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Commercial Business Model - Subcontract vs. Self-Perform
#1
A
aclutter
A
aclutter
All,
I am currently an estimator for a asphalt paving company. We submit bids and subsequently do a bunch of jobs for companies that advertise themselves as "Paving Contractors", but are really more of a construction manager that simply has the client, takes our price, and adds 10-30% to it. They are basically a middle man. Do any of you operate in this fashion? I am thinking of starting a lawn care company with the focus on commercial sector. I plan on keeping my current job so I only want to take on 10-15 hours of mowing a week that I will actually self-perform. What I want to try and focus on is growing my clientele and subcontracting much of the work...... Snow Removal, Landscape designs & installs, Plant and Tree Maintenance, fertilizer & chemical spraying, ect.
I would also advertise and do the same thing for pavement maintenance/ parking lot maintenance (asphalt repairs, striping, sealcoating, catch basin repairs, curb repair ect.)
My thinking is even if I do not make much money on some of the stuff I subcontract out, by just having the client and serving as their one stop shop for all grounds and pavement/parking lot maintenance I will be presented with opportunities that allow for some decent profit.
It is not uncommon for us to bid an asphalt job for $20K and our competition submits a price that is either lower for $15k or higher at $30k. That leaves a lot of room to do what I am describing. I would solicit several quotes from dependable contractors that I have built up a good working relationship with, take the lowest quote, mark it up and in many cases still be cheaper than the highest quote. So....lets say for example I get three quotes for some asphalt repairs, they come in at $16k, $20k, and $21k.
I add $3k to the $16k quote and make $3k for a little time and effort and a little risk.
Obviously you would need a good subcontract agreement that would transfer as much risk and liability to the subcontractor as possible.
Do any of you do some of this or even subcontract any of the work your customers need done?
I am currently an estimator for a asphalt paving company. We submit bids and subsequently do a bunch of jobs for companies that advertise themselves as "Paving Contractors", but are really more of a construction manager that simply has the client, takes our price, and adds 10-30% to it. They are basically a middle man. Do any of you operate in this fashion? I am thinking of starting a lawn care company with the focus on commercial sector. I plan on keeping my current job so I only want to take on 10-15 hours of mowing a week that I will actually self-perform. What I want to try and focus on is growing my clientele and subcontracting much of the work...... Snow Removal, Landscape designs & installs, Plant and Tree Maintenance, fertilizer & chemical spraying, ect.
I would also advertise and do the same thing for pavement maintenance/ parking lot maintenance (asphalt repairs, striping, sealcoating, catch basin repairs, curb repair ect.)
My thinking is even if I do not make much money on some of the stuff I subcontract out, by just having the client and serving as their one stop shop for all grounds and pavement/parking lot maintenance I will be presented with opportunities that allow for some decent profit.
It is not uncommon for us to bid an asphalt job for $20K and our competition submits a price that is either lower for $15k or higher at $30k. That leaves a lot of room to do what I am describing. I would solicit several quotes from dependable contractors that I have built up a good working relationship with, take the lowest quote, mark it up and in many cases still be cheaper than the highest quote. So....lets say for example I get three quotes for some asphalt repairs, they come in at $16k, $20k, and $21k.
I add $3k to the $16k quote and make $3k for a little time and effort and a little risk.
Obviously you would need a good subcontract agreement that would transfer as much risk and liability to the subcontractor as possible.
Do any of you do some of this or even subcontract any of the work your customers need done?
#3
BlazNT
BlazNT
I believe everyone on here owns their own business and does not contract it out.
#4
RDA.Lawns
Yeap !!!!
RDA.Lawns
I believe everyone on here owns their own business and does not contract it out.
Yeap !!!!
#5
RDA.Lawns
RDA.Lawns
Why would I want to bid a job for 350$ then pay someone else to do it? And I wouldn't agree to do a job knowing I had a middle guy between me n my $$. That's just stupid!!!!!!
#6
A
aclutter
A
aclutter
Are you telling me that you would not quote me, even if you got what you wanted as far as a price for the job? I think you would probably quote it. If you and I developed a relationship, I was bringing you work, you were getting what you wanted as far as a price, I dealt with the client. All you had to do was bid the job and perform it.
I am somewhat surprised that I seem to be getting some negative reaction on this. This is very common is the industry I work in. Not sure why it wouldn't translate in the grounds maintenance industry? Maybe the profit margins are smaller? In my mind, assuming the companies that were used to perform the work were good reputable companies, it is a smart business decision, reduces risk. You may not make much profit on the things like mowing and snow removal due to the amount of competition in the market, but it may open up the door to other services that you could sell them that would allow for some good profits. Example, Mowing leads to snow removal, which leads to curb repair, which leads to sealcoating entire parking lot , which then leads to a complete overlay a few years down the road. You make 10-15k on mark-up on the overlay job alone.......Not sure what is so complicated about that?
I am somewhat surprised that I seem to be getting some negative reaction on this. This is very common is the industry I work in. Not sure why it wouldn't translate in the grounds maintenance industry? Maybe the profit margins are smaller? In my mind, assuming the companies that were used to perform the work were good reputable companies, it is a smart business decision, reduces risk. You may not make much profit on the things like mowing and snow removal due to the amount of competition in the market, but it may open up the door to other services that you could sell them that would allow for some good profits. Example, Mowing leads to snow removal, which leads to curb repair, which leads to sealcoating entire parking lot , which then leads to a complete overlay a few years down the road. You make 10-15k on mark-up on the overlay job alone.......Not sure what is so complicated about that?
#7
RDA.Lawns
RDA.Lawns
I make more than enough doing things my way without someone else involved. Plus I have more work right now than I need. Your business plan only helps you make more money . you get the credit of my job and the larger profits later down the road lol I don't think that's for me .... I have had my business over 10 years have no problems getting jobs !!!! Our reputation and word of mouth alone with quality work more than ensures that I don't need a 3rd person involved in my business. I'd say most here will agree with me on this .
#8
BlazNT
BlazNT
Yep I'm not going to build a business for someone else. I will do it for me.
Edit: I have given someone a finders fee. But it is a one time exchange of money for a job they got for me. I then owned the account.
Edit: I have given someone a finders fee. But it is a one time exchange of money for a job they got for me. I then owned the account.
#9
A
aclutter
A
aclutter
I appreciate your thoughts, comments and opinions. Is what I am trying to do wrong or unethical? I am not trying to do anything that would upset or go against some sort of code between lawncare companies. So, what if one of my customers wants their lawn sprayed and fertilized? I do not have an applicators license......so should I tell them to call someone else or should I call a licensed applicator and get a price from them to do it?
#10
RDA.Lawns
RDA.Lawns
Maybe you should get your applicator license and solve the problem .. Honesty I started off for nation wide company. Started at the bottom worked my way to management in 3 years. Worked for them 15 years before starting my own business best move every.. In the situations you used for example.. Tell your customers I'll do you lawn and leave the application of sprays and fertilizer to the experts. Maybe suggest a company maybe not .your choice but only the home owner can hire a company to apply herbicides or pesticides in many states.
#11
BlazNT
What you are trying to do is not wrong or unethical it just goes against what most owners here do. You can run your business any way you want. You will even find lawn mowing guys that will work for you. I would make sure they are licensed and insured. You will have to have an umbrella style of insurance to cover your arse.
They have this type of business around here. I have gotten calls to mow property and I have a few times. When the owner finds out I am not employed directly they get very pissed that they have to pay more than I would charge. (I do not tell them what I charge) See I show up with my logo on my truck and it does not match who they are paying. They now know they are paying too much and should have just hired me to begin with. Not to mention the money aspect. Owner pays you and you are supposed to pay me. How do I fix a problem when they have paid you and you have not paid me? Who do I get my money from? My only recourse is a mechanics lean against the owners property. This is not what I want to do to get paid.
Do you understand my side of it yet?
BlazNT
I appreciate your thoughts, comments and opinions. Is what I am trying to do wrong or unethical? I am not trying to do anything that would upset or go against some sort of code between lawncare companies. So, what if one of my customers wants their lawn sprayed and fertilized? I do not have an applicators license......so should I tell them to call someone else or should I call a licensed applicator and get a price from them to do it?
What you are trying to do is not wrong or unethical it just goes against what most owners here do. You can run your business any way you want. You will even find lawn mowing guys that will work for you. I would make sure they are licensed and insured. You will have to have an umbrella style of insurance to cover your arse.
They have this type of business around here. I have gotten calls to mow property and I have a few times. When the owner finds out I am not employed directly they get very pissed that they have to pay more than I would charge. (I do not tell them what I charge) See I show up with my logo on my truck and it does not match who they are paying. They now know they are paying too much and should have just hired me to begin with. Not to mention the money aspect. Owner pays you and you are supposed to pay me. How do I fix a problem when they have paid you and you have not paid me? Who do I get my money from? My only recourse is a mechanics lean against the owners property. This is not what I want to do to get paid.
Do you understand my side of it yet?
#12
A
aclutter
I do understand your side of it and I appreciate your honest opinion and insight. There is no doubt in my mind that the customer may realize that I was subcontracting it out. Part of my plan is to not hire any subs unless they provide insurance certificate and workers comp. Insurance certificate will name my company as additional insured and in certain cases, the owner of the property as additional insured as well. I have called a handful of landscaping/lawn care companies that I know the owners and they have all been willing to provide me quotes if/when I get this off the ground.
You are correct that the only way to collect your money if you don't get paid is to put a lien on the property owner. I am looking at these other companies who I will hire to do the work as "partners" and it would be something where I bring them work, they bring me work as well. Kind of a network of subcontractors. It has been my experience in the asphalt/construction industry that many Owners/Clients prefer a one stop shop and are many times willing to pay for it knowing that things will get done right and on time vs the time consuming and cumbersome process of soliciting numerous bids, checking references, ect. Those are the type of clients I am after. I could be totally wrong.....but all it takes is one large job .....($90,000.00 Design/Install) with $9,000.00 of my mark-up to start paying off. I figure I will maybe get 1 out of 10 jobs/clients that I submit bids for....but the ones I do get should allow for some nice profit.
A
aclutter
What you are trying to do is not wrong or unethical it just goes against what most owners here do. You can run your business any way you want. You will even find lawn mowing guys that will work for you. I would make sure they are licensed and insured. You will have to have an umbrella style of insurance to cover your arse.
They have this type of business around here. I have gotten calls to mow property and I have a few times. When the owner finds out I am not employed directly they get very pissed that they have to pay more than I would charge. (I do not tell them what I charge) See I show up with my logo on my truck and it does not match who they are paying. They now know they are paying too much and should have just hired me to begin with. Not to mention the money aspect. Owner pays you and you are supposed to pay me. How do I fix a problem when they have paid you and you have not paid me? Who do I get my money from? My only recourse is a mechanics lean against the owners property. This is not what I want to do to get paid.
Do you understand my side of it yet?
I do understand your side of it and I appreciate your honest opinion and insight. There is no doubt in my mind that the customer may realize that I was subcontracting it out. Part of my plan is to not hire any subs unless they provide insurance certificate and workers comp. Insurance certificate will name my company as additional insured and in certain cases, the owner of the property as additional insured as well. I have called a handful of landscaping/lawn care companies that I know the owners and they have all been willing to provide me quotes if/when I get this off the ground.
You are correct that the only way to collect your money if you don't get paid is to put a lien on the property owner. I am looking at these other companies who I will hire to do the work as "partners" and it would be something where I bring them work, they bring me work as well. Kind of a network of subcontractors. It has been my experience in the asphalt/construction industry that many Owners/Clients prefer a one stop shop and are many times willing to pay for it knowing that things will get done right and on time vs the time consuming and cumbersome process of soliciting numerous bids, checking references, ect. Those are the type of clients I am after. I could be totally wrong.....but all it takes is one large job .....($90,000.00 Design/Install) with $9,000.00 of my mark-up to start paying off. I figure I will maybe get 1 out of 10 jobs/clients that I submit bids for....but the ones I do get should allow for some nice profit.