86. How to Manage Contracted Employees - recurringprofit.com

86. How to Manage Contracted Employees

“When or why do you hire contractors versus employees?”

That’s a frequent question we get asked a lot. 

Because the truth is hiring a team can be a lot. It’s not like we’re taught how to do this. Maybe you’re familiar with it, if you have a business degree or you have entrepreneurial parents. But hiring a team definitely doesn’t have a playbook of how to do it. 

Sure there are TONS of books that give you different strategies of how to hire. But that doesn’t necessarily mean that’s the right way to hire for your business. 

In this episode, I’m sharing how to manage contracted employees and the differences between contracted employees and permanent employees. Plus how I like to hire for my businesses. 


1:22- Why Do You Hire Contractors Vs. Employees?

4:43 – What is a Contractor?

5:25 – Who are Employees?

6:05 – Six-Figure Business Owner View

8:15 – Three Things Course Creators Specialize In

10:55 – Hiring Myth

14:30 – Money Needs to Come Back in 30 Days 

17:45 – Setting Expectations for Contractors 

21:14 – Building a Customized Team 

25:30 – Employee Purpose 



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How to Manage Contracted Employees

Team Margin 

I came into this industry without a business degree and knew nothing about this topic. And I’ve learned a lot through a lot of mistakes. 

You want your team margin to be anywhere from 20 to 40% in total collected revenue. If you want a further breakdown of what that means, head back to episode 63 – What Should My Profit Margins Be?

Of course that 20 to 40% margin isn’t black and white. It’s not a rule. You’re the leader of your company at the end of the day. 

If you’re under six figures, you’re probably better off having contractors instead of full-time employees. 

What is a Contractor? 

I view a contractor as someone who specializes in a specific skill. You can tell them a clear goal, what’s worked in the past and then they take that information to improve that process and get you to your goal with little management on your end. 

So it’s really great for hitting short-term goals consistently in a seven to 30-day goal period. Keep in mind this is just how I view contractors. 

For you to have the best contractor experience, you must set goals, what you expect your return on investment should be and your expectations for them. To manage contracted employees successfully, you have to ask the right questions too. You should be asking them questions like:

  • How do you best communicate?
  • What’s your management style? 
  • Do they feel confident in your goals?

Who are Employees? 

I view an employee as someone who specializes in an area of the business that consists of multiple skills instead of one specific skill. This is a long-term play. Employees are for maintaining short-term goals and setting the business up to hit long-term goals too. 

Employees serve the purpose of maintenance and growth. 

Think of your business as having three pillars. Recurring Profit’s pillars are growth, finance and client success. You have the maintenance of those pillars – which is every single daily, weekly and monthly task that it takes to fulfill that pillar.

Then there’s the growth of that pillar – which are the goals that pillar has. For instance, growth is probably a student goal. Let’s say, you want 40 new students this month. An employee or a contractor can hit that goal. 

It’s up to you on how you want to manage it. 

Six-Figure Business Owner View

When I was making six-figures as a business owner, I used contractors differently than I do now as a seven-figure business owner. Back when making six figures, I had a lower management fee for a contractor. I chose the exact contractors I needed to get the results I wanted.

As a course creator, I need to specialize in three different things: traffic, sales and program delivery. I specialize in all those things because I’m the one building my business from the ground up as a course creator. 

I delegate the solution instead of outsourcing the problem. For example, if your sales aren’t working, you can’t outsource your automated sales machine to an agency because you won’t understand any of it. You won’t be able to understand how to manage the growth of the thing that’s creating the growth of your company.

I always recommend those are the three skills that people get really good at. And those are the skills I teach inside Recurring Profit. That’s what sets course creators up for their biggest success in their business. 

Money Needs to Come Back

As an entrepreneur, you have to break down the math. When you’re spending money, how are you making money back within 30 days? 

When you have money going out, you have to make sure that that money is creating more money to come back in within 30 days or less. 

Now as you grow, you’re going to be able to have more money stored and might be able to extend it to 120 days, which is what our business does now that we’re a $6 million business. 

Terrible Hiring Advice

In the past, I’ve heard that you should hire for the growth that you want. And that is just terrible advice. Because the hiring process doesn’t have to be complicated. 

You should delegate the growth that you want to a very simple, streamlined team. 

Building a Customized Team 

Around my $500K mark, I hired my first part-time employee. She worked about 20 hours a week. As we grew, I realized employees are more for areas of the business. 

I would NOT recommend creating an accountability chart and reverse engineering what roles you need. That’s what’s typically taught – scrap everything and look at the roles. Then, you start to plug people in. And I don’t think that works well.

It’s failure after failure if I do it that way.

So I always go back to that streamlined approach and think about what we specialize in – traffic, sales and program delivery. Then I look at the areas of expertise that I need. 

I’ll take an employee and plug her/him into an area that she/he is best at. If she/he fits my company values, then I know that person is going to deliver and succeed. Once I know that person’s strengths, I’ll plug her/him into that area of the business. Then, I’ll use contractors to plug the holes. 

The key is knowing how to customize your hiring process. And avoid looking for all the “rules” of how to manage contracted employees and the hiring process overall.


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