We take bids from subcontractors because that’s what everyone always does, that’s the way it has always been. I’m here to tell you, doing it just because that’s the way it’s always been done isn’t a good reason.
Let’s take a look at a better, more cost-effective way to do this.
The first thing is to create a budget for every sub trade in your scope of work. To start, set your scope and budget for each trade that will allow you to protect the margin you want. Xactimate tells you the labor number and time guidelines, use your own multiplier % to protect your margin.
Don’t ask for bids, make an offer to your subs based on what you know you want exactly.
The point is to stay in charge of your own work, costs, and protect your profits.
Your subs are still making money, likely making 50% GP if they manage their own work well. (I know that because I was a sub for GC’s) The reasons why this is a win-win for everyone, your sub doesn’t have to waste time bidding. He knows he will get everything you offer. If you both have a good relationship that’s a big-time saver for him. The fact that he doesn’t have a cost for business development could be anywhere from 5% to 15% savings per job. If you’re running $1 to $2 million a year, you are likely offering each of your subs $100k to $200k a year.
That’s very good money for them, and all they have to do is take care of you, get their job done and it keeps coming.
That goes up if your subs are multiple trades, or your volume is higher, so it just gets better for everyone. If your subs are running their jobs well, they should still be making 50% GP on your jobs.
- The point here is, never give away your financial responsibility.
- Stay in control of your costs on every job.
- Maintain a successful and profitable relationship with every sub by controlling costs for both of you.
If you are still having questions about how to stay in control of your labor costs and subcontractor relationships, call me TODAY and I will help you.
-Greg
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