Partnerships and subcontracting offer opportunities and solutions.
By Janet Preus
It’s not so complicated: there are certain things your company does very well, and there are other things that could be done more expediently by someone else. It could be a matter of expertise, time available, or any number of factors influencing workflow. The bottom line is that contracting arrangements are a fact of life in business—and getting more important, not less, as the digital age develops (and the economy sours). Partnering with other businesses—both as contractor, and subcontractor—can offer workable solutions for everyday tasks, and indications are good that there are plenty of opportunities to go around.
Companies collaborate to create successful projects
Many highly successful businesses simply don’t try to do it all. Spencer Etzel, president of The SEC Group, Wilsonville, Ore., says it is more important to do what you do well.
“We find it more efficient and price competitive to use various contractors, because you can’t be good at everything,” Etzel says. The SEC Group does the design, technical work and management for a variety of product lines in the tent industry. The secret, he says, is having the contractors you need, and knowing them well.
Roy Chism, president of The Chism Company, San Antonio, Texas, says subcontracting allows fabricators to utilize resources “absent the investment and learning curve associated with ownership, and otherwise simply not available in-house.” In his company, which makes fabric shade, shelter and identity products, “subcontracting eliminates substantial waste from the fabrication process, allowing fabricators to concentrate on better serving the customer with enhanced design, sales and service emphasis,” Chism says.
There can be many essential tasks associated with a single project that need to be subcontracted. Don Araiza, president of Eide Industries Inc., Cerritos, Calif., says they subcontract engineers, for example, who must be licensed in the state where the project is done. Araiza’s company makes shade structures, awnings and canopies, and industrial canvas products, and regularly hires subcontractors for landscape surveys, concrete footings, electrical systems and permits “that can be a drive down to city hall in a small town, but can take tons of time in larger cities,” Araiza says. Granting a subcontractor the power to act on your behalf can be a crucial time-saver.
Deciding when, what and with whom to contract boils down to who can do what, and according to Etzel, if two contractors are good at doing the same thing, “then it becomes [an issue of] who has production time.”
Already established relationships, built on trust and a working knowledge of each other, are ideal partnerships, but that’s not always possible. An entity “that is just so low-priced that it is difficult not to consider them” might offer a good alternative, says Mike Coffrin, director of sales and marketing at Visual Impact Signs Inc., Minneapolis, Minn., but in the printing business, he says, “there are lots of specialty tricks of the trade that come into play. The learning curve could get you in trouble.”
“In picking your subcontractors, they have to understand the business from day one. It’s going to be a lot of on-demand work on a short timeline,” Etzel says. “You’ve got to know your manufacturing source basis and your subcontractor’s strengths and weaknesses so the components come together with the right degree of integrity.”
“Primarily, we look for a match between the project’s requirements and the effective utilization of our equipment, software and expertise in support of that fabricator and the shop personnel,” Chism says. Subcontracting for awning, marine and tension structure fabricators is a rapidly growing segment of Chism’s business.
Businesses rely on subcontractors
Ralph Waldo Emerson is among those credited with saying, “There is no limit to what can be accomplished if it doesn’t matter who gets the credit.” In the world of subcontracting it is a point worth noting.
In fact, the customer doesn’t really care who is involved, Coffrin says, but it could be very important to the contractor to be the primary problem solver. “Oftentimes the person selling to the end user is in a place where they appear to be the full service provider, which is beneficial to them,” he says. A good subcontractor understands the relationship and is comfortable functioning in that capacity. “It’s the person that is in front of the customer that makes the difference,” he says.
Visual Impact regularly hires subcontractors for installation work. “A good example would be vehicle graphics [installation],” Coffrin says. “[The installers] work for all of my competitors, too, but don’t tell me who all they are working for. The client feels like [the installers] are employees of mine, but they’re not.”
Businesses need to rely on their contracting partners to educate their customers, too, since the customer may not have the critical base knowledge or expertise to be able to tell you what they want, Chism says. “They can give you a conceptual idea, but everything that goes into building it—they don’t know.” Working with experienced subcontractors can eliminate this hazard and result in a better end product. “End customers sometimes have unrealistic expectations. You have to be honest. That stops a lot of problems,” Chism says.
Honesty plays essential part in contracting agreements
Honesty with your contracting partner is every bit as important. The agreement, Etzel says, could be “everything from a handshake to a ten-page contract.” To get it right, clear and honest communication essential. “We would say, ‘we aren’t going to guarantee you, but here’s what we’re probably going to need to have. Is that a piece of work that you’d like to have?’”
The “must include” points in a contract, Araiza says, are a clearly defined and agreed-upon scope of work: the work to be done and all other contractual items such as permit acquisition, prevailing wages (if required), sales tax, completion dates, coordinating special inspections and providing reports. Photos of the completed project and written customer acceptance may also be required. Flexibility can be built into a contract, too. “You can be flexible on any of it, as long as you know ahead of time,” he says.
Chism agrees that clear communication, along with establishing standards, defining deliverables and expectations all go into a good contract. “The amount of detail that goes into it is strictly by the job and application. Start with the deadline and work backwards from there,” he says.
Although nothing beats a history of trustworthiness, a good contract can also eliminate concerns about proprietary company information. A one- to two-year noncompete clause will protect both entities in a contract, and make for a comfortable working relationship.
Araiza says that it is important to share information, but some people are reluctant to do so out of fear. “You can share, if you support it with a nondisclosure: I’m not going to go after your customers. If you honor your agreements, you’re fine.”
Etzel, too, says he’s always sharing some information, but designs can be copyrighted, and on special projects, they have a standard rule: until the general public sees it, it’s proprietary information. “We’ve done that with all of our clients and it’s always worked,” he says. After that point, cameras and tape measures copy anything they want, he notes. In fact, he says “75 percent of today’s tent designs are glorified copies of somebody else’s.”
Contracting works best when the partners understand and use the best tools available to communicate and deliver the product, and are current on new developments
“In our particular case we’re operating almost a virtual workroom,” Chism says, using their Web-based portal for ordering and file sharing. The Chism Company regularly subcontracts to design and make patterns virtually, with the actual product being made someplace else.
“Subcontracting becomes easy when the subcontractor is thoroughly familiar with his scope of work and employs professional communication skills,” Araiza says. A business trying to break in has to sell the potential client on its ability to perform, and be willing to make promises—to say “here’s my cell phone number. Call me twenty-four-seven,” and mean it.
Chism says that educational seminars and other industry events are a great way to keep up and learn about contractors. “You’re going to find out which company has what expertise. That’s a good resource for finding subcontractors to work with,” he says.
Internet presents numerous possibilities for business partnerships
In the digital world, Chism says, there is no barrier to partnership. “In fact, it is often far easier than constraining yourself to working within your four walls,” he says.
Because of travel and transportation costs, Araiza says it often makes good sense for them to use the services of a subcontractor who is outside the radius of their normal target market. In any case, digital technology “levels the playing field,” he says.
As more sophisticated digital capabilities become available, what is needed, according to Chism, is equally evolved standards. “The main issue is consistency. You have to be communicating in the same language, in the same manner and toward the same end, and working in unison with one another,” he says. “Like the early stages of the Internet, the establishment of standards and best practices throughout the industry is still evolving and developing. As these standards mature, a more universal work platform will evolve, supporting tremendous opportunities to the industry and facilitating its growth.”