What's the difference between a subcontractor and a prime contractor?
In this video, I'm sharing the difference between subcontractor and prime contractor
plus how you can determine if you're ready to sit in the prime position.
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The information I'm sharing with you here today is the same thing I teach my clients
and that's helping them get positioned and be ready for the prime contracting position.
Let's dive into the difference between a subcontractor and a prime contractor.
So, here's the difference.
Let's start with the subcontractor, and I have my notes because I made a list of things,
and I want to make sure I get them all out to you because I want you to really understand
the difference between a subcontractor and a prime contractor.
The reason is that a lot of times, I have individuals come to me, they're just starting
their business, and they think they're ready for the prime position, and a lot of times,
they are not.
It hurts their business because here's what happens.
If you don't have your approach right and your approach tight, you will get passed over
on a lot of opportunities, and you'll wonder why it's not working for you.
Really, it's all in your approach.
You need to know how to approach the opportunity correctly.
All right.
So, let's dive into the subcontractor.
As a subcontractor, yes, you're still your own boss.
You have your entity set up, whether it's the LLC, a corporation or LP or partnership,
whatever it is, right, you have a legal business set up.
A lot of times, what happens is it's just you.
It's just you as the owner running your business, and on occasion, you may have a spouse or
significant other that is working in the business with you.
It may be just one person, sometimes two, where you have a husband and wife or significant
other, something like that, but even still in a lot of those cases, there's still only
one owner of the business.
Now, as a subcontractor, when you compare yourself to a prime contractor and you guys
are working a project together, you have a lower risk involved in the contract.
So, your risk level is lower than a prime contractor.
Another thing is, that's less, is your profit margins.
A lot of times, subcontractors may only get paid for time and materials or something like
that, so your profit margins are not the same as if you were sitting in the prime position.
Another thing is you're not an employee, so don't get that confused.
You're not an employee, and there are some other things involved with not being an employee
versus being an employee.
I'm not going to explain that here because you probably already know that, but just know
you're not an employee.
You have your own company even though you're working for another company.
Also, as a subcontractor, you still may have to cover your own ...well, you should hopefully
if you're doing it correctly.
You're covering your own taxes, insurance, and healthcare.
If you're a legal entity here in the United States, you should be filing taxes, however
that works out for you, just depending on the type of entity structure, but some kind
of way you should be filing taxes on the expenses as well as income of your business.
You may need a CPA for that, but you should be filing taxes, and you're covering your
own taxes, meaning if you think about when you were an employee, your employer took the
taxes out and paid them for you.
Well, now as a subcontractor in your own business, you have to pay your own taxes.
Another thing, this is actually a benefit.
I should have done these as pros and cons, but another thing is you get to learn how
to submit paperwork as a subcontractor.
So, it's not like you're going in blind.
It really gives you an opportunity to learn how to be a prime contractor.
You also get to learn about subcontractor agreements and things like that.
I think that's really, really important.
So, let's recap this real quick, and I'm going to say it as a pro and a con.
So, here are the pros.
You own your own business.
There's low risk.
You're not an employee.
You have to cover your own taxes.
That's neither here nor there.
That's either way.
You get to learn the business, the industry from the business side.
You get to learn how to submit paperwork, how to be a subcontractor.
Those were the pros.
I'm sorry.
Those were the pros.
The cons are the profit margins for one.
Your profit margins will not be the same as if you were the prime.
I talk a lot about that in other videos.
I mean, that's really the biggest con, I would say, is the profit margin, but some people
like to stay in a subcontractor position throughout the journey of their business, and there's
nothing wrong with that.
It can be very, very lucrative when you position yourself correctly.
Comment below.
Are you a subcontractor or a prime contractor?
Let's have a conversation about that down in the comment.
Okay, okay, okay.
Here, we get into the good part.
So, what I'm about to share with you really will give you a clear understanding of the
difference between a subcontractor and a prime contractor, and it should allow you to determine
right now if you're ready to sit in a prime position.
It's a lot more than having experience and maybe the cash flow in your bank account to
float the project.
There's much more to it than that.
As the prime contractor, you have more responsibility.
Here's the other thing, more money flows to you and through you, meaning your bank account,
and you have to be able to control the money, manage the money, and track the money.
It's very, very important that you're able to do that.
So, what does that mean?
You need to have your financial house in order, not just the money, having a bank account
set up.
You have to manage your finances and not just in your head, not just through the bank account.
You have to have documentation, which means you need an accounting system.
Also, as a prime, depending on the type of work, you're going to have some other insurances
that you may need to have.
Maybe you're required to have bonding, so that just depends.
A lot of times, as a subcontractor working under a prime contractor, sometimes, you can
get away with not having bonding or insurance.
It just depends again on how you structure the deal.
We talk about that in my Contractors Edge Bootcamp, so don't worry about that.
As a contractor, you'll be dealing with lines of credit.
More than likely, you may have to buy things from vendors, maybe rent equipment, just depending
on what it is.
You'll have lines of credit that you need to manage as well.
You have crews that you need to deal with.
You'll have the subcontractors that you need to deal with.
You're going to be dealing with a lot more people than that subcontractor where he may
only manage himself and maybe another person or something like that.
You also, as the prime contractor, deal with the customer.
You're the one making sure that whatever the scope of work is, that you're fulfilling it,
it's being delivered, that you're keeping to your schedule, that you're staying under
budget, and that you're making the customer happy.
That's the responsibility of a prime contractor.
Of course, your profit margins, yes, they can be larger as a prime contract definitely
than as a subcontractor because as the prime, you're going to be watching the numbers that
your subs bring in.
Now, you know the difference between a subcontractor and a prime contractor.
If you like to dive deeper into the subcontractor versus prime contractor and get your business
positioned correctly to sit in the prime contractor position, then I do want to invite you over
to the Contractors Edge Bootcamp.
The doors are open.
People are getting in right now.
They're doing work.
They're getting their businesses prepared, some are getting positioned already, and we
have not even started with the live sessions yet.
That's just through the course content.
So, come on in.
Learn how to get your company positioned, and be able to bid contracts.
That's the Contractors Edge Bootcamp over at feliciastreeter.com/bootcamp.
I'll put the link down below as well.
All right?
So, let me tell you a little bit about the Contractors Edge Bootcamp just so that you'll
know what's in there for you.
Here's what you're going to accomplish inside the Contractors Edge Bootcamp.
One, you're going to get prepared, so no matter where you're at, we're taking you from where
you're at, because these are people just starting out in government contracting, getting you
to the deal table.
That's what we're doing.
How are we doing that?
Just depending on where you're at, you'll pick up at that place.
It's self-paced.
You'll start where you're at.
Now, if you're just getting started, one, you're going to get prepared, meaning you're
going to do your registrations as far as getting registered in sales, picking your NAICS Codes
doing your certifications if you have not done that.
After that, then you're going to dive into your company.
What is your current capacity?
You need to know that so that we can figure out who's your customer.
Okay, who's your customer?
You're going to know who's your customer.
You're going to figure that out.
You're going to find out what opportunities they have coming down the pipeline.
If they have a forecast out, you're going to learn how to find that and read that so
that you can prepare because you're going to actually prepare for those opportunities.
The next thing you're going to do is you're going to learn how to bid.
You're going to put together your own bid process.
You're going to use my bid formula spreadsheet, and you're going to have your system in place
to actually bid contracts.
After that, you're going to actually break down a solicitation, pull out the requirements,
and then you're going to take that information and create your first proposal.
You'll have a proposal template that you can use as you're bidding other opportunities.
No, you will not use the exact same template, but here's the thing.
A lot of information will be the same.
The scope of work usually always changes, but you'll learn how to do that inside of
the Bootcamp, so don't worry.
You're also going to create your capability statement if you don't have that.
I have three different versions of templates in there waiting on you that you can use,
or you can create your own, but at least, you'll know what information you need to include
in your capability statement.
What are you leaving with?
You're going to know how to bid.
You're going to know how to read solicitations.
You're going to know how to put together a proposal that's responsive.
You're going to know how to go out and find opportunities and actually bid, and you're
going to know how to get to the deal table.
Those are the key components of the Contractors Edge Bootcamp.
We even touch on partnering relationships.
How to do teaming arrangements.
How to expand your resources is very, very important, especially when you're just starting
out.
All of that is waiting for you inside the Contractors Edge Bootcamp.
We go live with our sessions at the end of April, and I look forward to having you all
join us.
I can't wait to get started, getting my hands on your business and even work with you a
little bit one-on-one inside of this group setting.
Again, that's over at feliciastreeter.com/bootcamp.
A link will be down below.
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Share this with someone that you know, either they want to start a business, they just started
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They want to get into government contracting.
They're a minority-owned business, maybe a woman-owned business, a veteran-owned business,
service-disabled veteran-owned business.
The opportunity awaits you guys.
Sometimes, you just need to learn where it is and how to grasp it.
So, let's come on in, get prepared.
Let's get you prepared.
Let's get you positioned.
Let's get you promoting your business so that you can start seeing the profits come in.
All right, so until next time, I'll see you right back here real soon.
Bye for now.