Subcontracting has to earn you a profit, or it is not the right choice. As a virtual IT provider, you have to think about how profitable your business is. You can’t use subcontracting until you think about costs and implement a structure that will help you make money with subcontracting.
Give yourself some room with service agreements to allow you to use subcontracting to complete specialty services. Those you find through subcontracting will probably have different rates than yours, so you have to be prepared.
Subcontracting: Estimating Each Project with Clients
Estimate services with clients per project:
1. Identify the subcontracting need;
2. Determine what needs to be accomplished;
3. Get a subcontracting estimate.
Once you have completed these steps, you can deliver the costs with a fixed price to each client. Allow yourself to work with specialty contractors that charge you more than you may charge the client. If you don’t do this, you could lose money in the long run.
Subcontracting: Mark Up to Regain Costs
You need to use a mark up in order to make up for costs related to the following items:
1. Recruitment;
2. Project management;
3. Scheduling and billing
4. Risk management.
A good rule of thumb to use for subcontracting mark ups is to add on about 25% to 35%. If you are paying subcontracting costs of $400, this means you would bill your client $500 to $550.
Subcontracting: Disclosure of Markup Costs
You do not need to tell clients about the amount of your mark up when it comes to subcontracting, and in fact do not even need to tell them the subcontractor charges any more than any other professional with whom you are working.
The Main Point About Subcontracting
Subcontracting can help accomplish specialty work for clients. Make sure you get paid for your time and energy when you are maintaining and selling subcontracting relationships.
Blogged By: Joshua Feinberg
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