Outsourcing: Do you make these 5 deadly mistakes?

Outsourcing is one of the best ways for Internet entrepreneurs to grow their businesses. If you’ve got plenty of good ideas for new products and services but not enough time in the day to implement, you either need to hire employees which cost a lot — often more than than they’re worth — or outsource the work as projects to independent contractors. When you outsource with work-for-hire contracting, you can focus on growing your business instead of  getting trapped in the day-to-day details.

Over the years, I’ve seen entrepreneurs make some fundamental legal mistakes when outsourcing. These mistakes cost time and money to fix. And sometimes they can’t be fixed because the business was destroyed.

Although I’ve been able to help clients one-on-one avoid these outsourcing mistakes and profitably outsource work, there simply isn’t enough time in the day to personally do this for everyone. Even the attorneys who work with me don’t have enough time to meet the demand.

Because of this, I’ve decided to identify the 5 biggest mistakes that you can make when outsourcing and show you how to avoid them. Simply click this link right now to learn more.

Independent Contractor Agreements: Should You Use Them In Your Internet Business?

independent-contractorsLet’s make one thing clear. An independent contractor agreement should never be used in your Internet business to disguise an employer-employee relationship. If you get caught doing this with an employee, you could be held liable for payroll taxes and some nasty penalties. Simply not worth the risk.

If there truly is an independent contractor relationship, such as a work-for-hire web design gig for a single site, you’ll want a signed written independent contractor agreement in place to protect your legal rights.

Although the terms of an independent contracting agreement will vary depending upon the type of work to be performed and the unique circumstances surrounding the relationship, there are some general provisions that most of these types of contracts have in them in order to be binding (legally enforceable) in a way that offers you protection. These terms include:

  • Scope of work
  • Price (amount and time(s) of payment)
  • Expense allocation (including any reimbursements)
  • Deadline for completion
  • Milestones (often tied to payment)
  • Existence of an independent contractor relationship rather than employment
  • Ownership of intellectual property rights for work created and protection of trade secrets
  • Governing law and jurisdiction
  • Alternative dispute resolution provisions

Your Internet lawyer can draft customized independent contractor provisions that are designed to protect your interests while keeping you out of court in case of  a dispute.

Virtual Assistants Can Be a Pain in the Ass

Outsourcing work to virtual assistants has become popular among Internet marketers. And if the assistant is both intelligent and has integrity, it can be a win-win deal. If either characteristic is missing, it is better to do the work yourself.

Let me give you an example.

Mack (not his real name) contacted me looking for work. A college student, he wanted to earn some extra income. I outsourced work to Mack on a project as an independent contractor. He had the intelligence, needed the money, and he knew that it would be detrimental to him among a group which we were both affiliated with if he didn’t deliver as promised.

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Yet it became theater of the absurd to try to get Mack to deliver. If he had been an employee, I’d have fired him by the third day.

First excuse was that clarification was needed as to what was agreed upon in writing.

Second, he was “busy” but promised me that performance was just around the corner.

Third, a six-hour loss of electricity apparently justified no performance over several additional days…and BTW, he didn’t want to be “micromanaged.” Apparently inquiring about his total lack of performance constituted micromanagement. The things they must teach in college business courses these days.

Fourth, yet another “busy” excuse but assurances of quick turnaround with the work. When his new self-imposed deadline came and went without a word, I yanked the work and will reassign it.

The fifth and final excuse was that his summer school algebra course made it too difficult to perform, that he was “sorry,” and guessed that his behavior had affected his “credibility.” Really? Imagine that.

The next day, Mack “no-showed,” dropping the ball on his obligation to the common group of which we’re both members. He apparently used the algebra class as the excuse for not keeping his word to the group.

The sad thing is, Mack has no clue how bad he’s hurt his reputation. All agree that he’s bright. Yet he’s shown a fatal character flaw that renders him unfit to be recommended for any type of job. I’ve got several clients looking for a good virtual assistant. Mack would have had all the work that he needed to pay for his college education if he had simply performed. It wasn’t rocket science.

They say that it’s never too late to do the right thing.

I disagree.

Mack has irreparably burned bridges that can never be rebuilt. I want no part of doing business with someone who lacks integrity.

Now, I do outsource work to virtual assistants who perform. But they are honest. Therein lies the difference.

Some will wonder how a lawyer could have a problem like this. It isn’t a legal issue. The independent contractor agreement was in place, and Mack’s background only showed red flags with 20-20 hindsight. It was a business judgment call…and unfortunately, that call sometimes has to be made without knowing character or lack thereof.

In retrospect, what were the red flags?

First, Mack’s personal appearance was poor even for a college kid. As my great grandmother used to say (having raised five kids in the Great Depression), no matter how poor you are, you can always afford soap, water, and keep your clothes looking their best. Second, Mack always made it a point to talk big about morality. A philosophical “big hat, no cattle.” When someone makes it a point to emphasize how moral or religious they are, I grab my wallet to make sure it isn’t missing. Those who have these characteristics don’t need to tell you that they do…behavior demonstrates it.

I consider this experience with Mack a valuable lesson learned. I hope that you’re able to learn from the experience too so that Mack’s loss can be your gain.