Weiss Advice Issue: 158, November, 2016
Some consultants round-out their income streams nicely by taking on subcontracting assignments from other firms. And some actually derive most of their income from such arrangements.
The benefits include: no need to do the marketing and you can focus on what you’re good at—implementation; fixed income stream; take or turn down assignments as your own schedule dictates; learn new techniques and ideas from the contracting firm; introductions into new industries and new organizations; relatively little legal liability.
The disadvantages may include: relatively low fees, often hourly based (so the assignments tend to be labor-intensive); prohibition on mentioning or promoting your own firm and work in the client; dull and unchallenging work; excess travel; delayed payments, strict expense reimbursement procedures; sudden and abrupt demands due to situations you can’t control.
To each his own. If you want to find subcontracting work, or expand your business in that area, there are probably some good ways to do that, and I’d like to suggest a few. For our purposes, I’m defining subcontracting as accepting work from another consulting firm which holds the contract and conducts the relationship with the actual client.
- Find firms with a need you readily fulfill. It’s tough to get subcontracting work when you have to first learn the firm’s business and techniques. They have to make an investment in you before they can utilize you. But if you come ready to “hit the ground running,” that’s an advantage. If someone is seeking people who are adept at team building, and that’s your background, you’re best able to establish a clear value proposition (and negotiate for a higher fee).
- Modify your networking to include owners, partners, and/or executives at larger firms. Make it clear that you’ve done this work before, favor this work, and are seeking it out. Since such work can ebb and flow with the economy and business cycles, stay in touch with these people periodically. That leads to point #3.
- Create a press kit or set of materials that emphasizes your subcontracting value. Use testimonials from other firms which have employed you in that capacity. Demonstrate the range of consulting methodologies that you bring to the table. Use a client list, but of other consulting firms for which you’ve worked, not your own clients.
- Place your name on listings which provide subcontractors. There are a variety of Internet sites on which you can be listed for free or at minimal cost. There are some consulting brokers who serve as “matchmakers.” (Note: Since you’re not working with the final client, but rather with the consulting firm which has attracted that client, you have no need for relationship building and these “middle men” make sense in this narrow pursuit.
- Ask colleagues who they have subcontracted for and request a contact. Then write to them to ask for consideration, enclosing your modified press kit.
When you do subcontract, always establish clarity on the following:
- Who will pay you and at what intervals?
- How will expense reimbursement be handles and what are the restrictions or guidelines?
- Are there any guarantees, or can you be summarily “fired”?
- What can you say or not say about your own firm, and about your relationship with the firm doing the subcontracting?
- What is the correct procedure if you learn of problems and/or spot opportunity?
- How will the success of your personal work be evaluated?
One final caveat: If the IRS deems that over 80% of your work comes from a single client (and other criteria are met, which you can find in the IRS publication No. GAO/T-GGD-96-130 they may consider you an actual employee, which will have severe tax implications for both parties.