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What is a reasonable % up charge for work subbed out ??

Discussion in 'Business Fundamentals' started by On a Call, Mar 20, 2017.

  1. On a Call

    On a Call PlowSite.com Addict
    Messages: 1,078

    I guess the title says it all.
    We do use subs for some of our distant sites. I quoted prices to the sites and I hired a contractor who gave me better pricing than I quoted. But, there is a spread.

    So what is fair and what is gouging if you want to call it that.
     
  2. FredG

    FredG PlowSite Veteran
    Messages: 3,491

    If your sub is happy on what you agreed on I would not call that gouging, Unless I'm not understanding what your getting at. I personally would not care what you were getting as long as I was happy with what I was earning.
     
  3. On a Call

    On a Call PlowSite.com Addict
    Messages: 1,078

    Good point. I guess if I bid it for $ 500.00 and he does it for $ 300.00 I should think about tipping for a job well done.

    Hmmm...thanks.
     
    FredG likes this.
  4. Philbilly2

    Philbilly2 PlowSite Veteran
    Messages: 3,837

    I my line of work. I mark subs up 20% on small common in and out jobs. As the dollar margin of the project goes up, the mark up percent seems to decrease to get the job.

    Uh oh... I feel another "Why would you decrease your profit percent as the project dollar quantity increases" lecture coming... :confused:
     
    FredG likes this.
  5. JustJeff

    JustJeff 2000 Club Member
    Messages: 2,508

    It's difficult to say, as many companies pay subs by the hour. I now sub for a company that pays me a flat fee per site. I've negotiated with the owner of the company on most sites to a point that I feel is fair to me. Apparently he thinks it's fair on his end as well as he agreed on the pricing with me. I would say that if your sub is content with what you're paying him it doesn't matter if you're getting double what he's getting.
     
  6. 1olddogtwo

    1olddogtwo PlowSite Fanatic
    Messages: 12,189

    We do a flat 20℅ (21% in reality) no matter what on T&M
     
  7. Philbilly2

    Philbilly2 PlowSite Veteran
    Messages: 3,837

    I agree on the T&M. All T&M with us is a flat 20%... unless I have to add the PITA up-charge...
     
  8. On a Call

    On a Call PlowSite.com Addict
    Messages: 1,078

    Our PITA charges comes when jobs are not done to specs.
     
  9. ktfbgb

    ktfbgb 2000 Club Member
    Messages: 2,585

    Not from me, that's my exact markup. On larger jobs it starts to drop but usually not past 15% markup.
     
  10. 1olddogtwo

    1olddogtwo PlowSite Fanatic
    Messages: 12,189

    How do break that out.....?

    Do you just take 15?
     
  11. ktfbgb

    ktfbgb 2000 Club Member
    Messages: 2,585

    For snow work I always add 20%.

    For the other stuff it's kinda negotiable and depends on the project and how much leg work I need to do for the subs to help them etc. Like if the plumber needs us there to cut drywall, add backing in the floor or something like that.

    For a hard quote price I look at at how much it's worth and if it's really expensive I'll lower the percentage some depending on how I feel it will go. I also do a lot of cost plus jobs. When we are signing the contract I explain the structure to them and I start with a 20% markup for the plus part. If they seem like they might not like it or if it's a really easy job but with really expensive high end end materials I might lower my percentage some. Also depends on if they are repeat customer or not.

    I guess it's kinda seat of the pants now that I'm trying to explain it lol.
     
  12. BUFF

    BUFF PlowSite Fanatic
    from FR NoCo
    Messages: 9,217

    25% is what I've used for years and nothing is T&M.
     
    ktfbgb likes this.
  13. John_DeereGreen

    John_DeereGreen 2000 Club Member
    Messages: 2,978

    What little we use subs, 25% is what I go off of.

    Brickman/BrightView/whateverthehelltheyarethisyear Facility Solutions goes for 25% also, coming from a territory manager for them.
     
  14. FredG

    FredG PlowSite Veteran
    Messages: 3,491

    Yes if you need a sub you want to get between 20 - 25% for your Company. With that said I want 5 bids if I can get them at least 3. If I got it bid for $10.50 per sq and one guy comes in at $9.50 average price for example and another guy comes in at $7.00 and he does this work and his name is out there which one do you take? I use this example because I was the guy that got beat at the $9.50. The other guy that done the work for $7.00 I have no idea how he made money. He had a smile on his face last time I seen him and headed to Florida.

    The General Contractor that had it bid at the $10.50 made a ton of money. This is not gouging. If anything the guy that did the job was low balling. Don't worry if your ringing the bell. Again as long is your sub is happy don't worry about the big spread. You might not get so lucky the next time.
     
    ktfbgb likes this.
  15. Philbilly2

    Philbilly2 PlowSite Veteran
    Messages: 3,837

    Yeah, that is not realistic round here... I wish it was, but holding the 20% number, does not get the bigger work in my area.

    For some reason, I have found that for us at a $250K project, we have to get closer to 15% than 20% to stay competitive. $500k seems to get down closer to 10-13%. Once we get in the 1mil project level, 8-12% seems to be a fair space to lay. Now, that said, 8% on a million dollar job is still 80K profit (hopefully)... I would much rather have the 200,000K that comes with a 20% mark up, but it never gets the job landed... so you make 0% instead. ;)
     
    FredG likes this.
  16. ktfbgb

    ktfbgb 2000 Club Member
    Messages: 2,585

    Not arguing there. I'm doing small remodeling. Soon to be much larger remodeling so there is a big difference between a larger priced job for me compared to what you are doing.
     
  17. FredG

    FredG PlowSite Veteran
    Messages: 3,491

    Yes the larger the project, Dollar wise the tougher it is to get near 20%.
     
    ktfbgb likes this.
  18. BUFF

    BUFF PlowSite Fanatic
    from FR NoCo
    Messages: 9,217

    Ok so lets take this oof topic by shifting gears to what is your targeted margin at the job level for new work you do yourself (no subs) and the targeted margins for revisions to existing work?
    Also do you have different targets for materials in both scenario's?
    New work: Labor 25%, Materials 25%
    Revisions: Labor 35%, Materials 35%

    Next what's your bottom line profitability goals along with growth goals?
    Bottom line, 12%
    Growth, 10%
     
    Philbilly2 likes this.