9

Many times in past I had more projects that I could handle myself. Most times the clients are so pushy that you simply cannot tell them that you don't have time. They like your work and they want to work with you only...period.

Now, in such situation I tried all scenarios:

  • pay someone fix sum to finish it
  • hire someone part-time to do the project
  • hire junior to do easy stuff, then finish it yourself
  • etc.

In all such situations I faced the same problems:

  • not meeting deadlines
  • quality decreased so I had to be much involved to push it to my quality level
  • contractors leaving project saying something is too hard for them

Now, I read recently about "share ratio" type of work. Some guy in some company told his employees that he will find project and they will share the profit. I think they mentioned that he took 40%, and gave the workers 60%.

In this case, it seemed that the employees likes this concept. Maybe because they liked transparency or because they knew the boss is not getting rich on their shoulders giving them the crumbles only.

Do you think that this approach would be good in cases like I had?

What do you think should be the optimum share ratio between myself and the person I outsourced project to? I obviously want to get some money from the projects since I found it and I put my name in front of it, and yet I don't want to underpay my contractor since I want him to work 110% in every project.

5

To me, this just sounds like a referral business. Depending how you lay your contract and Scope of Work out would determine if I would recommend this if you like working. I understand it's everyone's dream to just let other people work for you, making you money. This model would be great if you had multiple deals going on at a time, with multiple "contractors". Screw it, call them employees!

You are right that you need to worry about quality as well; remember the old adage, "if you want it done right, do it yourself". If you decide you can trust others to do your work, you need to remember a few things:

  1. You need to pay for QUALITY work. This is not always true, but it will keep the good workers around. My previous employer lost me because he did not pay me enough, but I saw what we were making. I also had to educate and help other contractors who were paid much better then me, doing things that I always did simply. You need to pay enough that they want to do well, but not so little that anyone would just leave for an extra $1 or $2 per hour
  2. Supervision needs. Do you need to watch the contractor, or do they have enough of a track record you can leave them to do their own thing? Most people prefer to work on their own, without being micro-managed; you need to trust the people you hire to do the work. At the same time, if the contractor has never done this specific type of work before, you may need to mentor them, and you can go through the quality standards as well.
  3. Layout in your Scope of Work the estimated time of completion, and PAD IT. Mistakes will happen, no matter if you do it yourself or hire someone else to. Depending on your project, you'll sometimes run into times where skipping one section resulted in a domino effect, killing everything else. You don't want that. In the Scope of Work for your contractor, include the times that they have to complete the project, as well as the standards you expect them to adhere to. You must be specific! If you aren't supervising, make sure they have all the instructions they need, and write them so a 12 year old could follow them.
  4. Taxes/Deductions. Depending on your contract depends on if they require a paycheque (i.e. holding back taxes, paying Worker's Compensation Benefits, etc), or just a simple invoice-cheque solution, you should check with a lawyer as to what would be required on your part as the "manager" of the project

Edit about Share Ratio There is nothing wrong with sharing the profits, and your contractors will want a bigger piece of the pie if they're doing the work. If you want to keep more of the money, then you need to only give them the easy, remedial stuff that you don't want to do. This is the only way to negotiate a larger amount for yourself. If your contractor knows they're doing more work, they'll start asking for more, and you can pick a good share ratio. Having said that, I had started off my first two contractors at minimum wage +$5/hr, as they were just starting out and I was supervising them and teaching along the way. This was great for them. I am sure that when you get people who have been in the industry a while though, you'll have to up the price. I don't believe you can give a percentage, but that's just my experience in my town.

  • Good suggestions. But you said little about the share ratio? And you were absolutely right about supervision. No matter how good they are, I always have to be a supervisor and QA. – Peter MV Jul 24 '13 at 19:56
  • The Share Ratio is going to vary, so I didn't include any information about it. After I get some free time, I can try to update my answer – Canadian Luke REINSTATE MONICA Jul 24 '13 at 21:07
  • @PeterMV Updated – Canadian Luke REINSTATE MONICA Jul 25 '13 at 0:09
  • Thanks. So you're saying that I should leave percentage idea aside and rather go for hourly type of work? – Peter MV Jul 25 '13 at 9:59
  • In my experience, yes. Your mileage may vary though – Canadian Luke REINSTATE MONICA Jul 25 '13 at 14:19
0

Your 60/40 share ratio sounds about right. I used to be resentful of such ratios (this was for long-term multi-year contract job placements - after 3 years with no renegotiation of payment), until I discovered how time-consuming and exhausting it is to find freelance work.

You can easily justify the ratio by letting the subcontractor understand how many (unbillable) hours you spend on "business development", and also point out that you are providing project management services to the client (which you should be charging the client for, by the way)

When you find good developers, keep them on your roster any way you can. When you expand your company by subcontracting, you are ultimately responsible for the quality of the work your subs do.

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