Those are some good issues/ questions. My answers aren’t going to be absolutely complete, but hopefully they will provide some help.
ProWallGuy: Every time I measure/bid a job, it is different. How do I price a job for a company that has never seen it?
If I offered you a job to prep and paint 10 French doors, you could probably give me a price over the phone. Prep would be a light scuff sand with 180 grit, and then apply 1 coat of ProClassic Oil. In other words, if you know exactly what is involved in the job you could give me a price. That is what we do when we go to look at a job—identify what is involved.
I have production rates for the surfaces we normally paint. When I hire a sub I review those rates with him. If he finds the rates reasonable, then he will find my pricing reasonable. So he doesn’t need to look at the job—he has already agreed that the number I come up with will be acceptable.
I don’t have my exact numbers in front of me, but this will illustrate: I look a job that has 6 French doors, 50 feet of baseboard, and 450 square feet of walls. There is minimal prep—scuff sand the woodwork, fill a few nail holes on the walls (this type of prep is figured into my production rates). Let’s say my production rates are as follows: 1 hour per French door, 50 feet of base per hour, and 90 square feet of walls per hour. That comes to 6 hours for the doors, 1 hour for the base, and 5 hours for the walls, or a total of 12 hours. I multiply the 12 hours by my labor rate, add materials, and have my price.
From the subs perspective I’m basically selling his time for a specific rate (the percentage of the selling price I pay). At my current rates this is $29.70 per hour. He’s already agreed with my method for determining the number of hours on the job.
DeanV: It seems like there would be less over-all profit possible as opposed to having employees, but this would be balanced by lower risk since you are not responsible for keeping them busy year round.
There is some truth in this. When you use subs and pay them a fixed percentage, you are actually putting a cap on your biggest expense—labor. This does limit your potential profit.
For example: You pay hourly and bid 100 hours on a job. If the job takes 90 hours, the excess labor (10 hours) becomes additional profit. But if you pay a percentage, you are still paying the sub for the 100 hours. Now if the job takes 110 hours, and you are paying hourly, you have to pay extra labor costs, so you profit goes down or disappears. But if you are paying a percentage, you still pay for the 100 hours.
So, paying a percentage limits your risk, as well as the potential. But with hourly pay employees have little incentive to come in under budget—they still get their money. The sub however, has an incentive to be efficient—that’s how he makes more money. I prefer limiting my risk in return for a predictable, and almost guaranteed profit.
Further, the subs have a great deal of motivation to make sure the job is done right and the customer is happy. They fix problems on their own dime—they get no additional pay. So this system eliminates a lot of stress and problems in addition to the financial benefits.
Nathan: Anyways, my question would be what are the limits of what I can and can't do with subs. Tools, equipment, hours, vans, etc...
My subs provide all of their own tools and equipment. That alone removes a lot of stress and expense. If something breaks, they pay to fix it. When I owned equipment it was abused and never maintained.
I do not and cannot dictate their hours. On the first day of a job we establish the starting time, with the sub’s approval. After that, they determine their hours.
I do not allow subs to wear their company uniforms or display their company signs. That’s a part of our agreement.
Nathan: Also, I got really burned by my insurance company. They gave me a good price and I used them for the entire year and then at the end they audited me and gave me a much larger bill (about 3x) because of the amount of subs I used. I told them what I was doing from the very beginning but that didn't seem to matter. Anyways, I guess I'm just looking for insurance tips when using subs.
I carry a policy because some of my subs don’t. (There are no insurance requirements in Texas.) My insurance agent knows how I operate, and to date I’ve not had any problems.
My policy is actually based on the premise that none of my subs carry a policy. When I get audited each year, I present the numbers for those with insurance and those without. Those with insurance can help reduce my liability (it depends on the particular policy and how the rates are determined.)
I have never received a bill for additional premiums, and once received a refund of more than $1K.
I would suspect that your agent was the real problem and didn’t get you an appropriate policy.
Dave Mac: I think the biggest challange using a subs, is having a price system in place, that you agree on.
That is one of the biggest challenges. That is where an estimating system that is consistent and predictable is so important.
My system has about 30 surfaces for interiors and about the same for exteriors. So its not a huge complicated system.
When we look at a job we are really trying to identify 2 basic things: how long will it take, and how much material will we need. We can figure out material needs by measuring. A gallon of paint covers so much area. We can take the same approach to the labor needs. All things being equal, a painter should be able to prep and paint X doors, or X square feet of wall, per hour.
So it’s just a matter of agreeing with the sub how long each task takes. I’ve found that the production rates for my subs are pretty close to one another. Occasionally I’ll get one who is really slow. They don’t last long because they don’t make any money. But my rates are pretty reasonable—for example, 110 square feet of walls per hour (cut in and roll).