which is not an encouraging sign for a business looking to expand.
The better alternative is to hire a vendor whose quality of service is better than what you can provide. This might require you to charge a higher fee for your service. While it is challenge to acquire clients at a higher price, this is a better long-term strategy. Clients who can afford to pay more tend to be less sensitive to price increases. Also, a higher quality of work contributes to higher customer loyalty and word of mouth referrals.
In essence, the returns from hiring a high quality subcontractor are always better than what you get by lowering your quality.
Get your agreement in writing
There are dozens of ways a subcontracting relationship can go wrong. At a basic level, your vendor may fail to keep up with your client deadlines, or may not deliver you a product that is in line with the requested specifications.
But apart from these issues, it is also possible for your vendor to go behind your back and reach out to your client for their projects. This can not only be a serious breach of trust, but can also jeopardize your relationship with your client. To avoid these scenarios, it is always a good idea to get all your subcontracting requirements in writing.
Follow up regularly
As a freelancer, your reputation drives your business. A failure on the part of your subcontracting vendor is, in essence, a failure of your own business. Regular follow ups are absolutely important to make sure that your project is on track.
As a general rule, you must follow up with your vendor three times as many times as your client follows up with you. For instance, if you have a bimonthly call with your client regarding your projects, you must seek an update from your vendor at least once every five days.
Subcontracting can help you scale your operations. But it also brings with it an increase in the number of risky partnerships and administrative tasks on your side. While this can be intimidating at first, it is a rite of passage that every business owner must go through to grow their business.
Hiring diligent subcontractors and staying on top of things can go a long way in establishing yourself as a successful entrepreneur.