[Nathan]

For those of you who use subcontractors. What % of the contract price do you usually pay them?

- Nathan

 

[Floorwizard]

75% if they have workman's comp, less if they dont, and we will provide the comp.

 

[Grumpy]

75% if they have workman's comp, less if they dont, and we will provide the comp.

We don't pay in percentages. We give them a flat rate going into the job and unless something unknown comes up that's what they get when the job is done. We usually pay per square of roofing or siding. We actually have open agreements with them where we don't need to ask them before each and every job because we know what our charge is going to be.

Typically we charge as much for profit as we would for installation. That means if the sub makes $50 per square, we too make $50 per square. Then ofcoarse add materials and debris.

 

[Floorwizard]

Maybe I am misunderstanding the question. A better way of putting it is:
we have a 25% profit margin put on our labor. Looks like grumpy has a 50% margin.

 

[Nathan]

Let me ask it a different way.

You bid a job for $150 (for the sake of easy math)
$50 for materials.
$100 for labor, advertising, overhead, etc...

How much of the $100 does the sub get?

I've heard estimates anywhere from $35 - $65.(or 35%-65%)
Assume the contractor has his own tool and insurance.

-Nathan

 

[Grumpy]

Let me ask it a different way.

You bid a job for $150 (for the sake of easy math)
$50 for materials.
$100 for labor, advertising, overhead, etc...

How much of the $100 does the sub get?

I've heard estimates anywhere from $35 - $65.(or 35%-65%)
Assume the contractor has his own tool and insurance.

-Nathan

Well let me show you a spread sheat I did today (edited for easy math)

125 michal
125 profit
250 cedar
50 garbage

The profit is for overhead, my commission etc. What I charged the owner was $550. Michal is our cedar siding sub contractor. This formula changes on small jobs however. I usually double the subs cost because on small jobs the profit isn't high and my commission is based on profit not gross.

 

[Floorwizard]

All materials are of various margins, but the labor is figured what it is ( what we pay the installers) then we add 25% profit margin onto the labor and add it to the estimate.

 

[Nathan]

This is an interesting topic to me. Does anyone work for a company that only uses Subs and doesn't have any labor working directly for them?
If you could really get a way with paying a Sub 50% of a contract price minus materials it could be very profitable. (I would think)
Is this what your trying to do Grumpy?

What are the ups and downs to this?
Lack of control would be one Con.
Also, if customers found out you had no real work force it could look a little shaddy.

-Nathan

 

[Nathan]

All materials are of various margins, but the labor is figured what it is ( what we pay the installers) then we add 25% profit margin onto the labor and add it to the estimate.

The flooring trade may be a little different than other trades. You guys are making a lot of your profit off of the sale of the materials. Trades like painting don't really make much (if anything) on the products. We are strictly selling a service.

Of course when your using subs your not really selling a service either...
Your more of a middle man taking over selling and advertising for whoever the sub is.

 

[Grumpy]

This is an interesting topic to me. Does anyone work for a company that only uses Subs and doesn't have any labor working directly for them?
If you could really get a way with paying a Sub 50% of a contract price minus materials it could be very profitable. (I would think)
Is this what your trying to do Grumpy?

What are the ups and downs to this?
Lack of control would be one Con.
Also, if customers found out you had no real work force it could look a little shaddy.

-Nathan

I know some companies that use only subs. Infact the largest roofing companies in Chicago don't have any employees other than office and sales. One that I used to work for uses the same pricing structure that we use, except have been known to add more than we add!

Yes Nate, it's our goal to make as much as the sub makes. Sometimes we make more and sometimes we make less but it's always our plan.

We do have a real work force but we sub our gutter. We sub our siding and we have so much roofing work that we sub some of our roofing. The beauty is all our subs work regularly it's not too shady, but we try very hard to hide the fact that they are subs, short of lying.

Lack of control is definetly a con. Scheduling is the hardest part. Unless your sub works for you every day, you can not really control his schedule. All of our subs do what we say, in regards to how to do the job. If we say do soemthing a specific way they do it that way or go back the next day to fix it.

The funny thing is in my area the way we do things is the norm. Subs are used to handle work over load and under load. We dont have enough gutter or siding work to hire full time guys so we use subs. We have too much work for one roofing crew so we had to hire a second and third on a temporary basis.

 

[Nathan]

How much control can you have over subs before you start getting in trouble with the IRS?

I've heard of a few companies who classified their workers as subs but the IRS considered them employees because of how they structured things.

 

[Grumpy]

How much control can you have over subs before you start getting in trouble with the IRS?

I've heard of a few companies who classified their workers as subs but the IRS considered them employees because of how they structured things.

Like I said in my previous post I Know companies who use only subs. They have them use special sub tax forms. They also give them no tools or equipment. Just materials and the address for the day.

 

[ProWallGuy]

Trades like painting don't really make much (if anything) on the products. We are strictly selling a service.

I disagree.

I usually charge $1 less than retail per gallon. My cost is considerably lower than retail. Afterall, it is my time and gas thats wasted by picking up materials, waiting for mixing, etc., and the customer thinks they are getting a deal.

I also tack on a sundry charge to every job. Depending on the size of job, or if its paper or paint, its usually a percentage of the overall cost. I buy all my sundries, such as plastic, tape, sandpaper, thinner, wallpaper primer, oil-primer, etc. in bulk once or twice a year. I usually make a nice profit off materials on every job. This helps if I underbid on paint for a certain area, then its covered.

I also make notes in a customer folder if I find myself on the phone with them repeatedly for color consultation, paper measuring, etc. and pad that time into the final bill.

I work to live, not live to work

 

[Nathan]

I usually charge $1 less than retail per gallon. My cost is considerably lower than retail. Afterall, it is my time and gas thats wasted by picking up materials, waiting for mixing, etc., and the customer thinks they are getting a deal.

Well, it still doesn't really look like your making money off of the paint, only covering your costs to buy it. The extra money your charging is only covering your time.

Whether your making money or not on the paint its still not on the same scale as something like Flooring. The materials for painting aren't very expensive all things considered.

How much of a discount are you getting on your supplies?

Mark.... who much of a discount do you give to contractors?

-Nathan

 

[Blu Roofing]

The joys of sub-contracting. Most of the time the sub does not carry adequate insurance and often lacks the motivation to ensure quality as does the general. If a sub can meet your expectations reward them. If you have to baby sit more than not pay accordingly.

 

[Blu Roofing]

Great post.

 

[Cole82]

Old thread revival winner goes too

Blu Roofing!!!


Congratulations you have posted on a thread from 2003

 

[griz]

and not just this one....:laughing:

 

[ohiohomedoctor]

Nathan, grumpy, pro wall guy? Who are all these people?

 

[Oconomowoc]

Well played.