[Dixie Soak]

Hi all,
I am putting together some benchmark figures on our business and would be interested to hear what others have seen.

Ratios i am looking at include Labour as a % of Sales and also % of expenses. Same with Materials.

Anybody have some ballpark numbers???

Cheers

 

[HomeGuardPaints]

is this another way to ask what to charge?

 

[Ethan]

Hi all,


Ratios i am looking at include Labour as a % of Sales and also % of expenses. Same with Materials.

Cheers

I would also be curious to hear other's numbers.

If there are big differences, we could learn alot from each other.

Dixie Soak, we generally keep labor(wages+taxes+ins/worker's comp or payments to subs) at 46% and materials at 10% of sales. Therefore our gross profit generally hovers around 44%. We estimate to keep L + M at 50% or less, but inaccuracies in estimating, or inefficiencies in managing the jobsite has made this elusive.

Hope that helps you somewhat.

 

[ProWallGuy]

is this another way to ask what to charge?

It could be, but sure would be the long way around to it.
Probably just looking to compare with others companies to see where they stand, or if improvement is needed in certain areas.

 

[HomeGuardPaints]

Thought it might be a trick. :001_unsure:

Ratios. Labor at 38-40% per job. Materials end up between 10-20% but is not set because it varies so widely from job to job. gross profit is typically 48-50% although there are occationally a few better or worse.

Labor includes all wages, taxes, w/c insurance, ect.

Other insurance, vehicles, advertising, office supplies, office lease, office staff, gasoline, warranty fund, ect are under overhead.

 

[NHS]

Month to date for April, we are at 26.4% for materials and 26.6% for labor. These numbers are slightly high for us as I generally am able to keep both between 22 and 24.5%. My labor cost I factor high, and what I mean by that is that I factor in SUTA/FUTA percentages for the first half of the year, though they are completely paid in the first few months, I don't take out Workers Compesation OT discounts or estimated rebates. That way I certainly don't have any surprises and its an additional net at the end of the year.

Whatever you do, beyond labor and materials make sure you know what the company nut is and track that as well. Make sure you have a true picture as to what your net profit really is.

 

[Brian]

My direct costs-- labor and materials-- are fixed at 55%. I use subs, so that keeps these costs very predictable.

Brian Phillips

 

[HomeGuardPaints]

Brian,

can you explain how you are able:

1. to keep on a good schedule with subs(since they are a little less predictable)

2. get predictable results from subs

3. find good subs


also do they have to wear your uniforms, or do they wear their own or just whites.

 

[NHS]

I'm not Brian, but thats a post I'll gladly reply to. First let me say that for many years I was adamantly opposed to using subcontractors. In watching other companies and trades using them I was not impressed with quality or scheduling, then the revelation hit me.... it wasn't the subs, it was the guy contracting them. They generally approaching using subs as telling them where to go and what to do and that was it. No wonder it didn't work. No supervision what so ever.

Next issue, I had grown to where I had 50+ employees, with all of the headaches and overhead that goes along with that (that being said I still feel that the vast majority of those who worked for me were good conscientiuos employees).

I had been using a subcontractor for one aspect of our business and it was working well enough to convince me to try and use subs when we were very busy. The secret is to deal with subs as if they were employess. What I mean by this is lay the law down in the begining. When they are scheduled (day and time) it is not considered optional. They are expected to follow all of our rules. They are expected to give the quality we expect, jobs are inspected by my Quality Assurance Manager and if there are any deficiencies they are not paid until the job is correct. You must also treat them fairly and with respect. One thing I do is pay them weekly on a two week hold cycle, they like the fact that they do not have to wait until I am paid. One thing to remember is you may not save much using subs (sometimes you do save a lot) but you have a "fixed" labor cost for the job.

How do you find them? You just try one (see if you can get referrals etc.), and you must "babysit" thier first job or two (so you don't find yourself in trouble with the client) and once you are comfortable with them, you still need to watch/check on them but not nearly as much. Make sure the first time you try one you can cover the job if you have to toss them. It can be a win-win situation. The subcontractors I currently use have been with me for a couple of years now. Oh and guess what, I'm not dealing with 50+ personalities. If the sub has 10 guys working for him I'm still dealing with one guy.

 

[Brian]

Brian,

can you explain how you are able:

1. to keep on a good schedule with subs(since they are a little less predictable)

2. get predictable results from subs

3. find good subs


also do they have to wear your uniforms, or do they wear their own or just whites.

We keep on schedule by selling the job right and good communications throughout the job. I have found that subs are more predictable, since they have a very clear financial interest in getting the job done efficiently and properly.

I make it very clear to my subs what results I expect. When I start a new sub, we have a fair amount of training in that regard. I also inspect their work frequently until I am satisfied they know what they are doing.

We also use several forms to get feedback from customers and to monitor the sub's performance.

All of my subs come to me looking for work. Finding good subs is little different from finding good employees.

I provide t-shirts that they can wear if they want. Otherwise, it's just a white shirt.

Brian Phillips

 

[MAK-Deco]

We keep on schedule by selling the job right and good communications throughout the job. I have found that subs are more predictable, since they have a very clear financial interest in getting the job done efficiently and properly.

I make it very clear to my subs what results I expect. When I start a new sub, we have a fair amount of training in that regard. I also inspect their work frequently until I am satisfied they know what they are doing.

We also use several forms to get feedback from customers and to monitor the sub's performance.

All of my subs come to me looking for work. Finding good subs is little different from finding good employees.

I provide t-shirts that they can wear if they want. Otherwise, it's just a white shirt.

Brian Phillips

Brian,

So is it cost effective to use just subs? I would assume you have payroll set up for yourself and maybe office employees? So I don't understand why it wouldn't be cost effective to have employees that are painters as well? I would think that subs would be more expensive as they would have at least some overhead.

 

[MAK-Deco]

I'm not Brian, but thats a post I'll gladly reply to. First let me say that for many years I was adamantly opposed to using subcontractors. In watching other companies and trades using them I was not impressed with quality or scheduling, then the revelation hit me.... it wasn't the subs, it was the guy contracting them. They generally approaching using subs as telling them where to go and what to do and that was it. No wonder it didn't work. No supervision what so ever.

Next issue, I had grown to where I had 50+ employees, with all of the headaches and overhead that goes along with that (that being said I still feel that the vast majority of those who worked for me were good conscientiuos employees).

I had been using a subcontractor for one aspect of our business and it was working well enough to convince me to try and use subs when we were very busy. The secret is to deal with subs as if they were employess. What I mean by this is lay the law down in the begining. When they are scheduled (day and time) it is not considered optional. They are expected to follow all of our rules. They are expected to give the quality we expect, jobs are inspected by my Quality Assurance Manager and if there are any deficiencies they are not paid until the job is correct. You must also treat them fairly and with respect. One thing I do is pay them weekly on a two week hold cycle, they like the fact that they do not have to wait until I am paid. One thing to remember is you may not save much using subs (sometimes you do save a lot) but you have a "fixed" labor cost for the job.


How do you find them? You just try one (see if you can get referrals etc.), and you must "babysit" thier first job or two (so you don't find yourself in trouble with the client) and once you are comfortable with them, you still need to watch/check on them but not nearly as much. Make sure the first time you try one you can cover the job if you have to toss them. It can be a win-win situation. The subcontractors I currently use have been with me for a couple of years now. Oh and guess what, I'm not dealing with 50+ personalities. If the sub has 10 guys working for him I'm still dealing with one guy.

Ok so NHS answer a few of questions but I would still like Brian's take on it. Why wouldn't the sub want to just go on his own w/o subbing under another painting company, there has to be more money doing on your own w/o having to go to someone for your work. If I was subbing under someone I would feel to much like a employee and not a an owner.

And if your sub has 10 guys under him and you deal with one guy? so there's 10 guys you never checked to see if they are worth being in or on your customers property?? seems risky to me.

 

[MAK-Deco]

Also if you control your subs too much there is an IRS issue to deal with, lets not forget about that.

The state of IL just passed a bill this year putting more restrictions on using subs and the control you have over them...

 

[HomeGuardPaints]

I thought that the cost would be even, I like the thought that I don't have to hire a bunch of people for the summer then start laying off in the winter. That can be devistating to an employee where a sub is running his own business and expect that colder times of the year he'd better be ready. Do you guys ever have a problem with subs stealing work? It would only happen once(fool me once) if I were to hire subs but just want to know if its a problem

 

[Brian]

Brian,

So is it cost effective to use just subs? I would assume you have payroll set up for yourself and maybe office employees? So I don't understand why it wouldn't be cost effective to have employees that are painters as well? I would think that subs would be more expensive as they would have at least some overhead.

The OP was about benchmarking. I just pointed out that my direct costs are fixed, and why they are fixed.

The issue isn't subs vs. employees. Each have pros and cons. For me, the pros of using subs outweigh the cons. But that is me and my company, and it wouldn't work for everyone.

What it really comes down to, in my situation, is that I handle the sales and marketing for a bunch of different subs/ painters. Using subs frees me from worrying about a lot of the production side issues. For example, I don't have to worry about equipment-- the subs handle that. So if their spray rig breaks, they fix it.

I set standards. I spec the job. It is their responsibility to meet those standards and follow those specs. How they do it is up to them.

This isn't to say that someone couldn't do the same thing with employees. They could. I just don't care to deal with a lot of the production issues if I don't have to. It is my way of delegating those responsibilities. There are certainly other ways to accomplish the same thing.

I do have payroll for myself and an office manager. But my biggest expense--direct costs-- is controlled and fixed. That frees me to focus on other things, like marketing, sales, writing, and plotting to take over the universe .

Again, the OP was about benchmarking. I just wanted to set the context for my answer.

Brian Phillips

 

[NHS]

No IRS issues, its more of an indirect than a direct control. If a sub "chooses" not to keep a schedule or not to meet quality expectations then I can choose another sub. This is an expectation of the IRS. Where you run into problems is when you start putting them in your uniforms, putting your logo on thier trucks etc., etc.

Why would somebody want to sub? Couple of reasons right off the top;

Risk - Some subs can't or don't want to wait to get paid for jobs, however the way that we operate is to pay the sub for the job when completed not when we get paid.

Finding work - If you can keep somebody subcontracting for you busy it eliminates thier need to look for work.

 

[MAK-Deco]

The OP was about benchmarking. I just pointed out that my direct costs are fixed, and why they are fixed.

The issue isn't subs vs. employees. Each have pros and cons. For me, the pros of using subs outweigh the cons. But that is me and my company, and it wouldn't work for everyone.

What it really comes down to, in my situation, is that I handle the sales and marketing for a bunch of different subs/ painters. Using subs frees me from worrying about a lot of the production side issues. For example, I don't have to worry about equipment-- the subs handle that. So if their spray rig breaks, they fix it.

I set standards. I spec the job. It is their responsibility to meet those standards and follow those specs. How they do it is up to them.

This isn't to say that someone couldn't do the same thing with employees. They could. I just don't care to deal with a lot of the production issues if I don't have to. It is my way of delegating those responsibilities. There are certainly other ways to accomplish the same thing.

I do have payroll for myself and an office manager. But my biggest expense--direct costs-- is controlled and fixed. That frees me to focus on other things, like marketing, sales, writing, and plotting to take over the universe .

Again, the OP was about benchmarking. I just wanted to set the context for my answer.

Brian Phillips

Do your subs do work for other people? as in there own clients? or even other contractors?

I did understand the original OP was about but I guess then I hijacked the thread, sorry...

 

[NEPS.US]

Do your subs do work for other people? as in there own clients? or even other contractors?

I did understand the original OP was about but I guess then I hijacked the thread, sorry...

That's OK ...made a thread about pricing a good one!

I've been toying with the idea for a while. How do you and the sub come up with pricing? Do they tell you the hourly rate they have to get and you plug that into your pricing equation? Or do you tell them how much this job is worth ...labor and they have the option to accept or decline? Have either of you guys ever used subs on contracts for developers ... I would be very worried about the sub approaching the GC and telling them the labor figure they ae working for and steal the job.

 

[Brian]

That's OK ...made a thread about pricing a good one!

I've been toying with the idea for a while. How do you and the sub come up with pricing? Do they tell you the hourly rate they have to get and you plug that into your pricing equation? Or do you tell them how much this job is worth ...labor and they have the option to accept or decline? Have either of you guys ever used subs on contracts for developers ... I would be very worried about the sub approaching the GC and telling them the labor figure they ae working for and steal the job.

My subs work for other contractors, some work for home owners. They do not work for me exclusively, though some do most of their work for me.

I tell them the production rates I use for estimating. I tell them what I charge per hour. So they know what they get paid for each item. If they accept that, then we can do business.

I don't do work for GCs, so that isn't an issue.

Brian Phillips

 

[NEPS.US]

My subs work for other contractors, some work for home owners. They do not work for me exclusively, though some do most of their work for me.

I tell them the production rates I use for estimating. I tell them what I charge per hour. So they know what they get paid for each item. If they accept that, then we can do business.

I don't do work for GCs, so that isn't an issue.

Brian Phillips

You tell what you charge for labor ? and pay them that? Am I missing a markup for labor or misunderstanding you?