Subcontracting: The Secret Weapon of Freelancers
Freelancers are used to running one-person shows. But when your time is maxed out and clients are still banging at the door, it’s hard to turn down business. Enter subcontracting – one of the most powerful tools that help freelancers increase their revenue without working more hours.
What is Subcontracting?
Subcontracting is where you hand off some of your clients’ projects to a subcontractor (like another freelancer). The subcontractor isn’t your employee, but rather like an extra set of hands when you’re too busy to do it all yourself. They handle specific tasks or even entire projects. Your client pays you, and you pay your subcontractor after taking a cut for yourself.
Outsourcing to a subcontractor lets you take on more work even when your schedule is full. You don’t have to risk turning away customers and can grow your revenue without a significant time investment.
Can Freelancers Subcontract to Other Freelancers?
Freelancers usually work under 1099 contracts and aren’t exactly classified as small businesses. But you can still “hire” other freelancers to handle some of your workload.
Many freelancers overlook this opportunity to scale simply because they don’t realize it’s an option. If you’re a solopreneur, you’re used to doing everything alone. Maybe you even see other freelancers as competition.
But the reality is that working with other freelancers can help your business grow faster than you can grow it alone. You can take on more work, turn around projects faster, and make more clients happy.
Freelance Subcontractor Best Practices
There are a few do’s and don’ts when it comes to subcontracting to other freelancers. Let’s set you up for subcontracting success:
Only Subcontract When You Can Make a Profit
Throwing money at a problem can help to make it go away, but you might end up with another problem: no money.
The same holds true for subcontracting. You could hire some of the best freelancers out there and finish the work. But if you’re not able to make a profit on a job, subbing doesn’t make financial sense.
Ideally, you’ll partner with freelancers whose normal rates are below your own. This way, when you have to sub out work for clients who are already used to what you charge, you can easily send over some work without worrying whether you’ll make a profit.
Track and Report Your Subcontractor’s Earnings
When you’re a contractor hiring another contractor, you assume the same payment tracking responsibilities as an employer. If you pay a sub more than $600 in a tax year, you will need to report those earnings to the IRS.
Personally, I use tax software that has all of the forms I need and makes it easy to e-file my subs’ earnings via Form 1099. All you need is their legal name, mailing address, social security number, and phone number. File their earnings before January 31 of the following year, then send them a paper copy of the 1099 form.
Yes, it’s extra work on your part. But the good news: it can help reduce your own tax liability. Subcontracting work is a business expense.
I’m not a financial or legal expert and can’t give tax advice. I highly advise you to work with a tax pro who can give you more guidance on this.
Review Any Client NDAs
You might not be able to sub out work in some cases. For instance, if you signed a non-disclosure agreement (NDA) with a client, you might be legally prevented from subcontracting their work.
I highly recommend using CRM software to help you keep track of NDAs. Save a copy for your records and store it in your CRM with your client’s entry. This saves you time if you ever need to subcontract (you might have forgotten you signed that pesky NDA!) and keeps you out of legal hot water.
Use Contracts to Protect Yourself Legally
Just like you use contracts with your clients, you also need to use them with your subcontractors. Contracts outline everything from work expectations to payment terms. They help you hold your subs accountable so you can deliver the best work to your clients and preserve your reputation.
Decide How Transparent to Be With Your Clients
Do your clients really need to know you’re using subcontractors? This can be a slippery slope – freelancers should tread carefully.
In most cases, your clients only care about one thing – getting high-quality work delivered on time. They hire you for outcomes, not to micromanage the process. Mentioning that you subcontract their work can add confusion and distrust to the process.
However, I’ve had clients who were adamant about working with me. They made it very clear that they hired me based on my skills, expertise, and experience. I don’t sub out their work because they’re not getting the full value of what they paid me.
I don’t subcontract much work. Only when I have to because of scheduling conflicts. Clients with whom I don’t have a strong, ongoing relationship are good candidates for subcontracting. And if I do have scheduling conflicts with long-term, high-value clients, I either extend my delivery estimates or mention getting some help from my team – and leave it at that.
Find a Subcontractor Before You Need One
I found my first subcontractor just in time. I was speaking at an event in St Pete in the company of a hundred other freelancer writers. At an after-party event, I mentioned to one of those writers that I’d love to have her on my team. She was fully booked at the time but would consider me in the future.
COVID hit a week later. I had twice as much work as normal and she suddenly had some free time on her schedule. It was a perfect opportunity for me to start subcontracting. I was able to keep saying yes to new projects without losing my mind.
Because I had the benefit of already knowing how great of a writer she was, I didn’t have to do much vetting. There was mutual trust right from the start.
But if I hadn’t have found a subcontractor before I needed one, I would have been sunk. I would have needed to post a job, handle interviews, give test assignments, and figure out pay rates – all while trying to manage a growing workload on my end.
Subcontracting as a Freelancer: Final Thoughts
Subcontracting is a powerful weapon that freelancers don’t wield enough. Finding great subs allows you to say yes to more clients – and more money – while keeping pace with client expectations. The breathing room you get from reducing your own workload is valuable, too. Use my subcontracting best practices and watch how your freelance business transforms!