I’m looking for a general idea on how something like this would work. If I get a job with a HO and she has additional work, say plumbing or electrical, and I bring in my guys, am I entitled to make money for this service. What are my options in terms of a percent and how do I justify this with the HO.
Discussion Forum
Discussion Forum
Up Next
Video Shorts
Featured Story
Listeners write in about continuing education, minisplit heat pumps, compact home shops, and building science.
Featured Video
Highlights
"I have learned so much thanks to the searchable articles on the FHB website. I can confidently say that I expect to be a life-long subscriber." - M.K.
Replies
Well
you should and could make money for supplying the subs, as you in the end will be held responsible at least in the customer's eyes. If all you do is give a referral, maybe / maybe not.
I supply subs on jobs I contract and apply a 10% fee on their labor/material. I handle the scheduling and make sure they gain entry. I am paid for my time on the job regardless. If I am there, no problem. If I am only there to get them in (and monitor depending on the disposition of the customer) I bill for that time. I show this in the billing-sub bill plus another line for the markup.
If I refer, I don't.
I am thinking of no longer referring and supplying and marking up the subs-it is a pain in the rear either way and by referring I cannot be sure contact was made and all are satisfied.
My 10% is a spit in the bucket for comparison to what others do.
and then some
Let me be more specific and keep in mind I'm new at this GCing business. I've got a job doing everything but plumbing and electric, and the work from this lady keeps coming. When she asks me can I fix her electrical issues, I say no but I know a good electrician. When my electrician comes we all meet in the kitchen and talk out the issues. I think my mistake is at this point. The electrician says he'll do the work agreed upon for $20/hr. Do I then say, oh yeah, and I'm going to tack on another 10 percent. I don't want to fool the HO but I don't have a good explanation for why I am increasing her cost. He has stayed on to collect maybe six or seven $800/wk checks.
First-
You tell the electrician that when any talk of money is mentioned-he says I bill Wannaknow.
Wannaknow can be up front to the homowner and say, Yes-I will supply the electrician and will bill you for his time and material plus %.
or, I will bill you for his time/material and you of course will apply the markup b/4 giving the invoice to the homowner.
Now, does this electrician have insurance?
is he licensed if necessary in your locale?
Is he retired?
Is he reliable?
and 2 full weeks of a real electrician is an awful lot of time. What is being done-laborious rewiring of the whole house?
I ask because 20 bucks is dirt cheap, can't be real, electrical rates.
It's up to you how you present it to the customer.
When I first started doing the markup (and mine is up front, not buried) I felt like I was taking from the customer...............
After the first year of a 125,000.00 gross for my business and that 10% brought in 10,000.00 of it.............I enjoy it even more.
To be a real live full fledged general or remodeling contractor takes alot more than just you doing your job and your buddies that do plumbing or electric do there's and you all go to the pub on friday and tell lies to each other. You as the contractor are accepting way more responsibility than you would if you were just one guy doing handy work. That being the case, don't leave money on the table. Get the job and please them with something other than price.
best of luck.
taking the rap
Terrific, detailed response. But you bring up another concern when you mention insurance. I'm working without a contract and my electrician is not licensed. And yes he brought new electrical to the upstairs and first floor by tapping off of existing but scarce outlets. (He's aware of load capacity.) To this elderly women he's a godsend. The house was lighted with extension cords. Now I don't have any idea who's responsible for what. How do I protect myself?
And just as another example, my plumber is getting me in on a basement rehab--it was flooded. This is coming from HO's insurance. Plumber likes to work with a contract. This could be between him and the HO or the plumber, the electrician and I may sign separate contracts. What are my liabilities other than finishing the work I promised?
So, how long have you been in this business?
and how long do you intend to stay ?
Dave Meilands words ring true. Digest them and remember them. This is no part time game-this is the big leagues................
as much as some people try to be-rate and de-rate our profession, this is serious business.
What are you liable for? Let me tell you this story, take it for what it's worth.
I retrimmed a basement laundry, added a door to an existing opening, shelved a closet and put in a new drop ceiling with one flush flourescent troffer (to replace the bare bulb socket-existing wiring). Homeowner was ecstatic-beautified a rather drab and dark space. Job finished and paid.
Two weeks later I get a call on a Monday morning from them. They returned home from a vacation and after about an hour in the house noticed a burning smell in the kitchen. Now, this was after going down to run their vacation clothes through the washer/dryer, directly below that room.
I raced over and went straight to the basement and that laundry with the new troffer. Nothing out of the ordinary.
Went back up to the kitchen, didn't really smell anything, asked what they did when they got home-in detail. Nothing seemed unusual-but I asked what time they arrived...............very early, it was still dark.
Well, since it was dark, what lights did you turn on, did you make coffee-cook breakfast....................................
No coffee, no breakfast-they stopped b/4 getting home.
Which lights did you turn on.....................
The entry into the kitchen, the dining area light and those over cabinet lights (up top of the cabs, you know-that nice mood lighting............
I got my ladder and went up there and on one side everything looked normal-they were puck lights, strung along and the transformers were up there too. Moved over to the other side of the kitchen and not was all right there. Two pucks were upside down-whoever installed them just laid them up there, no fasteners. One was welded to the melamine top of the cabinets, another that was over a wood shelf pc over the sink had charred the wood.
Seems the cleaning people had done a little spring cleaning, getting at those usually undone areas.
Who do you think would have been responsible if the place burned down (and according to the damage to that shelf-wasn't long in coming? The guy that did the work in the laundry directly below? and changed out the light?
Two other times there have been these types of anomolies totally unassociated with work my company has done, but close enough and recent enough that had I not been contacted about a strange odor or uncovered the problem by chance-I would have been up sheet crick with a toothpick for a paddle.
Why do you mark up subs? David gave you reasoning-your management and contacts for one. How bout that spot on the carpet that no one seems to know how it got there?
The tire track along the edge of the driveway that you need to fill in and reseed?
Other little stuff that you need to take care of no matter how good a stable of subs you have. Things happen, and those that take care of it are looked upon in a good light.
In your situation it may serve you all best to do a "you scratch my back/I scratch yours" deal with your "subs" -- simply agree that you'll all make referrals for each other. Not that it's wrong to arrange a proper "sub" deal, with you taking a % cut (and all the billing through you), but it's more bookkeeping for you, more liability, more responsibility.
You ultimately need to decide whether you want to be a "contractor" or a carp, and it's better to base that decision on what you enjoy and what you're good at rather than how much money you think you're going to make.
Along with responsibility for getting the job......
lies the responsibility for the job.
Liability insurance is an important tool in the carpenter's toolbag. In most instances, it's the carpenter who runs the job and assembles the various trades. With that comes the acceptance of liability whether wanted or not. Of course, if you can get the homowner to sign a waiver that relieves the carpenter of liability, then maybe your idea would work. I don't know if such a paper could be considered legal or binding on all parties or not. Someone's gonna get stuck, best be covered.
And with being covered comes the insurance company. All contractor policies I've entered into over the years has had the consistant provision: Either you gather proof of insurance of all subcontractors or you will pay at the yearly audit their portion of the costs for liability insurance. In all cases the cost of insurance has a value scale-the more you do the more it costs-with a bottom threshold level or base cost.
All that above comes with the confession that I and friends and associates have worked under the system you outlined. He who got it, was the boss. At that time I didn't even carry insurance. We worked for peanuts as separate entities with no thought of business, profit, overhead or any of the other costs associated with a legitimate operation. We had a truck, tools, and the urge. No one thought or kept up with the cost of doing business.
Not a bad way to start except in hindsight the lack of the safety umbrella. Not to mention, it gave us a poor look at our future in construction. We had work, were making more than we would hiring on with someone and enjoyed the freedom.
All these things need to be realized by anyone entering into the construction trade as a fledgling business.
I'm not sure if I get your point. If a carp just refers and doesn't subcontract work to others, he's not responsible (very much) for their work or their liability. Given that the OP's situation seems to be tenuous (eg, would he be able to get liability insurance with an unlicensed electrical sub?) it's probably better to avoid the whole formal sub thing and just be "buddies who often work on the same job site".
Dan, it' be good to get the opinion of a lawyer or insurer
as to who's going to get stuck when something goes wrong on a job-whether the contractor hires the sub or the carpenter refer's (introduces) a sub. If you introduce an unlicensed or unqualified electrician to the job and they can prove you knew the situation, who's going to get drawn into it?
You example is a best case scenario. How many times does that prevail in a dispute?
But my point is that, however bad that situation is, it's going to be many times worse if there's a legal contractor/sub relationship. Do you think the OP would be able to get insurance?
Do you think the OP would be able to get insurance?
And why wouldn't he?
State rules my dictate what type of insurance he can be offered, but I have contractors insurance-for Carpentry. It covers me as an individual and could cover any uninsured subcontractor I hire.
As far as the wording of whether they are licensed or not I cannot tell you. The stipulation is that if they do not prove that they are insured and to the amount required by the insurance company, then my policy will be used and the rates raised at audit time to cover them.
I'm guessing that there's something in the fine print about being properly licensed.
Then I guess someone should find out.
I subcontract to licensed by the State of Ohio electrical and plumbing contractors. Anyone else needs only be licensed in some of the jurisdictions in which we work-and those are primarily a license to keep track of you so you pay your taxes to those areas. It's more of a registration than tested license.
Then there's the RRP rules to contend with. No insurance coverage underwrites these specifications. Contractor beware. It also emphasizes the "ignorance of the law is no excuse" situation.
The rules are stiffer and just hanging out your shingle isn't enough. For us playing by the rules to bid up against the part timers, firemen, unemployed auto workers and "others" the battle has gotten harder and more provacative. Your suggestion of the fraternity of workers moves right into this area.
Covert Construction-we can do it for less.
call now.
No one's foolin' anyone
I don't want to fool the HO
You're not. You're getting work done on their house on their behalf.
I bring subs to my customers all the time, and I add both cost and value. I make sure that I am adding more value than cost. I know what needs to be done. I know the best subs. They will answer my calls and show up at the job to do what is needed. They will do everything right and I know how to ensure that. They will be licensed, bonded, insured, and have comp and expose the owner to zero added liability. They will use the best materials and they will warrant their work. They will be pleasant to have around the house. They will not leave a mess. The whole thing will go smoothly and there will be no drama. If there are any questions or issues, you call me and I will be on it immediately.
If the owner doesn't want this service, they won't call me.
Your mistake was getting the electrician and the owner in the same room when the electrician's price was being discussed. I would have been in the room alone with the owner discussing the electrician's price. When the electrician was there we would have been talking about what the owner wanted done.
It takes a lot of practice to get all this stuff happening smoothly. And, you may have an owner who doesn't want to pay a GC. Possibly you can sell them on the value of it. The best way to start is to stop doing anything for free, like bringing in subs for their convenience.
You have a proper, trained, licensed and insured electrician working for a chargeable $20/hr? This is Fine Homebuilding, not "unlicensed, under insured hack . com"
Being "trained", licensed and
Being "trained", licensed and insured doesn't mean you aren't a hack.
Being unlicensed, uninsured and "untrained" doesn't make you a hack either.
Our schools at all levels churn out "trained" people all the time that can't tie their own shoes.