Subbing out dev work...

[spacebass5000]

So my friend and I are running an outsourcing business. We're basically offering up comprehensive IT services to small companies in the area. Anything from networking to web-dev and in-between. We can pretty much handle anything (within reason) that comes our way. Unfortunately, we don't have the time or employee resources to handle everything that gets thrown at us. Part of our business model is outsourcing our outsourcing (sub-contracting).

My question(s) to you is...

How do I go about subbing out work with other IT professionals? More specific, how do I handle the details:

1. How much should I go about paying the contractor? (what are some current standards?)
2. Do I hide the contractor from my client?
3. How do I keep my customer from bypassing my company and going straight to my contractor the next time around?
4. How do I find reputable contractors?
5. Do I need contracts for my clients and contractors or would one usually do business by word of mouth and a handshake?
6. More shall spew forth I am sure...

I'm primarily concerned with outsourcing web-dev and custom applications. It is something I can do, but don't have the time or motivation to pursue yet I would still like to offer this service to my customers.

Any insight you have into this sort of thing would be GREATLY appreciated.

 

[myCMDB]

For custom software development we refer our customers to a service called RentACoder.com

It allows them to put a development request in and collects different quotes. They can also view the coder's history, ratings ....

We offer a hosted service to track network equipment and we do not want to be in the middle of any custom software development. In your case you may want to be the middle man who makes sure that the requirements are clearly specified to protect your client.

Jim Davis
myCMDB.com
Network Inventory & Configuration Management

 

[Rich13]

There is no one-size-fits-all answer to your questions, but here are some things to consider:

1. How much to pay your sub?
**The rule of thumb I have always followed is to make at least a 20% margin on everything sub-contracted.

2. Do I hide the contractor from my client?
** That depends on the circumstances (is the sub doing a small part of the work or the lion's share? would your client end up wondering why they hired you?).

3. How do I keep my customer from bypassing my company and going straight to my contractor the next time around?
** You should have a sub-contract with your agent. In that agreement, you can have the sub-contractor agree not to deal directly with your client (or include a provision that says you get a % of anything your sub earns from that client in the future). Ideally, the contract with your sub will mirror the relevant provisions from your client agreement. That cuts down on misinterpretations.

4. How do I find reputable contractors?
** Not my field, but whoever you consider, get references.

5. Do I need contracts for my clients and contractors or would one usually do business by word of mouth and a handshake?
** It depends on the nature of the work, the $$ involved, and the likelihood of future problems. If you are concerned that your client may hit you up later for additional work or blame you for a problem, you're better off with a written contract that defines your rights.

6. More shall spew forth I am sure...
** That's what we are here for.

Rich
rckatz_usa@comcast.net

 

[spacebass5000]

I like the way you think.

Thanks for the replies btw. Much appreciated...

So I assume that I need to start talking with a lawyer to write up some contracts.

What type of lawyer should I look for?

Do I create a few contracts for anticipated jobs? Take em as they come?

Know of any good books on this topic?

Thanks again btw. It seems as if I will lurk about this section of tt's for a while. Looks like some good reading.

 

[spacebass5000]

If you are serious about your business, you should consider consulting with a business lawyer who will (i) help set up the right standard contract for you, (ii) counsel you on issues that you should expect to encounter, and (iii) counsel you on how to overcome them (including sample replacement language). A couple of hours should do it.

This upfront investment could save you a lot of heartache in the future.

Rich

booyakashaw...

 

[mmorancbt]

I subbed contractors for years. I find most of mine through direct referrals and people I have worked with over the years. Some I met at user group's meetings, others along the way.

As far as pay, if you want people who are thinkers and self-sufficient, you will pay more and it is likely will have smaller margins but... you don't have to baby-sit.

ContractEdge.com has several standard contracts - you purchase their software, to handle subbing and other situations. My publisher and I partnered with them for a sample contract in my book's consulting chapter. They seemed to be the most put together that I found.

As far as contracts with your clients, I would have something in place. However, I have operated many, many, many times on a handshake and a verbal agreement and in most cases have no problems. I am not against due diligence but I also want to work for clients who I respect and who seem to run a growing and profitable operation.

To that end, I start all projects (virtually 100% of them) with a "Work Initiation Payment." I also setup Net 10 terms. Even large companies will do this if you have made the case that you are "qualitatively superior" in your service or the product you produce. In fact, most of my personal clients receive my bill on Monday and cut me a check on Thursday.

When I start with them, I have a W-9 filled out, I provide a detailed billing report that accompanies my invoice, and I explain that I am a small shop and cannot "fund their business" through 30 day terms and still maintain a preferred rate for the company.

If the work is less than 1 month, I bill 50% of estimated project work up front. If it is longer than a month worth of work, I do 30% of the first month's estimated billables and then I invoice weekly.

This does a couple of things for me. One, it makes cash-flow easier for me - which is worth its weight in gold. Also, I can negotiate lower rates with my subs if I pay them very quickly (within a week). My subs have to provide me a time-detail every week to be paid - no time detail, no payment because I cannot bill.

Once again, client selection is nearly as important as contractor selection. A bad client takes energy and effort and even it they provide lots of work, you are better going out and finding less stressful clients to make up the income. You will find that you are much happier this way.

You can certainly get a lawyer to look over your contracts but I would be more inclined to say that a good bookkeeper is more important initially.

If you have an extremely large contract coming up, then you can retain an attorney. But this is largely a personal comfort level type of decision.

Matthew Moran

http://www.cbtoolkit.com

 

[spacebass5000]

good stuff, I just may have to take a looksee at your book

I also setup Net 10 terms.

I googled this "net 10" you speak of. No luck in finding anything out about it. Could you elaborate?

Thanks for your help!!!!

 

[lgarner]

The "terms" is the time in which payment is due:

Net 10 - payment is due within 10 days receipt of invoice.
Net 30 - payment is due within 30 days....
1%-10 Net 30 - payment is due in 30 days, but client can take a 1% discount if it's paid in 10.

etc.

 

[mmorancbt]

There is a book, "The Entrepreneur Magazine Small Business Advisor" - that covers some of those basic business terms, financial/accounting and even marketing information. I know there are others but I found this one helpful several years ago.

I have no idea whether it is updated yearly - or even if it is still in print but I have seen it at the library from time to time.

Invoice/billing terms are basically the agreed to timeframe for you to receive payment. See the post above mine.

I hope this information is helpful.

Matthew Moran

http://www.cbtoolkit.com

 

[spacebass5000]

Hmmmmmm... I've been reading Entrepreneur's "Start Your Own Business". I bet that term is in there among others. Prolly in one of the chapters I skipped. I'm currently reading about 3-5 books at once. There seem to be so many things I need/want to look into.

Here is an off the topic question for you...

Do you guys read a lot?

If so, do you ever get to those NON-business/technical books that you've always wanted to read?

I REALLY want to read some of Anne Rice's stuff. I wonder if I'll ever do it...

Thx guys, I'm gonna lurk for a while. Seems like some good people in here...

 

[spacebass5000]

to add someone's 2 cents from another forum:

1) Depends on experience. Usually when it comes to salary, the man (you) will offer something low, you'll (web dev) ask for something high, and hopefully the two will find a middle ground, no?

2) Preferably. But that's more work on your side. You or whomever essentially becomes the project manager, takes all the input from the customer, documents it into some Functional Business Requirements document or something or other, and the web dev works from that document and bugs the project manager whenever they need more input. Otherwise your web dev is going to be doing project manager work (meaning they have to talk directly to the customer).

From my personal experience, as a programmer, if you're intending to hire me and want me to act like a project manager as well as having code to write, and I wasn't told this during the hiring process, I would immediately become frustrated with my new job.

3) That could be easily something thrown into the contract you make with the web dev (as Sarca said, you NEED a contract. When you say 'word of mouth and handshake', I think you mean 'under the table and not paying taxes', which might even get your company in trouble down the line). It could even be something thrown into the contract with the customer as well (probably too late for this on your current project). NDA's/contracts I've signed in the past typically have a clause in there to avoid this 'poaching'

4) Word of mouth/friends. Or find that right resume/right interviewee, and checking references wouldn't hurt

5) See above

I'll subscribe to this thread, let me know how it turns out so I can steal your business plan at some point in the future


Skyline (Grams Bear)

 

[mmorancbt]

I read a lot...

Anne Rice, Stephen King, lite poetry, James Patterson, Siddons, some chick lit that my wife is reading (good for conversation), just read a young adult book, Surviving the Applewhites - about a home-schooling family that takes in a delinquent, etc.

I just picked up Eats, Shoots and Leaves - a book on punctuation - my editor at Cisco and some other writers I work/communicate with, said it is a more lively look at the topic. I just started it.

When I give my presentation, The Value-added Technologist, one of my tips for techies is to read more non-tech literature than purely technical. I believe it reduces burnout and is good for the grey matter. Read my article, Why Technologists Must Learn To Speak Business. I identify some general business books that I recommend.

Of course, this is an overall - over time strategy. There are times you may completely immerse yourself in the technical - during a new project start, when undertaking a new technology to learn, etc. The danger is when your total reading is tech related - more often this occurs with the new tech or with someone who isn't a big reader in the first place.

Thanks, good question.

Matthew Moran

http://www.cbtoolkit.com

 

[Rich13]

So I assume that I need to start talking with a lawyer to write up some contracts. What type of lawyer should I look for?"

** To find a good lawyer, ask your technology-saavy friends who they have used. It's always a good idea to get a personal referral. BTW, you don't need a huge law firm. In fact, you might get more attention from someone who focuses on small businesses. If you do speak with a lawyer, be sure to ask him/her about their experience representing businesses like yours, and GET REFERENCES. Don't be shy about asking.

"Do I create a few contracts for anticipated jobs? Take em as they come?"

** Consider developing at least one standard contract that you can propose to clients and that you know how to alter to suit your needs. First, taking the initiative to propose a contract to a client can be a time-saver for both of you. Second, it makes you look more professional. Third, using your own contract as a starting point makes it more likely that you will end up with terms and conditions that favor your business.

"Know of any good books on this topic?"

** Others on this board recommended books. You can learn alot from books, but there is no substitute for experience, including bad experience. Getting screwed in a business deal will make you stronger (if it doesn't kill you).

Rich
rckatz_usa@comcast.net

 

[spacebass5000]

Good stuff you guys. Thanks!!!

I can't wait to read some non-tech related books/novels. I've got a few lined up. I even started rereading For The New Intellectual (Ayn Rand) but have not been able to get back to it.

I have a Poe book lying around somewheres too.

Someday...

Thanks again!

You'll see more of me...