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How to create an IT subcontractor agreement with peers

In this tip, David Streit provides best practices for conducting business with peers, as well as a guide to a reciprocal IT subcontractor agreement.

It's been 12 years since I opened my IT services firm. My revenues have grown significantly, yet I haven't had to hire technicians or admin staff. I've had no difficulty keeping up with client requirements, leveraging my resources when I'm busy and solving problems when I'm stuck. Those resources are my professional association (ASCII), product and service vendors and my peers.

They form my network, the circle of companies, and the people, who allow me to leverage my time and expertise. The network of competitive firms who do what I do are my greatest resource. They are my peers; people who are equal, or superior, to me in skillset and capabilities. I argue any successful firm, solo or not, should develop relationships with talented peers. But how do you find them?

I argue any successful firm, solo or not, should develop relationships with talented peers.

Once you've decided to actually conduct business with a peer you've met, I recommend you follow these best practices:

1. Draft an IT subcontractor agreement with each peer if you are using their techs to perform support services for your clients, or you are providing services to them for their clients. The subcontractor agreement engenders arm-length trust and provides legal protection for both of you against poaching of clients or employees. The agreement should also state that all client information used in the course of servicing their needs is to be held confidential. This would include network and application settings and accounts. (Download our guide to a typical subcontractor reciprocal agreement.)

On occasion, I have worked with peers without an IT subcontractor agreement. These are mainly one-off jobs where the peer is providing an off-site service. For example, a peer owned an expensive network testing device I borrowed for a fee to test a client's network. His fee included interpretation of the results.

2. Accept responsibility for ensuring your peer subcontractors are paid, and paid promptly, even if you get stiffed by your client. I want to ensure my peers will work with me in the future. Even if the peer lets you off the hook, they know working with you is a money-losing proposition, so don't go there. You can also damage your industry reputation if your peer spreads the word you don't pay.

3. Follow formal procedures for documenting your work with your peers. If I call in a peer as a subcontractor, I usually call my equivalent, the owner of the peer firm, and ask him to get a tech out to the client. The owner will open a ticket in his professional services automation (PSA) system, like any other task, to ensure the request is fulfilled. The ticket will provide documentation you can provide with your invoice to your client.

4. Decide on branding. Since the client knows I'm bringing a subcontractor to assist me at times, I don't ask the peer not to wear their own logo'd clothing. My clients and I enjoy excellent working relationships and the reciprocal agreement protects me against solicitation of my clients. I don't want the peer to lie and say they are on my staff when they really aren't. You might decide to take a different approach to this issue, which is fine, as long as you and your peer are on the same page.

5. Work out fees in advance to avoid misunderstandings and to establish profitable margins for you and your peers. I have found my peers to be very flexible in working out fee arrangements with me so we both make money. For example, my peers charge me $90 to $95 an hour and I charge my client $125 an hour. If I'm onsite with the peer tech, I charge separately for my time.

6. If your peer does most of the work for a client, consider handing off that client to the peer. You may not have the right skill set to service a client. The peer might. So consider handing off the client to the peer for a referral fee or a percentage of billings for a period up to one year. Your peer may do the same for you. Then you'll both end up with clients well suited to your abilities.

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Do you conduct business with peers? If so, what advice would you give for ensuring the partnership goes smoothly?
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Yes. It is important to draft an IT subcontractor agreement in case you are using their technology for your support services or for your clients. This that peer subcontractors get paid on time even when you develop a problem with one of your clients. Following formal procedures when looking into partnership even with peers allows peers to come with their own terms but work under my direction as part of my branding policy.
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I think partnering with IT services peers hinges on trust and acceptance of responsibility. It is also necessary to sort out fee arrangement before initiation.
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