Expanding company - need advice on first/next steps.

[funkyContractorITUK]

PerfectStorm based on your last reply. I have managed to help recommend other contractors/agencies. I'm not sure if you would know this specifically (I'll do some more research) but Would it be wrong to start charging for these recommendations/ referrals and if so what sort of rate would be reasonable?

[PerfectStorm]

PerfectStorm based on your last reply. I have managed to help recommend other contractors/agencies. I'm not sure if you would know this specifically (I'll do some more research) but Would it be wrong to start charging for these recommendations/ referrals and if so what sort of rate would be reasonable?

There are agencies that do exactly that but they're not 'recommending' they're supplying, and it goes like this


Big Acme Client Co
Agency 1 that can't find the right candidates, but has the contract for work
Agency 2 that's a bit smaller and says they can find people that Agency 1 or Big Acme will like <-- this is you
Contractor

Quite often, though not always, Agency 1 is providing a "managed service" where they undertake the entire running of a project/delivery of something, and thus they become (if you squint a bit) the end client and, conveniently, often determine the contracts outside of IR35. Also conveniently, often Agency 1 is small enough to be a "Small Company" for the purposes of IR35 and thus "Contractor" becomes liable for the IR35 risk (much as all parties may not be aware of this) but also has the ability to make their roles sound a lot more enticing to genuinely intelligent and capable people due to being Outside.

Then what they do money wise is something like

Big Acme Client Co: "Agency 1, deliver this thing for me. You have £500,000 to do it with OR you may charge for your Project Managers at £1000 a day"
Agency 1: "Will do!" "OK... we can't find the right ones. Agency 1, find me a Project Manager that I'll like, you have £800 a day"
Agency 2: "We're looking for Project Managers for a new piece of work with Big Acme Client. You'll actually be working for Agency 1 but that's less of a big name pull". Client is paying £600 a day"
Contractor: "£600 a day? Brilliant"

Thus all the companies in the chain chip off what seems to be 150-200 a day for their bit of the arrangement leaving Contractor with what's left. And if they find Contractors that both agencies and client like, that arrangement keeps going until either A) the money for the deliverable services runs out (or more realistically when the agencies start biting into their profit margin without more money coming in) or B) it gets renewed or stopped.

Seems a very popular way of doing business these days, and the passive income once someone's in is obviously very beneficial. BUT agencies and clients are notably crappier to each other than they are to individual contractors when it comes to paying on time, and if Big Acme doesn't pay Agency 1 on time (or at all), Agency 1 can still be on the hook to pay ALL of Agency 2's fee for Big Acme (as they don't want them disappearing overnight) and Agency 2 can be on the hook for paying Contractors even if Big Acme haven't paid Agency 1 and Agency 1 haven't paid Agency 2!

But like I say, seems very common nowadays.

[northernladuk]

Thanks northernladuk As you can see I didn't really get much of a response on the forum. It has been on my mind on/off over the last year and just keep coming back to the idea of extending out.

So surely you should be working on a business plan, an offering to market, investigating the market and so on. Asking a bunch of strangers how to do it on the internet is really not going to work.

Paralytic to answer your question "Do your clients see you as a supplier or merely as staff augmentation?" I would say the former in that I control what is being built and how it is built and do not participate in staff events (to ensure don't fall foul of any IR regs)

I still don't see that as a supplier. A supplier supplies a product. You being in control of how you develop the clients product isn't being a business.

dsc "why do you want more people in the business?" I was thinking it would help me bring in more contracts/streams of income without me taking on more work directly but the thing that counter-argue is like what PerfectStorm says, I know when more people are brought in they do come with baggage, and it's then having to handle HR issues and complications, etc. and confirmed by @Lance

People don't bring in more contract streams. You've got it all arse about face. You identify new income streams and you staff up to meet the needs.

You really need to take a step back, forget what you do as a contractor and start again. You aren't thinking like a business so it will never come to you. If you start wanting more people that will being you more business then you'll never get it.

I asked ChatGPT 'How to start a business' and it gave me 8 steps. 6 of which you've not even begun to consider, 1 you have but out of order (hiring employees) and 1 you already have (the LTD).

I also googled it and got more or less the same again.

Time to clear the board and start from scratch but Post 2 is really the answer here.

[northernladuk]

PerfectStorm based on your last reply. I have managed to help recommend other contractors/agencies. I'm not sure if you would know this specifically (I'll do some more research) but Would it be wrong to start charging for these recommendations/ referrals and if so what sort of rate would be reasonable?

50, maybe 100 quid a head absolute tops. Agencies won't pay anymore as their cut is too low. But this isn't a business model. It's just you getting a bit of a kick back.

Sorry to say but I'd jump in and say you are just goint through the steps every newbie contractor goes through. See the money flying around, thinks they want a piece but doesn't have a clue where to start. You've confused being a proper consultancy offering a client a service to being a pseudo agency in the same thread. You are just scrabbaling I am afraid. Nothing wrong with that. I think you'd be hard pressed to find a contractor that didn't consider it but they also didn't flog a dead horse for years and just got on with contracting.

[NotAllThere]

You need a really good salesperson. Without that, the chances of your business surviving are minimal.

Some contractor friends of mine set up a consultancy and once they'd exhausted their own contacts, they hired a top knotch saleman. Since then they've seen 20% year on year growth.

Another couple of contractor friends built some incredibly useful software. They have no salesperson. They get ~50K per year, which is nice. But with a decent salesperson, they could be doing so much better.

[northernladuk]

You need a really good salesperson. Without that, the chances of your business surviving are minimal.

He's no idea what he's selling yet.

[funkyContractorITUK]

Thank you PerfectStorm for the thorough explanation and thank you northernladuk for your words of wisdom. It feels like I need to take a step back and think of it as a completely new adventure with more research needed.

[courtg9000]

How much business are you planning to pull in and how?
who are your competitors?
How are you better than them? - not just cheaper.
Will a new client buy it?
Can you actually sell or have you actually got access to a good sales resource or resources in your market now? (Not I will get them later - good sales resources are more thin on the ground than outside ir35 contracts and most contractors cannot sell for toffee).
Do you have the resources available to carry out the new work - not I will find them later - can you deploy them very quickly?

[NotAllThere]

He's no idea what he's selling yet.

It really doesn't make a difference! You still need to be able to sell regardless of what he ends up selling.

[TheGreenBastard]

To add some context the OP did ask this in April last year as well

https://forums.contractoruk.com/busi...of-income.html

funkyContractorITUK have you considered simply taking on more work and delivering multiple contracts? No staffing issues.