Org Chart.jpgOne of the best things about being a consultant is being able to manage projects without having to manage people. Hiring employees to help complete a project can entail adding burdensome tasks as well as much more risk. At the same time, passing on possible work because there is a section of work that you can't complete makes the sales process much more difficult. I've been able to get great jobs thanks to a functional subcontracting arrangement, but as I'm about to detail, I've also been burned.

 

What to do when the client requests deliverables A, B, and C but you can only complete A and B? Deliverable C may be a minor addition to the project but it is out of your wheelhouse. Instead of just quoting a delivery of A and B while leaving the client on their own for the management and integration of deliverable C, your quote can be made much more attractive if you provide the complete solution by hiring a subcontractor.

 

However, this puts you in the position of being the consultant AND client. Ideally you will understand what the client wants, hire a subcontractor to do part of it, and everyone delivers on time. Nothing ever goes to plan, so here are a few rules that I always implement when exploring a subcontractor agreement:

  1. Always remember that your reputation is in the hands of the subcontractor and their work. They must be great candidates for the task at hand: easy to work with, competent, and trustworthy.
  2. The subcontractor MUST complete a consulting contract with a good acceptance clause.
  3. Include a buffer on time and cost to accommodate the subcontractor's possible mistakes and project underestimates (both of which can be understandable).
  4. Include some of your time for management of the subcontractor.
  5. Add some profit to make the hassle and risk worth your while.
  6. Make sure there is a clear contractual understanding of how to deal with the subcontractor quitting.

 

I was able to come up with most of these rules before getting started, but rule #6 above came from the school of hard knocks.

 

I was quoting on a job that was going to mean a lot to my consultancy. It was a well-paying job at a time that sales were pretty slow, in a technical area I love to work in, and it would be my first job with a new type of client which could lead to more business in the area. The only problem is that this new type of client needed some very unique software that I couldn't deliver. I didn't know anyone from my network that had both the time and ability to work on the project with me. I really wanted to get this new business, so I looked outside of my trusted network to try and find a potential candidate.

 

It turned into a standard employee search, with me interviewing people that expressed interest from job boards. I had a couple of candidates that were pretty well suited for the job, and even got me excited about how things would turn out. My favorite was a recent graduate that was looking for full time work, but had the time to pick up some side work during the job hunt. I was nervous about this, but the project was only two months long. In the interview I explained that once started the job must be finished, and he assured me that he wouldn't go half-way and he would stick with it until the end. Satisfied with this, I accepted his quote and used it to quote the big job that I wanted so badly.

 

Things started off well. The subcontractor needed some flexibility in order to accommodate his job search, but the work he did was otherwise fine. Until he found a full time job and told me that he was taking it in a few days, despite only finishing half of his agreed work.

 

Needless to say, this was a big problem. We went back and forth about how he was leaving me in a lurch, how we discussed this eventuality at the start, and how his financial situation changed making it impossible for him to keep his word.

 

The first priority was to deal with the potential lack of delivery. I picked up all of the action items that I could from his section of work, but there were some pieces that I simply could not complete. I was lucky enough to have a good friend who was able to help out. He worked on this project in his free time (something he didn't want to do earlier when I was looking for help). Thanks to his generosity and hard work, the project was completed on time and on budget. It's been a couple of years and I'm still looking forward to the chance to repay him for his help.

 

The next problem came when the subcontractor submitted his invoice. Despite not completing the project, he expected full payment for his time. When I discussed this with him, I explained that I'd pay his time, but he should pick up my extra costs associated with his leaving early. He was not willing to consider that, and threatened legal action. In addition, he wanted his payment earlier than the contract stipulated, suggesting that tax law could make him considered an employee instead of a consultant, and again threatened legal action. Obviously, the working relationship during this entire ordeal had broken down and the conversation was quite contentious and frustrating for both sides.

 

My solution to the problem? Pay the man, and add to the subcontractor rules I listed above. Not because he was right, because I'd lose in court, or even because I didn't want the hassle and expense of court. The reason I paid him straight away is because it was the fastest path available to end the relationship. People that don't keep their word and are quick to run to court should be avoided at all costs. It is important to limit negative relationships like these as much as possible in order to focus on building the next great thing. Looking back and trying to correct injustices only consumes time and good attitude, both of which are a necessity for small businesses to run successfully.

 

At the end of the day I got the new business, delivered, and it did result in sales growth as I hoped. The whole ordeal was worth it, and I'd do it again even if I couldn't change who I hired. I also expect to benefit from this lesson in the future.

 

James Benson is writing a series on 'Engineers As Consultants' to educate and encourage salaried engineers to consider if hanging a shingle is right for them. New posts on the first Monday of every month.

Pt. 1: So You Want To Be A Consultant

Pt. 2: How Do Engineers Find Consulting Gigs?

Pt. 3: How To Price Consulting Services?

Pt. 4: How To Keep A Client?

Pt. 5: Finding The Best Client Mix

Pt. 6: How To Turn Down A Client

Pt. 7: How to Write a Client Acceptance Clause

Pt 8: Business Structures

Pt. 9: Taxes, Writeoffs, and Accounting

Pt. 10: When Subcontractors Quit

Pt. 11: When a Client Turns into a Deadbeat

Pt. 12: Getting Paid with Company Stock

Pt. 13: How to Assign IP Ownership in a Contract

Pt. 14: Annual Review

Pt. 15: How to Take Vacation

Pt. 16: How to Engage Peers