Are you running your small business using independent contractors? More and more of us small business owners are doing so these days. Independent contractor relationships provide many benefits for entrepreneurs, including greater flexibility, cost savings and the ability to access talent you might not be able to afford on a full-time basis. But there is a downside too: Since you aren’t their full-time employer, independent contractor relationships offer less control, which can sometimes cause problems.
Here are some questions to consider before you use independent contractors.
Make sure the person truly is an independent contractor. Depending on what you ask them to do and how you want them to do it, you might find the person you thought was a freelancer is considered by the IRS to be your employee. This can result in not only an unexpected tax burden, but an even more unwelcome fine. Visit the IRS website to read about what defines an independent contractor vs. an employee and be sure you’re not crossing the line.
Understand availability. Independent contractors promise you flexibility, but just how flexible they are can vary. If your contractor gets a bigger, better-paying project, will your important deadline suddenly be less-than-important to him or her? Make sure the person is available to handle your desired timeline.
Provide predictability. By the same token, you can’t expect an independent contractor to sit around 24/7 waiting to work for you. (If that’s what you need, you probably need to have several contractors in reserve to work on the same project.) Let the contractor know the expected timeline, deadlines and other information about your project so he or she can decide whether it’s a good fit or not.
Put it in writing. Even with contractors you’ve worked with before, written contracts are essential to define a project’s scope and keep things from getting out of control. Contracts protect both sides, so be sure to carefully think over all the elements that may need to go into your contract. If the contractor creates a contract, read it carefully—or you may regret it.
Communicate clearly. Unshared expectations are the downfall of many an independent contractor relationship. Clearly define your terms at the beginning of the project so you both understand what the other expects. This way, you won’t end up paying for something that falls short of what you wanted.
Wrap it up. At the end of each project, it’s a good idea to go over what went well and what didn’t, so you can learn from it and fine-tune your relationship going forward. It’s easy to skip this step, but it really pays off if it enables you to streamline your independent contractor process.
Follow these steps, and you’ll end up with a roster of reliable contractors that you can turn to again and again. If you need help managing it all a SCORE mentor can help you.