sub-contracting to someone else ? (becoming an agency)

**oaksoft** · 7 April 2004, 12:37

Actually it does not make you an agency toe-rag at all.
Neither should you be "taking a cut". The profit you take is whatever you can negotiate with the client minus whatever you can get the sub contractor for.

You will not be taking anything from the subby as he'll be getting what he negotiated with you.

Contractors seem to have this delusionary opinion that the client is "theirs" just because "we do all the work".
My advice would be to stay well clear of contractors who believe they have a right to dictate what your business is allowed to charge its clients.
Contractors can dictate rates and terms when they find the client themselves and not before.

If you were making widgets for a client and a sub contractor who painted them decided that he could decide how much you sold them for you'd tell him to take a hike.

**Vetran** · 11 April 2004, 13:55

You found the business, you set the margins, if your subbie doesn't like it then he can find something for himself.

You have to decide how much it is worth to keep him or replace him, not how much its worth to make him happy.

Remember to stress the fact you are paying your subbie quickly whereas your customer will take a month or two. If your subbie is willing to wait 3 months for their money then will you take a cut in your margin?

Agencies that add little value to the relationship should charge little margin. Most of the ones I have seen just make a call once a quarter and pay the bill on time if you are lucky.

**billydoyle** · 14 April 2004, 07:37

Hi Folks,
Thanks for the replies.
Thinking on the subject of paying sub-contractor before the client pays me. Indeed this alone justifies a fair bit of margin.

What I'm really hoping for is to learn about pitfalls. Like how things can go wrong, what can cause realationships to go nasty and people to end up in court.
cheers,
BD

**BillyBobHathaway** · 14 April 2004, 13:52

What I'm really hoping for is to learn about pitfalls. Like how things can go wrong, what can cause realationships to go nasty and people to end up in court.

Greed.

-BB

**oaksoft** · 15 April 2004, 22:58

Other pitfalls

1)Make sure the sub contractor is happy with his rate first and foremost or you'll have no end of trouble.

2)Make sure the client is not constantly pestered by you for rate increases on each renewal. You achieve this by starting at a higher margin and then increasing the subbies rate in line with 1) and accepting a lower margin to satisfy 2). Bear in mind that your risk reduces over time as the relationship grows.

3)Try and ensure that you do not get tied to a single contractor. Use multiple sources where possible and have them both work together at least for some stages of the project (but do not charge the client for the 2nd contractor). This will show you as a true business from the clients perspective and will allow you to substitute easily because they'll have experience of the 2nd subby.

1) and 2) above will ensure that all parties are happy and do not start talking to each other about what the subby gets.
You should not touch any contractor who demands during rate negotiations to know what the client is being charged because that problem will never go away once it is there.

3) will ensure that you can deal with the problem quickly should an emergency arise and you need to ditch the contractor for any reason.

**billydoyle** · 26 April 2004, 09:19

Re: Other pitfalls

excellent, thanks Oaksoft

sub-contracting to someone else ? (becoming an agency)