Contractors' Questions: How to collaborate as a contractor?

Contractor’s Question: I’ve read about collaborative IT contracting and, with National Freelancers’ Day 2012 only about five months away, I’d like to join forces with some of my freelance colleagues. Are there any practical tips to ensure such a commercial collaboration will succeed? I really would like to forge some sort of partnership with a few similarly skilled consultants although I admit; I’m a bit reluctant about having to share my profits as a result of sharing the workload!   

Expert’s Answer: Firstly, you are not alone. Creative and media industries seem to be increasingly looking at collaborations and so-called ‘start-up teams’ for some of their projects. In fact, any project-based brief that requires a variety of skill sets will fit with collaborative working. The best scenario however is where a group of freelancers all have complimentary or matching skill sets.

Skills all sorted, you should then, from the outset, agree the financial risks and rewards – the ‘who gets what’ (so consider financial splits), when and who bares any liabilities, both for tax (depending on the commercial structure of the collaboration) and business risk, in the event something goes wrong.

In terms of that commercial structure, you and your team will have to decide whether to each set up and each run your own limited company, or work out of one joint company. This needs to be thought-through and a good accountant can advise you of the options.

Next, ensure commercial arrangements are in place. So contracts must make clear the ‘who does what,’ with particular attention to any high level obligations or responsibilities of the individuals involved, alongside consideration of any sub-contracting arrangements.

Lastly in terms of practical steps to take, ensure the vetting of background references of all the individuals involved in the collaborative hub is thorough and, ideally, documented.

In response to your reluctance to share your profits, it is difficult to comment without knowing more about the project and how its workload is to be apportioned and to whom.

Consider financial splits, as mentioned above, but be aware that the mere presence of other specialists in your team (even if their contribution is going to be less than your own) may make your bid, tender or application more attractive to the prospective client. This way of working is not for everyone, perhaps because its chief drivers are non-traditional – social media and online networking. Still, that boils down to word-of-mouth referrals, without which so many smaller businesses wouldn’t be able to survive and thrive as they do.

The expert was Martin Hesketh, founder of contractor accountancy firm Brookson.