Paper contractors

19325 Views 46 Replies 26 Participants Last post by untdflrcoatings, Nov 23, 2015

CarpenterSFO

Discussion Starter · Jan 29, 2014 (Edited)

In the S.F. Bay Area there's a resurgence in paper contractors right now - contractors without employees, who don't perform any physical work. I'm seeing it in small jobs - even kitchen and bath remodels - where that practice hasn't been common for a few years at least.

Prospective customers have started routinely asking whether I'm going to perform the work myself, and whether I'm going to sell the job. They're asking because they have friends who have had projects done, and the people who show up to do the work aren't with the guy who signed the contract, and sometimes have never heard of that guy.

I'm trying - not very successfully - not to be judgmental about it. It's a legitimate model - I know that there are C.T. members who are non-performing primes, and probably good ones too - but it feels more like a lot of folks are getting into it who think there's easy money to be had.

Is this happening in other places, too?

- Bob

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Jaws

· #2 · Jan 29, 2014

That's pretty much every contractor here.

I did the numbers, and I make more money with my own guys, since we are doing primarily remodels, docks and decks. Otherwise, I would definitely sub everything. A lot less headaches.

Then again, a lot more headaches in other areas. Like control.

No matter what my model, I will always have a set of nail bags and tools in my truck. I'm not subbing out a small portion of work any kind except MEPs. Painting too, I hate that chit. Lol. That would be embarrassing, and unprofitable.

If I were doing primarily custom homes, I would definitely sub everything except trim work. I can't believe what guys get things done for around here. It makes it hard to sell a new home with my crew.

There is a lot of good PC here, but the good ones arent really PC. They came up through thr trades and just hung up their bags. The ones I call paper boys are the ones with no trade knowledge or experience.

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Jaws

· #3 · Jan 29, 2014

There is one major player in Austin, he does great work, and has zero trades experience. He does have a lot of knowledge though. He only does remodels, from baths and kitchens to additions. He has two PMs and two admin people. I would imagine he is well over 3 million a year, maybe a lot more.

They sub everything, no self performing. They have a sub for demo, clean up, everything.

I know another builder whos projects ive judged officially, primarily a remodeler, who does the same. He was an accountant before.

They have great reps. It takes all kinds

Texas Wax

· #4 · Jan 29, 2014

I Agree with John, especially on the PC's who came up through the trades.

The "questions" are:

What is the value to the home owner? How are the true PC's, as John defined, winning the customers over? $, quality, pure BS?

How can a 'self contained' contracting company be of a greater value than just "the same people who sold the work doing the work"? Is it a regional perception thing among the potential customers?

At my personal stage of the contracting game I need to be heavily involved in the work and straight up enjoy it. From a marketing and real competitive edge standpoint, these questions have been very challenging to effectively answer. Cause hell ya I'm better than everyone else, aren't y'all. :whistling But that doesn't seem to be the answer to the questions of the potential customers eyes to leverage against a paper contractor. It really seems that things are moving fast toward being a commodity. All are equal, except price.

.... or am I totally off track

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rotarex

· #5 · Jan 29, 2014

Lots here in Toronto, People love a Sales Man. but The government wants this, as the more screw ups there is the more money the system makes.
there are more paper contractors than there are employees here.

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mako1

· #6 · Jan 29, 2014

I live in a small town of 21,000 and it is effecting us here too.Various adds for crews and come to find out it's a middle man trying to get contractors to do work for HD.
Here's one that is very funny to me although unrelated to HD:

GENERAL CONTRACTORS NEEDED IMMEDIATELY - Mattoon (Mattoon & Surrounding)

We are seeking Experienced General Contractors to complete repair efforts on numerous residential properties.

This is an ideal situation for your company to be successful by expediting work and getting paid without having a storefront or doing marketing. We bring you the opportunities, and once we are selected, all you need to do is get it done - fast and 100% complete.

Requirements:

• Experience in the residential repair/construction business with an excellent track record and references
• Appropriate Insurance - General Liability, Workers' Compensation
• Ability to perform/manage -- Repairs, Heating/Cooling, Electrical, Plumbing, Painting, Roof Repairs, Mold Remediation, Estimating, Etc.
• Own reliable work vehicles and all equipment necessary to complete, document, and upload work (computer, digital camera, cell phone, GPS, etc.)
• Able to meet financial requirements which includes funding projects until compensation is issued (60 days out)
• Have crews/staff immediately available to complete work orders within 24 - 48 hours (or otherwise established schedule) after acceptance/approval including all paperwork
• Motivated, reliable & organized with outstanding character & integrity

Location: Mattoon & Surrounding
Compensation: Per Job
This is a contract job.
Principals only. Recruiters, please don't contact this job poster.
do NOT contact us with unsolicited services or offers

Here's the best part:

• Able to meet financial requirements which includes funding projects until compensation is issued (60 days out)

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Warren

· #7 · Jan 29, 2014

The two contractors that I work for the most are both PC's. They are also both 2nd generation builders. Both of their dads were primarily PC's as well. What do they bring to the table? A quality reputation, outstanding subcontractors (moi!), an eye for detail, and excellent communication. Both of these guys do new builds and high end remodels.

Around here, in homebuilding, it is probably 2/3 Paper contractors. You also have the tract home builders here who are all exclusively PC. Wayne Homes, Drees, Pulte, Ryan, etc. Most of the other remodeling companies are split, but it depends a lot on the services offered.

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Roofcheck

· #8 · Jan 29, 2014

Evolution of the contractor. As it is said over and again here on CT running a business, and many tradesman are not businessmen.

Operating a Contracting business is just like operating any business just a different product.

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mako1

· #9 · Jan 29, 2014

I do understand the point of it and maybe just a bit jeloius because I'm not smart enough to do it myself,but ,lots off these people are taking advantage of the contractors who are slow in this area and have to feed their families to put money in their pockets while screwing the contractor.I could not sleep well at night .Just an ole mans opinion that has been in the business a long time and always worked for what I have.

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Texas Wax

· #10 · Jan 29, 2014 (Edited)

Roofcheck said:
Evolution of the contractor. As it is said over and again here on CT running a business, and many tradesman are not businessmen.

Operating a Contracting business is just like operating any business just a different product.

PC and self contained contractors are both marketable variations on a similar product, in the business sense- Chevy vs Ford truck thinking.

Home Builders benefit from subbing everything out, but on smaller baths and kitchens the time spent getting, organizing managing subs plus their mark-up (if they have any) jacks the costs. Slim margins for the PC a bit more meat on the bone for an expereinced self contained contractor.

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CarpenterSFO

Discussion Starter · #11 · Jan 29, 2014

Interesting responses. I'm seeing PCs who don't manage the job - they make the sale, then look around for a general who has a clue. I don't know how they got licenses. I'm trying to figure out how to respond to it.

CarpenterSFO

Discussion Starter · #12 · Jan 29, 2014

Texas Wax said:
... Slim margins for the PC a bit more meat on the bone for an expereinced self contained contractor.

Yeah, what got me thinking about this was that situation - a recent post on C.T. from a paper contractor operating on slim margins, trying to figure out how to cut costs by finding the cheapest subs.

Rockmonster

· #13 · Jan 29, 2014

There are a fair number of them here as well, and the number seems to be growing. I've heard anecdotal evidence that owners like having the professional looking front, visiting an office, sitting at the conference table......not having to muck around the job with scruffy workers......having said that;

A few have Ivy league educations, and are likely far more comfortable on the 'cocktail party circuit'......

A few are real estate brokers who make it coming and going....

And some are born bean counters without any hands-on experience, but with little or no compunction when it comes to grinding and low-balling....

My neighbor across the street used one of these guys (the latter), and his house is an absolute joke......cheapest materials, cheapest subs, real hack job.......but it's his pride and joy, his first house (at age 60).....so I nod politely while helping him fix something seemingly every two months......

Yeah, it's everywhere.........

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Rio

· #14 · Jan 29, 2014

CarpenterSFO said:
Interesting responses. I'm seeing PCs who don't manage the job - they make the sale, then look around for a general who has a clue. I don't know how they got licenses. I'm trying to figure out how to respond to it.

One way to respond (I've heard this on the radio when a company is touting their services) is to proudly proclaim that your company does its own work.

Another possibility is to contact these PC's and see if you can be their GC; of course for that to work they have to price the job so you can make yours while they make theirs.

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txgencon

· #15 · Jan 29, 2014

There are a number of them around my area. One of my neighbors just had a master bath remodel (completely rearranged). Even the project management was subbed out.

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91782

· #16 · Jan 29, 2014

Times have changed. the PC model seems to be the norm around here - from Home Depot, to (nearl) every Insurance job & Kitchen & Bath remodeler to window & siding installer.

Hell, I've spent much of MY life as a PC, so has every builder with names like Pulte, Toll Bros, Centex, Horton, etc.

You differentiate yourself factually: all your people (starting with you) who have hands on, exceptional experience and reputations, as (insert long list here) will attest to, make you desirable.

The minute you move from production/insurance work to custom or specialized crafts, you put yourself in a different category.

I do what I do well, But I would never be able to compete with the guy who turns out handcrafted, labor intensive products like mantels, libraries and the like.

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CarpenterSFO

Discussion Starter · #17 · Jan 29, 2014

One reason these answers interest me is that it hasn't been like that around here. On small to moderate-sized remodels - up to $1MM - not only do contractors usually run their own crews, but they often put the bags on personally when something really needs to happen.

I've been on site on a few smaller 100%-subbed jobs, and the quality has been pretty casual. MEP's usually good, but flooring, cabinet installs, and finish carpentry are all just big-box quality. Homeowners seem proud and satisfied with work that I'd be embarrassed to claim as my own.

I'm definitely going to have to change something up; maybe just my advertising and sales routine; maybe something more.

Texas Wax

· #18 · Jan 29, 2014 (Edited)

CarpenterSFO said:
and the quality has been pretty casual. MEP's usually good, but flooring, cabinet installs, and finish carpentry are all just big-box quality. Homeowners seem proud and satisfied with work that I'd be embarrassed to claim as my own.

However you slice it, that's the pivot point . Fulcrum for, dare I say, leverage.

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BamBamm5144

· #19 · Jan 29, 2014

What do homeowners prefer?

The owner never involved, owner somewhat involved or owner always on the project?

I think that when someone hires for a kitchen remodel they expect a bunch of sub contractors and you to be the main to coordinate it all.

I think when people hire for something such as a new roof, they expect at the very least to see company employees and vehicles and not other contractors around.

A paper contractor can be very successful if they've used their hands before. I rarely run into anyone who has never physically done the work they are selling to be as knowledgeable as those who have worn the tool belts.

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Jaws

· #20 · Jan 29, 2014

CarpenterSFO said:
One reason these answers interest me is that it hasn't been like that around here. On small to moderate-sized remodels - up to $1MM - not only do contractors usually run their own crews, but they often put the bags on personally when something really needs to happen..

This is how I came up. I worked for my old man until I was 18, he wore his bags everyday, with 4-10 guys. He framed and trimmed huge customs for two big builderd here, and built 3 or 5 3 or 4 bedroom ranches every year. Maybe a hand ful of additions, never a remodel. A lot of decks.

I didnt get into remodeling until I was about 25. I cant imagine subbing most of it, especially on a small job like a kitchen or bath, it would be a control nightmare.

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