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Discussion Starter #1
Looking for guidance from anyone who runs a business this way or if you have reading & info that I can dive into that would be amazing.

Our current model has 7 crews ranging from 4 installers down to 1 technician all in-house. The owner and I have discussed moving to all subs and 2020 just gave us the extra nudge in that direction. In Jan we helped 1 foreman convert over, put together a price list to work off of and so far it has gone alright, nothing amazing but it's working. With time I'm sure we will fine tune it, right now the biggest issue is the owner of our company basically giving him free lunch by allowing him to dump, operate one of our trucks and take certain materials on our dime obviously cutting into the profit.

Most materials the sub will be responsible for but the specialty materials that we are known for we provide. With this I am seeing waste material which is coming out of our end so I'm looking into changing that model to one where I resell them the materials but then I'm worried about them using the specialty materials on work not contracted with us.

I know there are a ton of pitfalls I can not see yet and I'm just looking to up my knowledge.

Thanks in advance for any help or links you can provide!
 

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You need to be very careful with how they do work for you, so they are truly subcontractors.

With tegard to them using your materials for other projects ... that could become a profit center if you handle it correctly.
 

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You need to be very careful with how they do work for you, so they are truly subcontractors.

With tegard to them using your materials for other projects ... that could become a profit center if you handle it correctly.
My initial thought on this was I am moving 2 of my guys up to "project managers" who will make rounds to oversee the sites as well as provide direct customer interactions. We cover a decent amount of area so in the future I'd love to have them sit on territories and also do sales. Figure if they are W2 with a bonus on jobs coming in under budget projects will be better written than my 1099ers who stop caring once the homeowner signs on the line.

As for the resale of materials I never considered it as a new profit stream... I like that, thanks!
 

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GC
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Without knowing what the guys are doing, it's pretty tough to evaluate the changes.
What I can tell you is that when you go all subs, you have to live with their schedules and pricing.
 

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If your able to maintain in house operations, stay there. Subs don’t use your trucks, dumpsters or materials. Cost will sky, you won’t sleep, & subs will pimp you like a 10 dollar ho & will get better rates on materials elsewhere. Lining up good subs takes a lot of time, effort, headaches & many no shows. Plan on schedule bumps, delays & some your schedule means nothing types.

Mike
 

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Without knowing what the guys are doing, it's pretty tough to evaluate the changes.
What I can tell you is that when you go all subs, you have to live with their schedules and pricing.
Yep, you will definitely lose a great deal of control.
 

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Sounds like you just want the same guys to work for you, but not as employees.

That may get a bit shady.

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“I’m worried about them using the specialty materials on work not contracted by us.”

In other words you want your own employees to bear their burden so you don’t have to.

You don’t want them to be true independent contractors in the sense that they may be in competition with you.

You want to make a good living while depriving others of theirs.

Lame.




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What is your main three reasons for moving in this direction?
If I had to guess, I'd say the same three any of us would use. Money, money. and more money.

Edit: Reading this it appears I may have had a stroke while writing it. Fixed now.
Does anyone else smell burned toast?
 

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Positively, If employee/“subs” were treated like this, they might appreciate the employer and the benefits more.

I worked for one locally popular deck and fence builder when I started out a few years ago.

They treated employees as independent contractors, debiting all the materials on the truck that went to the job site from the crew leaders account. The crew lead would get 60% and the helper would get 40% of the percentage of the gross sales dedicated to labor.

Some crew leaders didn’t make any money at all.

It was nice to make minimum wage.

I did make decent money one time on an hour long job putting in some blocking for handrails. I made 15 bucks an hour for a whole hour.


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Wow, came back here today when I finally had the chance and was surprised by the negative comments. I mean, it is the internet so I probably should’ve expected it so I’m going to be more descriptive and hopefully discount those comments and get some more constructive ones in return, maybe even from the negative nelly's!

What does my company do?
We are a full service foundation waterproofing and foundation structural repair contractor in the NYC region. Currently, besides the aforementioned services, I also provide masonry work (flat work but mostly building envelope repairs to brick, stucco, etc), basement egress solutions (staircases and windows), microbial remediation and indoor air quality solutions. Since I do a lot more than just “French drains” my guys are trained and therefore paid well. We currently present ourselves as the white glove service company with a great office staff and sales team and are known as the company that has systems and exclusive products that out perform the cookie cutter franchises.

Why did this change first come about?
One of our foreman who started with us about 12 years ago as a helper and worked his way up, started a side business for party rental equipment in 2019. He grew, times were great and then COVID happened. We were shut down for 2 months (owner’s decision to keep our guys healthy even when NYS deemed us essential) and the foreman was able to reposition his party rental business helping restaurants with tents. He approached us late 2020 saying he wanted to expand that but also wanted to maximize his guys time and income potential by working as a sub for us. The owner thought about it for a while then approached me to figure it out. Not sure where anyone got the “control” thing from as these guys are working other industries and jobs on the side as well. I sat with him, heard him out and he was eager to begin but didn't have much to work with. The owner of our company agreed to help him for a few months by providing him one of our dump trucks, tools to loan, a place to park, etc. with the idea to cut the cord as soon as he could. He has his own corp and has his own employees (2 of the 4 are former employees of mine that wanted to make the jump to him).

How are we operating right now?
I put together a basic sub agreement, hold harmless, etc and a price list. After evaluating the price list I think we made it a bit too much in his favor, but that’s the learning curve I guess. We want the projects to be good for them to keep them wanting to work with us. When I have a project that I think is best suited for his crew I contact him, run through the details and he accepts or denies it. As far as the materials and such what I was trying to articulate before is we have exclusives on some products for waterproofing. Currently we provide as needed for installations however there is an increased waste amount so we are thinking about going to the resale end and adjust the installation price list to reflect that. Readily available materials such as pipe and stone, wood, etc are all on the sub to acquire and yes that is reflected in the price list for the installer. Also it is worth noting that 1 other current foreman and 1 past foreman who left to work a union job both want in on this deal. We are holding back right now because as I stated some things need to be adjusted.

What differences have we noticed so far?
Since he was working for us for many many years the biggest thing I’ve found is where he was previously “dragging his feet”. For example an interior footing drain with us he was installing an average of 30 linear foot a day, now he’s pumping out an average of 50 linear foot and being done before 3pm (most recent one was 105lft in 2 days about an hour drive from the yard).

What changes am I thinking about making right now?
The most recent discussion between the owner and I have flushed out a few ideas. The first is I want to build something that is scalable so we can push into Jersey and Connecticut. Since we also have 3 potential subs now, and growing, I'm thinking breaking it down into territories and going from there. The owner wants to keep one in house crew so the territories will head off any conflict on whos install is whos.

We want to make sure that the guys know what they are doing when installing the work so we are thinking of making a certified contractor program and within that have training on installation methods and also arranging OSHA 40 classes because we don't want to be in the news for deaths or injuries. I'm not sure how this would work (remember I was here to pick your brains not get the ridicule and bogus "lame" comments?) but I know many other manufacturers (Grace) and big companies have certified contractor designations to help with the quality control.

Main three reasons for this (if not already covered)?
I would say the origin is that our #2 foreman brought it to light. We were honestly not happy with the idea that we would lose him so we were willing to hear him out and assist him if we could. Upon our consideration I would say the top 3 reasons are
  1. Ability to scale - With the current model of all in-house crews it would be a very large company. Currently we cover an area that is limited due to drive time alone and erecting satellite offices is something I have been pushing for since 2005 but the owner is complacent where he is. I've been pushing to utilize subs since 2011 but he was also hesitant as it's seen as a dirty word where we work casting visions of Home Depot parking lot workers. On the other hand I have worked other places in more of a GC role where we used electrical, plumbing, framing, etc subs and I never thought it was wrong. In fact I always thought a good sub with an established price list can make a GC shine in the other roles of marketing and sales.
  2. Ability to stay competitive - As I mentioned previously our guys are dragging their feet. Look, I'm not cracking a whip and, to an extent, I don't fault them for it but at the end of the day it's adding to the price of projects and we can't compete with the companies around us that carry the wrong insurance or do pick up guys from the Depot. Switching to this setup is already proving that his men are in and out quicker and his company is making more this way than if he remained an employee. Yes, he's making more and I believe he is paying his guys per-task to incentivise them. This means at the end of the day he is getting more money, his men are getting more money, I am getting more money per project and I can get more projects in on the calendar for the year. Especially during the busy season when I am 8 to 10 weeks out for an installation this speed will be great to win bids.
  3. Reduction in nonsense overhead costs - I have 10 dump trucks, 5 other vehicles, 3 skid steers, 1 med size excavator and all the headaches that go with that. Then I have all the warehoused supplies in my yard from pipe and stone to specialty membranes and tools for installation. I'm sure many of you here have been yelled at by dad when you left a wrench outside overnight or misused a tool. I swear these guys just didn't have that dad. The amount of money that goes into frivolous waste and forgetfulness seems to change really fast when it's tied to their paychecks.
So, what did I hope to get from this forum?
I was really looking for guys who have been in this type of environment and hear from them. At the very least I was hopeful someone would have a good resource, podcast, book, article whatever to point me in the right direction. Seems like more employees here than employers and there is a propensity to jump on the victimhood bandwagon. I can assure you that his guys that were making $18 & $22/hr with me are making more now while working less hours so I guess we're really horrible.

My current vision would be to retain an in house crew for our "home territory", grow our marketing and administrative end, increase intake volume for production by utilizing subcontractors thereby raising our gross yearly intake and once we have something good in place begin expansion into neighboring territories. I've met so many good workers who just cannot grasp the bookkeeping end or cannot be bothered by marketing. By this method we would be the machine that finds, sells, sets up finance and delivers the projects to the sub increasing his yearly volume as well.

Let me tell you about my past employee Alberto. Alberto was an amazing mason, he had hands of gold and I've never seen a better guy do flatwork or restorative work to a building. He tried to start a company twice and both times fell victim to the administrative devil. Not enough work coming in, not enough time to run the leads when he was tired after work, not enough time to answer his cell when he was doing installations and not enough money in the contract to cover his overhead and other factors many people do not consider. I would have so many conversations with him over the few years he was with us and it was always sad. He just wanted his own company and to be proud but, like most small businesses, he couldn't get past the bend.​
So why tell you that sad story? Well imagine if Alberto had the office staff to pick up the phone whenever it rang, to run the sales lead, to market his work, to collect the money and pay him out. Imagine if all the back end was done for him and he could just worry about the part he loved, his passion for getting up every morning. THIS is what I want to do, this is what I am good at. I'm ridiculed by the owner for being too fair and here for being lame when that's not the case at all. I want a symbiotic relationship where we all grow together.

Now. After all that please, Please, PLEASE tell me there's someone here who could assist me on my fact finding journey.
 

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You do not give subs a pricelist.

Sounds like you want to relieve your company of labor burden and pass it to your emppoyees that you are trying to call subs.

Your story is way too long to read and no matter how you attempt to justify it what you want to do is also illegal.

If you cant legally compete you need to review your business model, efficiency both in the office and job site and the services you provide.
 

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Discussion Starter #15
You do not give subs a pricelist.

Sounds like you want to relieve your company of labor burden and pass it to your emppoyees that you are trying to call subs.

Your story is way too long to read and no matter how you attempt to justify it what you want to do is also illegal.

If you cant legally compete you need to review your business model, efficiency both in the office and job site and the services you provide.
Super Mod who doesn't read and then casts stones? Really?

Previously I worked for a GC who did roofing and siding. The subs we used all had a price per square that was pre-negotiated them to install, this is common practice. How the heck do you price jobs and work with your subs (if you even have experience here)? Are you having them come out and bid each job for repetitive work? Do you even have experience in this area?

There's absolutely nothing illegal here. Not only am I competing legally but I also happen to be one of the top guys in my region I'm just looking to get better. Should I franchise? Should I build a good subs list? Should I should I should I... should I seek help from supposedly like minded people in a forum???

I would really appreciate thoughtful and constructive feedback so if you could take the time to read I would be grateful.
 

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It's no wonder why this industry has such trouble attracting young people. Turning tradespeople into Uber drivers.
 

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It sounds like you're "subs" are actually piece workers. Do they require licensing and insurance? Or are they working under your license and insurance? That's really the first thing that needs to be nailed down.
 

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Have you considered a business consultant or approaching a business school. What you’re asking is very specific scaling up of a business that I doubt anyone can answer with this type of format. I’m of the thought that the reason that most contractors are small businesses with fewer than 20 people is that is a manageable size. What you are proposing is a McDonald’s approach where you get a Big Mac and fries. I don’t think that you can work construction in such a manner. That’s my opinion. Maybe there is a business forum out there that has some smart people that could help. I think to illegality could come in is if you’re working as a central clearing house and setting the job prices. I’m not a lawyer so I’m sure I don’t know what I’m talking about.


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It sounds like you're "subs" are actually piece workers. Do they require licensing and insurance? Or are they working under your license and insurance? That's really the first thing that needs to be nailed down.
The one ex-foreman already had a corp and changed the name to better reflect what he would be doing. He provided us with a W-9 and is licensed and fully insured properly not miscatagorized as I see so many others. As I stated before we have an agreed upon list of what he charges me and when I get projects I offer them to him to accept or pass on. He's only passed on one so far and he's done well for himself on the others, well enough that others want to do the deal as well.

Have you considered a business consultant or approaching a business school. What you’re asking is very specific scaling up of a business that I doubt anyone can answer with this type of format. I’m of the thought that the reason that most contractors are small businesses with fewer than 20 people is that is a manageable size. What you are proposing is a McDonald’s approach where you get a Big Mac and fries. I don’t think that you can work construction in such a manner. That’s my opinion. Maybe there is a business forum out there that has some smart people that could help. I think to illegality could come in is if you’re working as a central clearing house and setting the job prices. I’m not a lawyer so I’m sure I don’t know what I’m talking about.


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Going after a consultant or similar is the direction I think I will be going in but right now I'm just looking for feedback. Want to see if this rabbit hole is worth it by finding others who may have experienced this already. There are several franchised waterproofing & foundation repair businesses (B-Dry, Everdry, Basement Systems, Basement Doctor, etc, etc) but I'm not sure if that's the correct path for us or if there's something better out there.
 

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While I rarely disagree with griz, I might on this one. Though tentatively.

At least as far as a price list. If it is negotiated between both parties and they agree, I'm not sure it is an issue.

However, any additional work, ie., change orders would need to be negotiated on an individual basis.

I do think you are trying to lessen your employer burden. As long as you do it above board, then it's all good.

Now, as far as calling griz out on a possible lack of experience, uh, that is a bit laughable.

I think don't even think Jimi Hendrix would ask griz if he was experienced.

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