Have you ever thought about expanding your freelance business beyond yourself? Maybe you’ve always assumed it would become a small business with employees, or maybe you’re a solo entrepreneur and you’ve never thought about it as more than just being a freelancer.
But what happens when you get busy? Nobody likes to turn down work, but there comes a point when you’re so busy and your project pipeline is so crammed full and scheduled out so far that you have to turn people away. What if you could hang on to that income?
There’s only so much you can do with your business when you’re limited to what one person can accomplish. That’s when it might be time to think about expanding through outsourcing or hiring an employee.
It may sound complex and intimidating, but it doesn’t have to be. In this post, we’ll explore what it means to expand your business through subcontracting and the legal implications you need to be aware of.
How to Know It’s Time to Hire
Freelancing is complicated enough, now you’re supposed to do it for a subcontractor? There are a number of situations where it might become obvious that you need some help.Maybe there’s so much work coming in and so much to do that you just can’t do it all. There are only so many late nights you can work and it’s not what you signed up for. It’s time to bring in some help.
You might want to expand because you’re doing stuff you don’t like to do. Maybe you hate doing certain types of work. Maybe it’s monotonous or it’s not your skill set or you’re just too picky and you know someone else could do it faster and better. Maybe you want to get out of the weeds of a project and focus on the big picture—or maybe you just want someone to handle all the random business stuff so you can do the work you enjoy.
It could be that your clients want services you don’t offer. Rather than give them referrals and send them on their way, you could subcontract the work and build your business (rather than someone else’s).
Or maybe you recognize that you can only get so big with just one person, and you want to do more. It’s time to take your business to new heights and that only happens by growing your team.
There are a number of different scenarios where you might expand with outsourcing or hiring employees. Some of those positions might include:
- Sales: Maybe bringing in work isn’t something you like to focus on, so you can hire a salesperson to help.
- Developer: More hands make light work, so hire another developer to help you build sites faster.
- Designer: If you’re more of a developer than a designer, hiring a designer will let you get back to the work you enjoy.
- Writer: If the copy your clients deliver is always awful, maybe it’s time to offer copywriting services.
- Virtual assistant: Get help organizing all the loose threads, coordinate your schedule, handle paperwork, etc.
- Business manager: Someone to help coordinate all the business details and project process.
- Bookkeeping: Bring in someone to handle your accounting (maybe you’re already doing this).
Not Every Freelancer Hires
First, it’s important to decide if you really want to grow your company through hiring. Do you want to manage employees or subcontractors?Not every freelancer needs to hire people. Some freelancers prefer to go the solo route. You can grow your business in other ways than hiring. Some freelancers will raise their rates or narrow their focus.
You need to decide if managing other people is something you want to do. It’s not for everybody. So consider this question carefully and don’t rush into it. It’s a big shift in your business and your mindset.
Also? Don’t be too intimidated by that change. It might be scary, but sometimes we need to confront our fears to make real progress. If you’re unsure about this decision, do some soul searching, talk to other freelancers, and maybe hire an intern to see how you like managing people (you might be surprised to discover you enjoy it).
Independent Contractor vs. Employee
When you’re ready to expand your business through hiring, the first thing you need to decide is if you’re going to hire an independent contractor or an employee.
Does It Matter?
Oh yeah. It matters a lot, because there are different legal obligations for hiring an employee versus an independent contractor. You can get in serious legal trouble if you’re not following the right rules.
Which means now is a good time for a legal disclaimer. I’m not a lawyer. This is not legal advice. If you’re thinking about hiring anyone—whether it’s subcontracting or an in-house employee—you should talk to a lawyer.
What’s the Difference?
There are a number of differences between an independent contractor and an employee. Those differences can get kind of fuzzy depending on different factors. But from a legal perspective, those differences really matter, so it’s important to understand the distinction.
Here are a few of those differences:
- Exclusivity: You can’t make a subcontractor work exclusively with you, but you can put those kind of limitations on an employee.
- Self-direction: Subcontractors have a lot more freedom over when and how they work. You can’t micromanage a subcontractor the way you can an employee. If you’re demanding set hours and stipulating how the work is done, that’s an employee relationship.
- BYOLaptop: Subcontractors provide their own equipment, while you should be providing the equipment for employees.
- Training: You train employees, you don’t train subcontractors.
- Full time: Subcontractors are generally not working full time. It’s possible to have a short stint of full-time work for a subcontractor, but generally permanent, full-time work is an employee relationship.
- Benefits: Employees get benefits, subcontractors don’t.
- Taxes: Employees pay taxes through withholding that the employer has to take care of, but subcontractors are on their own. There are no taxes withheld from their payments and they generally have to make estimated quarterly payments.
That’s not a complete list of the distinctions (again, talk to a lawyer), but it’s enough to give you a good idea. These differences are important because if you classify a new hire as a subcontractor to make things easier, but you’re actually treating them like an employee, you could get in trouble. They might be able to sue you for violating labor laws.
Have we mentioned the importance of talking to a lawyer? Talk to a lawyer. Make sure you’re doing it right. To learn more about the legal issues involved with subcontractors, watch our Working With Subcontractors webinar with Anna Blanch Rabe.
A Word About Profit
If you’re hiring subcontractors or employees, you should be making money off their work. That’s right—you profit from someone else’s work. That can sound a little weird and make some freelancers uncomfortable. But there’s work involved in managing subcontractors or employees. You also do a lot of work to land each project. You’re earning that extra profit.
That’s also the reality of business. Just as beginning freelancers have to learn to charge more and be comfortable with it, freelancers hiring subcontractors have to learn to be comfortable with profiting from the people they hire.
In the end, everybody wins. The company hiring you gets a website. You get paid. Your subcontractor gets paid. As long as you’re paying people fairly, this is how business gets done.
More Hiring Issues
As you think about how you want to grow your business, there are a lot of things to consider.
- Budget: Do you have the reserves to cover payroll a few months out? What if a project falls through and you don’t get paid—will you still be able to pay your subcontractors? You need to have some stability in your budget to handle this kind of growth.
- Growth: While it’s important to get the legal distinctions right, it’s not like subcontractors versus employees is a one-time decision. You can always start with a subcontractor and move toward an in-house employee. Or you could go the other way. The point is this can morph and change as your business changes. Don’t feel like you’re stuck.
- Responsibility: Bringing someone else into your business is a big change. It’s not just you anymore. You’ve got other people relying on you. That might change how you do some things—less seat-of-your-pants decisions and more long-term planning.
- Culture: When you run a solo freelance business, the culture is you. But as you’ll grow you’ll need to be intentional about defining and developing that culture.
And there’s plenty more. But that’s more than enough to get you started. While it is a lot to consider, it’s also exciting.