# How do you price out subcontracting?



## MC94XR7 (Nov 24, 2015)

I have residential properties that are prepaid. How much should I pay to a subcontractor to look after my residential clients? What do you think of me sharing 50%? Is that fair?


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## Hydromaster (Jun 11, 2018)

Let them bid on it,
your hiring a contractor not a employee.

Of course you have a idea what the work is worth, then haggle or except the bid that you like. 
If you can hire a contractor to do it for 1/2 the price and they will perform the work to your standards, hire them.


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## MC94XR7 (Nov 24, 2015)

Hydromaster said:


> Let them bid on it,
> your hiring a contractor not a employee.
> 
> Of course you have a idea what the work is worth, then haggle or except the bid that you like.
> If you can hire a contractor to do it for 1/2 the price and they will perform the work to your standards, hire them.


Thank you for your reply. Is 50% a good place to start the negotiation? What range can I expect?


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## Hydromaster (Jun 11, 2018)

If a Licenseed and insured contractor can do it for 1/2 of your price and do good work, hire them you surely don’t want to compete against them.

But this would be a red flag for me.
2 things
1 your price is two high( even tho you got the account) if someone can do it for 1/2 of your price 

2.how can they be legit if they can do it for 1/2 price?


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## jonniesmooth (Dec 5, 2008)

Hydromaster said:


> If a Licenseed and insured contractor can do it for 1/2 of your price and do good work, hire them you surely don't want to compete against them.
> 
> But this would be a red flag for me.
> 2 things
> ...


 It's apples and oranges
The sub contractor isn't necessarily cheaper.
The contractor has a pre paid seasonal.
The sub is being paid only for work performed.


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## Kvston (Nov 30, 2019)

Typically in the construction world you’d like to make 20% on a sub. With snow, 30% or better.

Remember you found the work, set the job up, the parameters, pay schedule, etc. that all costs money.


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## Hydromaster (Jun 11, 2018)

jonniesmooth said:


> It's apples and oranges
> The sub contractor isn't necessarily cheaper.
> The contractor has a pre paid seasonal.
> The sub is being paid only for work performed.


I am Comparing apples to apples.

Why would you hire a subcontractor that's going to cost you money?


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## Kinport (Jan 9, 2020)

is 50% fair? Probably not, but it’s relative and impossible for us to say without seeing your hard numbers.

as the owner/contractor, it’s up to you to negotiate the best possible price with subs. If you can get someone who can service the property consistently to your standards and will do it for 50% of what your being paid, by all means do it. My (limited) experience tells me they’ll probably want closer to 70-90% of total contract value.

as an aside but related, when I see some of the numbers that the NSP’s offer to service the properties they manage, I cant help but think they are probably aiming to make 70% or higher. So there is some precedence for 50% or higher


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## Hydromaster (Jun 11, 2018)

Kvston said:


> Typically in the construction world you'd like to make 20% on a sub. With snow, 30% or better.
> 
> Remember you found the work, set the job up, the parameters, pay schedule, etc. that all costs money.


True,
the subcontractor didn't do the legwork but,,, they still have overhead even half price or even 30% that's a big difference.

Ps
If your rates are that much higher than what you're getting bids for I suggest you have them sign a noncompete clause because they're going to take a lot of your business come spring

Pss
I have found the margins on commercial work versus residential to vary greatly.

Psss

What is your cost to acquire one new customer?


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## jonniesmooth (Dec 5, 2008)

Hydromaster said:


> I am Comparing apples to apples.
> 
> Why would you hire a subcontractor that's going to cost you money?


The sub is not necessarily cheaper then you ON THE PER SERVICE PRICE.

the price model is apples and oranges
Per season versus per service.
The per season has to have enough overage to cover profit for you and to pay the sub FOR THE NUMBER OF SERVICES PRRFORMED.
it's like the stock market,it's not a short play, it's got to ride out the whole season.
In our area. Contracts run Nov-April. Both end months are hopefully a " gimme" basically spreading out the cost of the season for the customer.
Although you can't rule out a late April blizzard that dumps 3 ft in a weekend.
But for those months the contractor has been paid,the sub,working only when it snows gets nothing.


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## BossPlow2010 (Sep 29, 2010)

MC94XR7 said:


> I have residential properties that are prepaid. How much should I pay to a subcontractor to look after my residential clients? What do you think of me sharing 50%? Is that fair?


One sub for every property, or are they broken up in regions?
How many accounts? Route density?


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## Hydromaster (Jun 11, 2018)

jonniesmooth said:


> The sub is not necessarily cheaper then you ON THE PER SERVICE PRICE.
> 
> the price model is apples and oranges
> Per season versus per service.
> ...


I would have a contract with my subcontractor &I know my costs ahead of time, 
Just like your client would.

A mid April storm will be "all a cart" (
Voice to text) as my contracts end April 1st
Even though we can get some big snowstorms in April and May they usually melt so fast plowing to waste the time

if A subcontractor has a higher rate or a bid that exceeds what I would make, I would not hire them as there bid is to high. 
it's called being in business & I am in business to make money


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## NBRam1500 (Nov 22, 2019)

We sub out residential all the time. We bid on as many as we can. We then offer a group of say 10-15 properties to a plow guy in that area for a set price. 

We take 25% 
He gets 75% Paid Monthly this gives us the opportunity to inspect how the properties were taken care of. 

Non compete for 3 years are signed 
Property owners sign contract with us for 2 years at a time most of the time. 
Expectations on standard of work are signed 
Condition of payment upon satisfaction by myself and any complaints dealt with.


Do this over 100 properties it's profitable. 
We also manage 160 rental properties on the property maintenance and rental side of things we supply a price to all of our contacts and sub out the work.


If your going to sub out your contracts you need volume.


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