Your Complete Guide to Subcontracting as an Independent Consultant
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[Note : Most people would break this into a few different articles but I want you to have all the info in one place. 😊]
Having consistent cash flow is one of the hardest parts about being self-employed, especially when you’re just starting your business. It can be difficult for veterans, too! Client payment terms can be ridiculous, often leading to stressful delays. Even if you start working tomorrow, you might not see any money for 45-60 days after submitting your first invoice. Realistically, it can take months for the money you earn to reach your bank account. To improve cash flow, I recommend subcontracting as a way to generate income while you continue to build your own business.
The Pros and Cons of Subcontracting
Basically, subcontracting is about working through intermediaries such as agencies, consulting firms, or online platforms to connect you with client projects. It offers several advantages:
Starting work faster than if you find the work yourself
Grants you access to clients you might not otherwise reach
Simplified business administration because paperwork, insurance, and taxes are done for you
Potential access to group health insurance plans
An opportunity to build your network and gain experience
That said, subcontracting comes with one big drawback: you'll only receive a portion of what the client pays for your services. Here's how the math breaks down:
Traditional agencies and boutique firms typically take 30-50% of your billings (the average is 35%)
Online platforms usually charge 20-30%
To put this in perspective, let's say your rate is $150 per hour. On a three-month, full-time project (approximately 480 hours), here's what you might give up in fees:
With a 35% agency fee you’ll lose $25,200 ($150 × 480 × 0.35)
With a 25% platform fee you’ll lose $18,000 ($150 × 480 × 0.25)
Of course, the amount you sacrifice will depend on your typical billing rate and the average length of your typical consulting project. For example, if you do change management work on big system implementations, you may lose $50,000 or more. If you work shorter projects lasting two or three weeks, though, subcontracting might be worth it.
Where to Find Subcontracting Opportunities
Both agencies and online platforms are good options for connecting you with clients. However, it’s important to note that their approaches and value propositions differ significantly.
Agencies (and boutique consulting firms) typically involve human intermediaries who actively match consultants with projects. They manage the client relationship and often oversee the project, which means that they may require regular status reports or check-ins. Because agencies rely more on humans, they tend to charge higher fees; they’ll keep anywhere from 30-50% of what the client pays for your help.
Online platforms, on the other hand, use algorithms to match consultants with opportunities. Overall, subcontracting with an online platform is a more hands-off approach. You will likely have direct control over the client relationship and you’ll have fewer administrative requirements. Plus, their fees are lower than agencies; you can expect them to keep about 25-30% of your billings.
As the leader of the Professional Independent Consultants of America, I’ve talked with hundreds of independent consultants about their experiences. Based on their input, here’s a list of agencies and platforms for you to consider.
Traditional Agencies
Business Talent Group (BTG): Known for high-impact, strategic projects that often require senior-level expertise (e.g., strategy development, market research, transformation initiatives).
On-Demand by RGP: Specializes in operational and implementation support; projects tend to be longer-term roles focusing on functional expertise like accounting, finance, HR, IT, and supply chain.
SolomonEdwards: Provides financial, operational, and technology consulting.
ECA Partners: Serves private equity and PE portfolio companies with consulting and interim leadership.
Korn Ferry: Excels at filling interim leadership positions.
vChief: Focuses on placing fractional executives within companies.
Online Platforms
Catalant
TalMix
Graphite
LinkedIn Services Marketplace
Pro tip: When using online platforms, upload the most detailed version of your resumé that you can. Like applicant tracking systems, the platforms use algorithms and keywords to match you with opportunities, so including comprehensive project descriptions will increase your visibility.
Subcontracting Through a Major Firm
Depending on the type of work you do, you may want to register to be a subcontractor with a major consulting firm. You don’t have to be an alumnus of the firm, and having a big-firm name on your resumé is a good thing. Here are some to consider.
Boutique Firms
In addition to the options above, boutique consulting firms can be an excellent place to find subcontracting opportunities. Here's how to tap into this market:
Find the Right Firms
Start with internet searches that combine your area of expertise and location (e.g., "boutique firms digital marketing Atlanta").
Look for firms that complement your skillset and industry experience.
Most boutique firms don’t openly advertise subcontracting roles, but they may still hire nonemployees for projects.
Make Connections
Use LinkedIn to identify key people who work at the boutique firms you’re targeting.
Look for shared connections who can make introductions.
Reach out directly to decision-makers when necessary.
Craft Your Pitch
Focus on the specific problems you help solve rather than just listing your skills.
Highlight your relevant industry experience and your focused expertise. What makes you stand out?
Explain how your work could complement their existing services.
Remember that boutique firms are more likely to value specialty expertise and cultural fit than larger agencies do. When reaching out, emphasize your ability to work seamlessly with their team alongside your other qualifications.
Understanding Payment Types: W-2 vs. 1099
Many subcontracting arrangements pay on a W-2 basis, treating you as a temporary employee rather than as an independent contractor. Although a W-2 payment is faster—you’ll be paid every two weeks—being paid on a 1099 business-to-business tax basis is a smarter long-term decision. For the full explanation of “why friends don’t let friends W-2”, I recommend my prior article, but basically, a 1099 arrangement will enable you to take advantage of business-owner tax deductions and more robust retirement-saving options.
Contract Essentials
Before signing any subcontracting agreement, it’s important to carefully review three critical areas so that you can protect your interests. Remember, contracting is a process. It’s not unusual to request changes!
Payment Terms
Will you be paid as W-2 or 1099?
How quickly will you be paid after submitting your invoices?
Non-Compete Clauses
After you stop working as a subcontractor, how long are you restricted from working with the end client directly?
Are there restrictions on working with the client’s competitors and, if so, for how long?
Intellectual Property Rights
Who owns the materials you create while working as a subcontractor? It will likely be “work for hire” so the client will own it, but what can they do with it, and for how long?
Can you retain the rights to your pre-existing tools and templates?
Are there restrictions on using similar methodologies with other clients?
If you don’t understand the legalese in the contract, ask an AI tool to explain it in plain English for you. You may not even need the help of an attorney to request changes to your contract, but if you do, I recommend hiring one through UpCounsel.
The Bottom Line
While subcontracting can boost your cash flow, it’s best to treat it as a stepping stone rather than a long-term strategy since you’ll be giving up a significant chunk of your revenue. Be sure to continue building your own business so that eventually, you’ll have your own clients and keep 100% of what you earn!
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