[florin]

I got a contract with a company that owns over 15000 apartment suites in my city. Since I cannot handle all the orders and cannot find serious employees I plan to give some work to sub contractors but I don't know what percentage to pay them.

If anyone can help me here I would appreciate it.

 

[ibsocal]

offer serious money and you will get the serious workers.15k units is serious.

 

[seversonspainting]

Do your homework, charge a good price. If you offer good money for the employees, there will come and be good.

If you going to pay 8.50/hr, expect bad painters.

Good luck to you. 15k units, I wish I had that.

 

[CApainter]

I don't know Smegal...I mean Severson, three painters for the price of one!

 

[tsunamicontract]

hire Jason, he said he can do a two bedroom by himself in like 2.5 hours. Now that is doin work

 

[HomeGuardPaints]

everyone has their own numbers. Take into consideration if you are supplying materials or if the sub is. who picks up materials. who supplies sundries. basically if the sub does everything you might only get 10% because basically you are a salesperson, but if take on some of the responsibilities then you should earn more.

 

[florin]

I cannot pay by hour because most people will take it easy when they are unsupervised. I have seen that everywhere and I don't think I've ever met a painter in my life who doesn't steal the hours if he can.

Since I supply the paint, pick it up and deliver to him or to the site, do the inspection etc...How does 35% for me and 65% for him sound to you guys?

 

[George Z]

I cannot pay by hour because most people will take it easy when they are unsupervised. I have seen that everywhere and I don't think I've ever met a painter in my life who doesn't steal the hours if he can.

Since I supply the paint, pick it up and deliver to him or to the site, do the inspection etc...How does 35% for me and 65% for him sound to you guys?

75% job costs (with paint) is bad.
Think of 55%-60% job costs, at least. 50% is best.

 

[painttofish]

I cannot pay by hour because most people will take it easy when they are unsupervised. I have seen that everywhere and I don't think I've ever met a painter in my life who doesn't steal the hours if he can.

You cannot pay by hour to a sub because he would then be an employee. Read some of brians posts regarding sub contractors and the IRS website.

 

[Brian]

75% job costs (with paint) is bad.
Think of 55%-60% job costs, at least. 50% is best.

I can't agree with this. It would generally be true based on our normal man hours and expenses. But in the situation described, he could have a lot more man hours in a similar time frame.

For example, if he normally has himself and 2 others, that's 480 man hours a month. If he brings on a sub of the same size, he's doubled his man hours. His overhead recovery per hour is cut in half. I have jobs where I can pay a sub 70% and still make a 12% net profit.

Without more knowledge of his hours, his expenses, what he will be doing for the subs, and how/ what he is charging, it is hard to throw out a percentage that will be fair to all.

Brian Phillips

 

[vermontpainter]

For example, if he normally has himself and 2 others, that's 480 man hours a month. If he brings on a sub of the same size, he's doubled his man hours. His overhead recovery per hour is cut in half. I have jobs where I can pay a sub 70% and still make a 12% net profit.
Brian Phillips

Brian

If I am understanding the op correctly, it sounds like he wants to "sub out" the work entirely and just "oversee" it, rather than use sub labor to augment an existing crew. This assumption is based on the repetetive choice of personal pronoun in the original post.

The problem here is that to bring in a sub crew to work under the numbers that he used to secure the job, numbers that probably applied to him completing the work himself, he would have had to build into the estimate his "markup" on the subs. This didnt happen, so my concern would be that if he acquired such a large volume of work, his pricing must have been pretty competetive - perhaps too competetive to fit subs under the one man pricing umbrella. I think this is a flaw to the old "Oops I caught a big fish and can't reel it in, I'll just sub it out and make money that way" (not that theres anything wrong with that!). If that is the method used to complete a large project, it has to be priced that way from the get go.

This raises a larger issue of the proper way to go about using subs.

 

[Brian]

The problem here is that to bring in a sub crew to work under the numbers that he used to secure the job, numbers that probably applied to him completing the work himself, he would have had to build into the estimate his "markup" on the subs.

I disagree. Marking up subs applies in a "normal" situation-- i.e., we know going in we are going to sub the work.

This is not a normal situation. In this case, an enormous number of man hours have fallen on him. For the sake of an example, let's say he normally has 480 man hours a month. Suddenly he gets a 4,800 man hour job that could be done in a month with the right man power.

He has 10 times the man hours, yet his overhead will remain essentially the same. So if he was originally charging $15 an hour to recover overhead, he could now charge $1.50 to recover overhead. He can actually cut his price and still make more money, because of the huge increase in man hours.

I'm not saying he should cut his price, or pay subs a huge percentage. I am saying that he could, and still make better money than if he did it himself. And of course there are other issues, such as admin and management, that have to be factored in.

Back to the above example. If his gross profit on 480 hours averages $15 an hour, that comes to $7200 a month. If he cuts his gross to $7.50 an hour on 4,800 hours that comes to $36,000. So whether he had a markup for subs really doesn't matter. If he knows his numbers and can manage the hours, he can make more money.

Brian Phillips

 

[Brian]

I indirectly addressed this issue back in January.

http://www.painttalk.com/showthread.php?t=916

Brian Phillips

 

[vermontpainter]

I disagree. Marking up subs applies in a "normal" situation-- i.e., we know going in we are going to sub the work.

This is not a normal situation. In this case, an enormous number of man hours have fallen on him.
Brian Phillips

This may be more of a normal situation than you think. We dont know much about Florin, and this isnt intended to criticize him, but this work didnt fall on him. He pursued it and got it. I think there are alot of people who fish in deeper waters than they are prepared to navigate (Crow - this is just a metaphor, like a comparison of one thing to anotha).

Generally, if a person proposes and receives a contract for an amount of work that is beyond their reasonable ability to deliver and they "cannot find serious employees", how would they expect to fulfill the contract? Working ones self to death and ending up with an unhappy client would be one way, using subs would be another way. Hopefully it turns into a beneficial growth opportunity for Florin.

I don't know that a 15,000 suite contract is the place to learn about using subs for the majority of the work. I think your analysis is, as always, well-presented and applies beautifully to a business that knows its numbers well enough to anticipate what its subs numbers should be for a win win to happen. I guess I am a believer that its best to explore the learning curve on a little bit smaller stage.

Its great that Florin has such an opportunity to grow right now, and better still that guys like you and the other posters in the thread are here to help him figure it out.

 

[MAK-Deco]

I cannot pay by hour because most people will take it easy when they are unsupervised. I have seen that everywhere and I don't think I've ever met a painter in my life who doesn't steal the hours if he can.

You cannot pay by hour to a sub because he would then be an employee. Read some of brians posts regarding sub contractors and the IRS website.

florin is in Canada (I think) not sure if there sub rules are different than ours? George Z may have info on that subject.

 

[vermontpainter]

florin is in Canada (I think) not sure if there dub rules are different than ours? George Z may have info on that subject.

Are you calling subs from Canada dubs?

 

[MAK-Deco]

Are you calling subs from Canada dubs?

man I couldn't even edit it before you chimed in

 

[vermontpainter]

man I couldn't even edit it before you chimed in

Couldn't resist, MAK! I am working on some other hobbies these days and trying not to be so trigger happy with the posts. Just bad timing!

 

[George Z]

I can't agree with this. It would generally be true based on our normal man hours and expenses. But in the situation described, he could have a lot more man hours in a similar time frame.

For example, if he normally has himself and 2 others, that's 480 man hours a month. If he brings on a sub of the same size, he's doubled his man hours. His overhead recovery per hour is cut in half. I have jobs where I can pay a sub 70% and still make a 12% net profit.

Without more knowledge of his hours, his expenses, what he will be doing for the subs, and how/ what he is charging, it is hard to throw out a percentage that will be fair to all.

Brian Phillips

Thanks Brian
I guess different rules apply to subs and I am not as familiar with them,
assuming they are as hands free as yours would be.
Are you also saying that if you had a larger pool of workers you should shrink your profit margins to as low as 30%?
Is there anything wrong with keeping them to 40-50% if being competiive is not an issue and you can?
Well, increasing your overhead to accommodate:
more field supervision and administration
Incredible training opportunities,
additional marketing,
lots of nice overhead would be nice,
maybe a bigger salary for management,
how about a new position created,
I am thinking maybe a "crew/employee services" driver.
If you can keep your margins high, why not.
Yes, I know our economy isn't as bad as yours (yet)
but why not?

Another example;
Iphone for every job manager fully paid, even for their personal use.
Soon, iphones will replace the job folders,
used for our new time tracking software,
connect and collaborate with everything Google Apps etc.
All this costs money, effort and the consultants are not cheap for tech dummies like me.
But everyone is really excited and looking forward to these changes.

I am also going on a workshop later this fall.
Me, myself and I with my laptop, in a resort up North.
Mission, to work on my business, completely focused for a week.
That costs money too, but i think that's useful.

I love my overhead! Any more suggestions on how to use it?

 

[Brian]

Thanks Brian
I guess different rules apply to subs and I am not as familiar with them,
assuming they are as hands free as yours would be.
Are you also saying that if you had a larger pool of workers you should shrink your profit margins to as low as 30%?
Is there anything wrong with keeping them to 50-60% if being competiive is not an issue and you can?
Well, increasing your overhead to accommodate:
more field supervision and administration
Incredible training opportunities,
additional marketing,
Lots of nice overhead would be nice,
maybe a bigger salary for management,
how about a new position created,
I am thinking maybe a "crew/employee services" driver.
If you can keep your margins high, why not.
Yes, I know our economy isn't as bad as yours (yet)
but why not?
even looking for new opportunities.

George,

No, I didn't mean that you shouldn't keep the margins the same, only that you don't need to. I am certainly in favor of high margins.

A few years ago I was in a situation similar to Florin. I landed a very large job, and we only had 5 weeks to do it. I had plenty of work for my regular crews. I called someone I'd used for years and explained the situation. I offered him higher pay if he could meet the deadline.

My overhead was already covered by my regular crews. This job was pure gravy. My thinking was, if I cut my margin 10% on this job, I will still be way, way ahead of where I planned to be. And it worked out that way. The sub was thrilled. I was thrilled. The customer was thrilled.

In fact, the customer has hired us the last 3 years, with each year involving more work.

This isn't about subs vs. employees. This is about taking advantage of opportunities. This is about managing painters. This is about knowing your numbers.

Brian Phillips