Ok, first let’s get the laughing part overwith. I left my job as a wildlife biologist with GADNR last summer to start my own remodeling business. I’d done a lot of construction before, during, and after college. As an adult I’d worked a lot on my own older house (including remodeling a master bath from the ground up with tile shower), I’d done some cabinet installs or similar things for friends, and I’d been encouraged to go for it by friends who knew how unhappy I was in my job. ‘Once you start doing good work for a few friends, you’ll be covered up with work from people who don’t mind paying a little more for better quality.’
And, that was the niche I was going to go after – Quality. I sensed a market out there for folks who were sick of paying folks that did crap work or never came back to finish work. I hoped to start small (i.e., alone) and gradually work up to eventually building entire quality houses. The family and I were in a good enough financial position to try it, so I jumped. I stayed fairly busy until this last May doing a little bit of anything you could name. Made pricing mistakes, didn’t make much money, and poured the majority of it back into buying tools and whatnot. I did it all by the books, especially anything that said JLC and Taunton. I set it all up legitimate, licensed and insured. As such, had to increase my pricing quickly to account for that. By-the-way that, “first decide how much you’d like to make” line is about the stupidest thing I’ve ever read – I’d like to make $175,000 annually, please.
Well, the hard lessons I’ved learned in 12 months include the fact that damn near every contractor and/or sub around these parts is cheating some how and as much lip service as folks give to quality, they don’t want to pay for it. Everybody’s looking for a deal. Thought I had my big break in March pricing out a 500 sq ft master bedrm/bath suite addition for a co-worker of my wife. Good neighborhood, nice location on front road, do the job, put up the sign, and I’m on the way. Nope, they didn’t want to pay $96 a foot, they knew a guy who could do it for $78. Never been done by anyone.
After scraping through May-June I’ve realized I’ve gotten myself in a spot where I can’t really do everything on the up and up and survive very long, because the competition is either cheating to charge less, has a sugar daddy investor paying the bills, or is really big and operates on an economy of scale. I even called several builders and asked if I could do there trim, painting, etc. Most have their “own” multiple crews (i.e., guys they pay under the table and don’t pay WC on).
Anyway I hated painting, but did some anyway for friends and associates of my In-Laws. Mainly interior re-paints. I still had no employees, so I just subcontracted for help with free-lance painters, and now I’ve got two that are very good and fairly fast.
So’ve decided this year to try and focus on interior, repainting. Most big painters are only interested in new construction, so my real competition are the handymen and guys that want to be paid upfront and may not come back. I can beat the handymen on speed and quality cause my painters are the same journeyman painters that are painting for the big GC’s across town (under the table I found out last week). They paint for me in the late afternoon, rain days, evenings, and weekends. I’ll meet a customer, estimate and quote, get all the materials, and deal with the business end of things, and do some prep and clean-up. They do the painting. They are good and they are fast. I’ved regarded them as Subs on the few jobs we’ve done together so far, because I’m not their primary income as of yet.
Unfortunately, I haven’t got enough work lined up to take them on as employees full-time. In fact, right now it’s week to week. Also, I haven’t renewed my GL insurance cause I’m getting conflicting info from agents on what I need. Some say I need GC insurance (starts @ $2500) cause I’m sub’ing out more than 25% of work. I’m like man I’m just repainting houses, give me the basics, here!
Please give me advice on the best way to pursue this venture. I regreted paying for ads in paper and yellow pages last year cause they didn’t seem to generate what they cost me, so I’m gun-shy but lost on marketing. I put out nice colorful “Passion for Color – fine interior painting” business cards at about 20 interior design, day spas, hair dressers, etc. trying to appeal to the ladies cause they’re the one who want the house painted. Got one (1) call last week after two months. Give out references from clients that act very satisfied for the few estimates I do. Don’t sell many jobs.
I want to be insured for me, the clients, and the painters. I don’t want to take on the painters as full-time employees right now cause I don’t have enough work to pay me steady. And, for now I’d like to pay them as 1099-tyoe subs cause most of their income comes from another source, and I don’t tell them how or when to work (though I do mediate the schedule with the clients). I want to keep paying them by the square foot which is how I’m doing my quotes. I pay them about 50%, 25% to materials, 25% to me for my time, profit, and business costs. I don’t want to start them on an hourly basis for obvious reasons. They’re happy with our set up and say get them all the work I can.
Please advise me on how you would proceed. Sorry to be so long-winded.
MikeVB
Replies
And, for now I'd like to pay them as 1099-tyoe subs cause most of their income comes from another source, and I don't tell them how or when to work (though I do mediate the schedule with the clients). I want to keep paying them by the square foot which is how I'm doing my quotes. I pay them about 50%, 25% to materials, 25% to me for my time, profit, and business costs. I don't want to start them on an hourly basis for obvious reasons. They're happy with our set up and say get them all the work I can.
This oughta be good!!
Eric
It's Never Too Late
To Become
What You Might Have Been
[email protected]
After scraping through May-June I've realized I've gotten myself in a spot where
(I can't really do everything on the up and up) and survive very long, because the competition is either cheating to charge less,
The first thing that goes is the ethics.
There are a lot of responsibilities that come along with being a respected, ethical and legitimate employer. Providing living salaries and benifits, Conforming to state and federal employment laws just to mention a couple. If it was easy anybody could do it.
When I bring a legetimate same trade contractor on it is ussually in an effort to complete a project with in the scheduled time allocations. Other wise payroll labor would be preforming the tasks.
I feel I do not carry any overhead asssociated with the use this sub contract labor. They are in fact burdened with their own overhead. Adding some funky multiplier to their fees would prove to be cost prohibitive.
Usually these subs are suppling labor only. In this situation one could expect to see a higher hourly rates due to the fact that Labor, benefits, burden, overhead and profit is built into their hourly fee. I usually only make a profit margin on these same trade contractors. My overhead recovery is based only on my own payroll staff labor.
Legitimate Real Sub contractors in my neck of the woods can usually be recognized by these characteristics.
They have all there own equipment.
They have all the required Insurances.
Truck and tool trailer signage
You will see a add for there business in the yellow pages
They have letterhead and business cards
They have a business address
They have contacts for the work in which they are engaged in.
They have office space even if it is in there own home.
They have overhead cost other.
And the biggest characteristic of their self employment is their pay structure. It includes sufficient funds for salaries, benefits, taxes, overhead and profit.
My suggestion is: If you can not legally hire the labor resources you mentioned in your above post, I would work alone, then all the revenue goes to you (50%- for wages) + (25% for overhead). Still leaving 25% for materials.
Lead - Follow - or get out of the way.
Respectably submitted,
Tom
Working for nothing is not getting any cheaper.
Edited 8/8/2005 7:33 pm ET by TomMaynard
I'd say if you have to "cheat the system" something is wrong.
If you aren't part of the solution, you are part of the problem. By cheating you are stealing work from someone that does it legitimately.
mike...
if they can't give you a certificate of insurance they you are going to get caught in an audit and will wind up paying a premium for their associated GL
also.. depending on your state law.. they may.. or may not be subs..
LOTS of contractors use 1099 subs.. but if you scratch the surface you will find that no one is insured.. which means that the deep pockets will wind up being the go-to guy
imagine this scenario... one of your "subs" falls off a step ladder.. breaks his neck.. and lives... but he'll never walk again...
guess who's going to court.. guess who will ultimately be responsible for his care and medical bills..
this is a very dangerous game.. i wouldn't dream of letting subs on my job without certificates of insurance and i really want to see a WC certificate... most do NOT have WC... in Rhode Island they have to give me a DWC-11 IC form which is a " Notice of Designation as Independent Contractor".... this goes on file with the Department of Labor & Training.. and one copy to my file for my annual insurance audit
if you are missing certificates and DWC's , it can get very expensive at audit time... and if there is no insurance, you are basically putting every asset you own at risk
believe me...many do cheat.... but , some do not... once you start down that slippery slope , it is harder and harder to claw your way back...
make up your mind.. if you are going to be an employer... be a legitimate one, or work alone... or go to work for someone elseMike Smith Rhode Island : Design / Build / Repair / Restore
I knew this was gonna get deep.....................
as Buck would say; '' ahahahahahahahaha!"
EricIt's Never Too Late
To Become
What You Might Have Been
[email protected]
Well, maybe I failed to adequately explain in my first post that the reason I'm damn near out of business is that most of the competition down here is cheating the system or other people and
I have refused to rip people off, cheat other tradesmen, or work illegally w/o proper licensing, insurance, etc.
I want to do the right thing otherwise I wouldn't be asking on here. I'd find a good forum on how to screw people out of their money!
Now, I'll quit yelling if you will.
Man, when I started out on this venture I'd hoped to work my way up until I and my own crew framed and trimmed out houses that I was contracting for nice folks that wanted a good quality house at a good value. Well, it wasn't long before I got proof that it wasn't possible to make a legitimate living, much less a profit, by framing houses for $3-7 per square foot. Hell, I even went asking to just get on a framing crew and was told after a little conversation that I probably wouldn't fit in with their crew cause I seemed too smart!
My point was - I want to be on the up and up, and want to get business, and I want to grow as a business in construction. I've determined that I would be better off getting into the business of a specialty (e.g., painting, cabinets, trim, etc.), because I don't have the capital and I have too many morals and/or brains to try to go up against the big GC's.
The re-painting business is something that should have a decent market, because most legitimate paint contractors here only want new construction and most people hate to paint but need it (or at least want it) redone more often than say roofing. It's relatively inexpensive as far as equipment and insurance rates go and it's not rocket science.
As far as I know my ethics are not going bad by using these pro painters to do my labor. In fact, I'm giving the customer a much better product than I could do by myself. I also thought I was doing the painters a good deed by: 1) giving them a chance to make more income, 2) not paying them under the table, so that one day it's their #### and not a GC that the IRS grabs, and 3) not lying to them and promising them steady work which I don't have yet.
I believe that I'm meeting the IRS guidelines on paying them as subcontractors. I'm quoting people similar rates to what other real painting businesses are charging, I've got pro painters doing the trade work, and I handle the business end and customer relations.
I'd like to get enough work to be able to hire them on as regular W-2 employees and work them until their hands cramped. But, I'm at a loss as to how to get more business in this market. I'd like to cover them with WC and pay them $15-20 per hour cause their good guys and good painters. I'd like to give them full medical coverage. Hell, I'd like to buy them a COKE, BUT I CAN'T BECAUSE I DON'T HAVE ENOUGH BUSINESS!
I was hoping for some suggestions along the lines of, 'Well here's how I built my successful painting business.'
I read a lot on here about the way to be successful is to "work on your business, not in your business" and "don't undercharge" and blah, blah, blah. Well, all that may work great in New England and other places with real state-wide licensing, and union labor and all that, but down here it hasn't exactly set me up.
Look, I'm asking for some help. I get enough criticism from myself. If something's not generally considered kosher please just tell me and explain why, and then maybe offer some alternatives or constructive criticism.
Along the lines of "lead, follow, or get out of the way,"
Constructively criticize, offer suggestions, please help, or shut the hell up.
Edited 8/8/2005 7:51 pm ET by MikeVB
I have too many morals and/or brains to try to go up against the big GC's.
And you wonder why your business is failing?
To all the good fellows posting with replys that were seriously trying to be helpful, I apologize for my outburst in the previous post.
Thanks.
mike... we used to build houses... last one i built was in '90... from '75 to '90 we probably built 30 houses.. all custom..
after '90 i decided i could no longer compete.. houses had become commodities.. we changed to additions and remodeling..
i'd rather build houses.. but i'd rather make a living..
.. if you want to stay in construction , you'd best find something you can do and make money.. and be legit... there are lot's of legit buidlers and subs out there, even where you live...
or... move someplace that can afford the kind of work you want to doMike Smith Rhode Island : Design / Build / Repair / Restore
I was thinking about this some more. I'm not sure what you are asking. What will you be doing while the other guys are painting? If you are trying to build a business, you should be doing the work.
If your "professional" painters are working under the table now, they are not "professional". I'd assume they don't have any insurance, just like you(by your own admission) don't have any insurance. That makes your business illegitimate. End of story.
Get insurance, do the work yourself, or get legitimate subs that are insured. Make sure you pay your taxes, and that you 1099 them.
People start businesses for many reasons, and most fail. Don't become part of the problem.
Edited 8/8/2005 8:30 pm ET by dustinf
I can not speak for the others that posted previous but I thought I gave you some good constructive criticism.
<!----><!----> <!---->
I outlined my interpretation of a real sub contractor. If my description failed to meet the profile of the labor resources you employee then maybe they are really employees. In your own admission you claimed that you are struggling with being “on the up and upâ€.
<!----> <!---->
Based on the language of your initial post, those of us who read it may be left with the impression that you are trying to slide by your responsibilities as an employer. Your arrangement with the painting crew appears to be one of employer and employee.
<!----> <!---->
Those of us who operate our business legitimately and have to compete with contactors who engage in some forms of illegal employment of the production staff may initially go on the offensive with a post such as yours.
<!----> <!---->
My wife is a professional painter. She uses legal payroll painters and in certain instances with a work load that the payroll staff cannot handle uses sub contractors. The cost of the sub contact labor is obviously considerably higher then the payroll labor. She feels that in instances when she has to use same trade subcontract labor that she makes no profit on this labor item. This labor is strictly a matter of convenience and used to expedite the project in a manner that meets the scheduling plan.
<!----> <!---->
Based on the numbers in your initial post earlier
(50%) – (for subcontract Labor, Benefits, Burden, Overhead and Profit) –
ADD another layer of fees (yours?) Totaling (25%)?
(25%) for materials
It is my opinion base on these numbers you may not be competitive.
<!----> <!---->
Example: Real Sub Contract Labors Analysis:
Master Painters base wage = $22.00 per hour
Fringe Benefits = $8.00 per hour
Taxes - Disability insurance – etc. = (30%) sum above = ($9.00)
Subcontract overhead recovery on labor only = ($16.00)
Profit = $3.00
Total subcontract labor = $58.00 = (67%) of total charges
Your fees = ($29.00) = (33%) of total charges
Total labor charges= $87.00
<!----> <!---->
Compare it to this; (You are the employer in this scenario, you burden all the payroll taxes and overhead)
Master Painters base wage = $22.00 per hour
Fringe Benefits = $8.00 per hour
Taxes - Disability insurance – etc. = (30%) sum above = ($9.00)
Subcontract overhead recovery on labor only = ($16.00)
Profit = $3.00
Total labor charges= $58.00
<!----> <!---->
<!----> <!---->
<!----> <!---->
Have you checked with your states employment laws? You mentioned that you felt you were in compliance with IRS requirements. This may have a bearing on how you can handle your labor resources.
<!----> <!---->
<!----> <!---->
TomWorking for nothing is not getting any cheaper.
You're right.
I quit.
What is Subcontract overhead recovery on labor only ?
EricIt's Never Too Late
To Become
What You Might Have Been
[email protected]
eric.. it sounds like some of hte PROOF system for allocating expenses
you can put all of your overhead onto your labor.. or reduce your labor charges by allocating some of it to materials and subs
i use PROOF, but allocate my O&P equally to all of my costs.. and of course, our labor includes ALL remotely asscociated BURDEN..
our burden is currently 62%.. so.. if an employee is getting $10, it costs me $16.20 before i add O & P Mike Smith Rhode Island : Design / Build / Repair / Restore
I don't want to really hijack this topic but I guess any discussion of Overhead, Markup, & Profit is only gonna help MikeVB but Mike Smith I'm not getting what you are saying. You wrote:
"i use PROOF, but allocate my O&P equally to all of my costs.."
Unless your saying something else I missed on that's an oxymoron. The PROOF (Capacity Based Markup) system says to recover your Overhead as a function of the Labor your company performs as opposed to a function of your company's aggregate dollar volume of Labor Materials & Subcontracting. They are at two different ends of the spectrum. You can't logically say you use PROOF but you recover or distribute you Overhead over all your costs (Lab,Mtls, & Subs). That's like saying I'm on a Low Carb Atkins Diet but I still eat bread and pasta.
"and of course, our labor includes ALL remotely asscociated BURDEN.."
And what do you mean by "remotely asscociated BURDEN"???
I guess now that I'm here I'm going to have to read through all the other posts here and see what this topic is really all about. Maybe I missed something that was said earlier but what you said there didn't make sense with me.
View Image
Edited 8/9/2005 5:40 pm ET by Jerrald Hayes
jerrald........ when i took the proof course, ole what's his name ( the painting contractor ).. said to allocate it all to labor...
but he ALSO said if you wanted to hold your labor rates down, you could allocate some to materials & labor
we choose to do so...
we seem to havea very balanced operation... it almost always tracks at 1/3 ...1/3.... 1/3.
so we allocate O&P equally... AFTER we've correctly identified all of our direct labor costs..
by " remotely".. i mean.. training... vehicles.... bonus.... anything that i think/feel would not exist as an expense if we didn't have employees .. which is why our burden is up to 62%... what's your's now ?
anyways.. it's still PROOF.. it is still the child of the father... it's certainly more PROOF than StoeppleworthMike Smith Rhode Island : Design / Build / Repair / Restore
Mike Smith - "jerrald........ when i took the proof course, ole what's his name ( the painting contractor )"
It's Irv Chasen
"but he ALSO said if you wanted to hold your labor rates down, you could allocate some to materials & labor
we choose to do so..."
" You may have gotten (interpreted) that out of what he said but that I would doubt that he would recommend that. What possible purpose would it serve to "hold your labor rates down" especially if that an artificial deflation? I hear other contractors use that logic saying that they need to "keep their labor rates down to get the work" but if deflating their labor rate causes them to not make or even lose money how does make any sense?
'we seem to have very balanced operation... it almost always tracks at 1/3 ...1/3.... 1/3." That is then the only reason it (using the Estimated Total Volume Markup method) is working for you. Those are the only conditions where it works when the ratio of Labor to Materials to Subcontracting on every job is the same ( and that's really pretty rare).
So now ya got me wondering,...what made you go over to the "dark side"? A PROOF (Capacity based) markup will work in any scenario. A contractor who's projects all have the same ratio of Lab:Matls:Subs can still use a PROOF (Capacity based) markup and then when he or she does run into a project that the ratio changes they are still protected where a Estimated Total Volume Markup method could be really screwed. What made you think you needed to recover Overhead through Materials and Subcontracting. We mark them up for Net Profit (which is what Irv Chassen and Ellen Rohr both write about) but none of our markup on those things is earmarked for Overhead.
"by " remotely".. i mean.. training... vehicles.... bonus.... anything that i think/feel would not exist as an expense if we didn't have employees .. which is why our burden is up to 62%... what's your's now ?" I and they refer to that as "Variable Overhead" since it varies based on how many employees your operating with.
"which is why our burden is up to 62%..." 62 % of what?Your saying 62% of the wage correct? $10 of wage generates $6.20 of "Variable Overhead" or "Burden"? I really try to never talk about our numbers publicly because I know someone reading them here or over on JLC will take the shortcut use them rather than figuring they out for themselves (using my spreadsheet!) but you're right up where we are.
"anyways.. it's still PROOF.. it is still the child of the father... it's certainly more PROOF than Stoeppleworth " Nah I don't think it's still PROOF. You may be more PROOF (Capacity based) than Stoeppelwerth and Michael Stone but I think as soon as a contractor wants to "cheat" on the diet and start snacking by recovering some of their Overhead as part of Material and Subcontracting sales they are potentially digging themselves a hole and leaving money behind.
View Image
Jarrald & Mike,
Am I understanding you correct when you both talk about applying a (62%) mark up on payroll labor. Assuming you do mark up as such what line item of labor do you apply the mark up to?
Would you please you use my labor worksheet below to communicate to me as to what line gets market up?
<!----><!----> <!---->
<!----> <!---->
Payroll Labor Expense Item (2005)<!---->
Hourly<!---->
Cost <!---->
<!----> <!---->
1<!---->
<!----> <!---->
Base pay = ($13.00) – ($22.00)<!---->
<!----> <!---->
$ 22.00<!---->
<!----> <!---->
2<!---->
Cash Contribution To Fringe Benefits :<!---->
Paid Time Off – Health Care & Retirement =<!---->
(40%) of Line 1 =<!---->
<!----> <!---->
$ 8.80<!---->
<!----> <!---->
3<!---->
Total hourly compensation =<!---->
Sum lines (1-2) =<!---->
<!----> <!---->
$ 30.80 <!---->
<!----> <!---->
<!----> <!---->
<!----> <!---->
<!----> <!---->
4<!---->
Payroll Burden & “Self Employmentâ€: Taxes - Liability. Ins. – Work. Comp. – Unemployment – Etc. = (31%) of Line 3 <!---->
<!----> <!---->
$ 9.55 <!---->
<!----> <!---->
5<!---->
Truck Allowance - (When applicable) = <!---->
Max. = ($2.67) * This individual =<!---->
<!----> <!---->
$ 2.67 <!---->
<!----> <!---->
6<!---->
Employee tool allowance per hour =<!---->
($.35) – ($2.00) This Individual =<!---->
<!----> <!---->
$ 2.00<!---->
<!----> <!---->
7<!---->
Total direct Labor cost this individual =<!---->
Sum lines (1-6) =<!---->
<!----> <!---->
$ 45.02<!---->
<!----> <!---->
<!----> <!---->
<!----> <!---->
<!----> <!---->
<!---->
<!----> <!---->
<!----> <!---->
Working for nothing is not getting any cheaper.
Edited 8/9/2005 9:37 pm ET by TomMaynard
First of all it's Jerrald not Jarrald. (How come all of a sudden everyone seems to be misspelling my name!!!)
Would you please you use my labor worksheet below to communicate to me as to what line gets market up?
Base Pay.
What I think Mike is saying (because it is what I would say) is that 62% is 62% of the Base Wage on your sheet. Using the numbers on your sheet (and why is it printing so huge on the screen?) the "Variable Overhead" or "Burden" come to 51% in your case.
Cash Contribution To Fringe Benefits Cash Contribution To Fringe Benefits
$8.80
Payroll Burden & “Self Employment”: Taxes - Liability. Ins. – Work. Comp. – Unemployment
$9.55
Truck Allowance
$2.67
Employee tool allowance per hour
$2.00
Total "Variable Overhead" or "Burden"
$23.02
I figure that $23.02 is 51% of the "Base Pay" figure your using of $22.00.
View Image
Edited 8/9/2005 7:24 pm ET by Jerrald Hayes
Jerrald,
I got it. Sorry for the screen size and the miss spelled name. I hope you forgive me?
The mark up applies to the base pay.
TomWorking for nothing is not getting any cheaper.
Okay now we're on the same page (with both markup and the name)It's been really wierd but as soon as August started everyone is spelling my name wrong. Even my bank sent me a new Visa card with my name spelled wrong. Geez how does that happen?
View Image
Ohh...relax Gerard........
Sorry- I couldn't resist. Whatcha been up to bud?
Bob
We're on the clubhouse turn with that Westport job but I'm actually working with a tootbelt on a client project just up the road from me. In fact while I was having my car worked on I walked to the job. Nice being that close to home.
View Image
Good to hear that you're staying busy- I know the feeling. We went from having $315,000 on the books two weeks ago to having $86 million as of last Friday. We were low bidder on a $17 million municipal complex (new municipal building, first aid squad building, and two new firehouses) two weeks ago (low by only 1.3%- nice....), got a $14 million assisted living facility handed to us (provided the number can be met, which it can), and acquired a $54 million dorm project in beautiful downtown Newark that should have started already, so it's already behind schedule.
As if it's not enough that we've got three projects to buy out and get moving by mid-September, we just got drawings for a $77 million highrise condo tower in Jersey City today. Of course, they're a month late, and they need the GMP yesterday (well, they were actually "gracious" enough to give us two weeks for a rough estimate and 4 weeks to get to a GMP amount- we normally require 6 weeks).
As the old saying goes- "when it rains, it pours"............
Bob
By the way that Towpath Center project is deader than a doornail now and buried pretty deep, no chane of any more revivals. But I'm guessing you figured that when NYC lost the Olympic bid. Got a good business plan developed out of it though incase you ever hear of someone else looking to do something like that, We'd sell it to them.
View Image
Bob,
Sounds like things really are picking up.
The $350,000.00 on books prior to the huge Volume increase? A small bathroom remodel or something similar?
TomWorking for nothing is not getting any cheaper.
Actually, it was a small tenant fitout project in an occupied space- around 8,000 SF with 2 new conference rooms, a remodeled kitchen/break room, and several office areas converted into open cube space. The price was high because the existing HVAC and electrical systems were a mess- needed to add two panels because the was so much garbage clogging the existing panels from previous renos, heat pumps that blew up into the plenum instead of down into the space, and a bunch of PVC piping to the heat pumps (a big no-no in a return plenum ceiling).
Bob
Bob,
I was just pulling your leg a little. I had little question it was something interesting, unique, architecturally interesting and from a engineering perspective a challenge.
TomWorking for nothing is not getting any cheaper.
Eric,
<!----><!----> <!---->
When Mike first started his post he mentioned that he was using a workforce that consisted of sub contractor painters.
<!----> <!---->
These painters were being hired to provide labor only. Mike was providing the materials. In this scenario the painters had only one vehicle in which to cover all their cost. And that is from their labor or their time. Therefore they had labor only in which to cover their overhead. No material mark ups etc. (labor only overhead recovery)
<!----> <!---->
This is not an uncommon concept; many Framing & Finish Carpenters for example supply labor only to the General Contractor. They too have to build their Salaries, Benefits, Payroll, Burden or taxes overhead and profit into their labor.
<!----> <!---->
Their invoice rate per hour would have to cover all their expenses:
<!----> <!---->
1) Hourly Salaries
2) Benefits
3) Taxes
4) Direct overhead: Trucks – Tools & equipment
5) Indirect overhead
6) Profit
TomWorking for nothing is not getting any cheaper.
Guys,
I appreciate everyone's replies, even the one's that told me what I didn't want to here and made me pout.
Down here in Georgia they just passed a law last year for state-wide licensing of contractors, but they didn't allocate any funding so it's not in effect.
Also, the law reads so that in order to get the license you must pass an exam, but you also must have so much experience. It seems from reading it that current contractors wrote it and structured it so that a new guy couldn't very easily qualify.
Also, the insurance deck seems heavily stacked against new guys. The best WC rate I got quoted to start my own framing crew was $32/100. Combine that with cost of GL and all other costs associated for running a fully legitimate business and you can see why I knew I couldn't make $3-7 a sq ft work mathematically. I'd have been making less money than my employees and no profit.
I've decided that this business has gotten like farming in the 80's. If you ain't born or married into it or otherwise got some way to jump past the bottom half of the ladder from a business economics standpoint, YOU AIN'T GETTING IN IT.
I'll be on Monster's Job Board if anyone asks.
Without seeing your states contractor licensing laws, I would bet they are similar to other states. Generally, as you stated, some form of experience is required. Usually they state the experience shall be either practical trade experience or management trade experience. The person who qualifies for the license is then designated as the supervisor of the work done by the licensee. If the contractor is an individual who works alone, he is the supervisor who takes the examination. Now analyze your states workmen's compensation laws. They probably state that if you have no employees you need pay nothing but may cover yourself . Some states specifically mention contractors about this issue. Therefore, if you run your business as a one person supervisory business with no employees you need not pay any workmen's compensation unless you cover yourself. Remember, the state makes a distinction between those who do the practical trade labor and those who act as supervisors (contractors). As a supervisor you supervise work done by other individuals, firms and corporations.
This is not a business for the faint of heart. You sound like you already know this.
You will always hear that if you just do good work and price fair they will come. I found as you found, BS. I think you need to work at a lower price at times when starting out in order to not starve and to get your name around.
When I started I billed at $25 an hour. Everytime I got a month ahead I upped it $5. I am at $50 now. I also think some well placed marketing is a good idea. Again you won't get referals until you do some work for people that they like/didn't mind paying for.
I am in my fifth year and in the last 6 months have finally started to get a steady stream of referals. Why? Finally worked for enough people.
As much emphasis that is put on all the business issues,books, theories etc. I really believe that one of the key factors is time. Time that you have been around so more people have heard of you, know of you and feel comfortable that you will be there later. I know that some contractors feel that way about new starts. One told me once he made a habit of each spring looking around to see who didn't make it through the winter.
I would advertise some, cold call some, do yard signs during the job, maybe door hangers in every neighborhood. As far as the master suite that didn't happen. A saleman told me once the number one rule in sales..........customers lie. DanT
Dan, you make an important point with this statement.
Time that you have been around so more people have heard of you, know of you and feel comfortable that you will be there later.
Before we met, DW had run her own small painting business, primarily interior painting, paperhanging, and some sub-contracting to larger painters.
She got her start by first getting a job at the university, painting dorm rooms. From that job she became known to the maintenance staff, some proffessors, and the Sherwin-Williams store. So when she went on her own, she was already a known quantity by the people hiring her. Many of her leads came from these scources.
The other thread about "In the begining" also got me thinking about when I started. I would bet that 90% of the work my first 2 years could be traced to references from a few people who knew me long before I ever went on my own.
I had been getting material from the mom and pop lumber yard for 5 years while working for others, so they had no problem recommending me to customers for small jobs. 1 small job, (replacing 2 windows) has turned into 2 additions and a covered porch over the years.
The cabinet shop manager knew of me because he was on the board of directors of the tech school program I had gone through, and he knew my parents somewhat. My first job for them was not a fancy install, but a small drywall repair.
I had gone to high school with the kids from a family that owned a carpet store. They fed me small leads to cut off doors, and repair rot around toilets.
Even with these leads the first years were not easy. About 10 months into it I was never so glad as when the car ahead hit a deer and didn't pick it up. Now I can joke with clients about eating road kill to get by, but it is not far from the truth.
Bowz
every contractor and/or sub around
because the competition
Don't sell many jobs.
MikeVB
>>"work on your business, not in your business"
That's what you came here for, to work on your business.
OK.
First, You've made it to the end of the first year. Congratulations.
Second you don't have any kind of a Business Plan. You have no idea what you are going to do next simply because you haven't thought about it in the systematic method a BP forces upon you.
Third, QUIT COMPETEING! Don't even think of trying to compete with crooks and lowlifes unless you are a worse crook and lowlife. Sell MikeVB. Don't sell price.
Fourth, Unless you are strictly a subcontractor who uses the lowest paid, lowest skilled, but fastest help . . .
YOU MUST LOSE TWO WORDS FROM YOUR VOCABULARY. . .
"per foot."
Those two words will doom you in your market.
Fifth, you don't have a Business Plan. You don't know if you are doing good or bad at this point.
I think I have a quick fix that will get you thru the 12month blues. You should bring your two paintersand their wives/GFs in to help you and to get them on your TEAM.
Plan a FALL PAINTING SALE to be held by MikeVB Remodeling. Print 1500 flyers on your computor advertising this sale. Take your TEAM and spread these flyers around any 10-15 year old, middle to upper middle class tracts. Find a wife, girlfriend, teenage offspring, or retiree who can answer the phone and take appointments for sales calls. Write them a script. These appointments will be handled by your TEAM and you
Have KINKOS, or similar, print 1500 brochures you designed, and mail them to any upper middle to upper class, 5-10 yo tracts. These appointments will be handled by you.
Get a graphics arts studio to print 1500 brochures and introductory letters. 1000 with your teams appointment phone number and 500 with your number. You will handle all theses appointments. Make sure your 500 mention to call between 7p and 9p Mon thru Sat. BE THERE. Miss the kids BB game if you have to, but BE THERE. Just this once.
Personally sign all letters. Mail the 1000 to any upper class tracts 1-5 yo. Hold a hotdog and hamburger BBQ and get the team and families to hand address the other 500 envelopes. Mail them to any upperclass home that has closed in the last month.
You will have to give your TEAM a by-room price menu. The prices should be figured from occasionally breaking even (maybe lose a tiny bit) to occasionally making a windfall.
Menu Items
Two menus, interior and exterior, exterior should include multi story. Don't forget scaffolds, etc. Don't try to be too exact, err in your favor. Sell your company, not the job. If you don't feel comfortable with the TEAM estimating exteriors, have them make an appointment with you.
The prices should include material, labor, consumables, and M/U.
One good brand (price) of paint. "I'm sorry, Ma'am, but we only use the best quality material."
Pad the time estimated for the job. Call the appointment desk for a schedule time slot.
Your TEAM should wear nice clothes, not painters overalls.
Hold a team meeting every night to review sales calls and job time estimates. update the job schedule and give to the team
These must be one call sales, so your SYSTEM must allow the painters on your team to fill in the blanks, get the contract signed, and get a signed 10% check.
Do not schedule any work to start before Sept 15, then schedule it all to happen as densely as possible keeping your painters busy 40 hours a week.
Read Sonny Lycos' posts to see what to do at the job re. work style. Keep it a maximum quality style. Not talking about workmanship, talking about Company Style.
Your goal in this quick fix is to get you 3-6 months work for your painters so you can hire them full time and give you a space to sell the remodeling part of MikeVB's Remodeling.
Your primary task for Mike VB's Remodeling is SALES.
Your primary task for Mike VB's Remodeling is SALES.
Your primary task for Mike VB's Remodeling is SALES.
Your secondary task is running the business.
Your very first secondary project is develop a Business Plan.
Wearing your bags must be the third thing on the list, even if it is the only reason you got into this.
SamT
mike... don't be dissuaded... samt has some great advice..
look, it's all about selling.. get a copy of "Guerilla Marketing" one of my favorites
and as an aside... some of the most successful guys i know are painters..
some of the guys i know who are painters just scrape by.. they both do the same quality work.. have been in business for about the same time..
one knows what they're worth and are willing to sell their jobs for that price.. the other doesn't have a clueMike Smith Rhode Island : Design / Build / Repair / Restore
Sam, you're one smart guy! Great advice. Once in their homes, he then concentrates on "Branding" himself so "the word" gets out to each customer's friends, relatives, co-workers, neighbors, etc.Then get ready, because the "Branding" results will make the phone ring, and keep the phone ringing, ringing, and ringing; and the best part is that most of those new calls will already be sold on him, and consequently, "price importance" will go down the list.
Sonny,
That's the main point that I forgot to point out to Mike, having his TEAM concentrate on the lowest of his target market is just to get some $$ coming in so he can build his real market, the higher $$ range.
Way back in 1980, I worked for two brothers, Handy Men, but they called themselves Remodelers. Their day was 7-6, while the crews' was 8-5, mon thur fri, and no OT.
They had no business cards and an unlisted phone number. Their rates were $300 minimum and $75/hour for each man on the crew. Paid travel time. 1980 dollars.
From 7-8 and 5-6 daily, they returned calls. They were booked 4 to 12 months in advance. 4 months for the small, less than 2 day, jobs. Mostly they turned down work.
Their secret? They were meticulous. At the end of every job, or the end of the day, every thing was swept, mopped, vacuumed, wiped down and polished with furniture wax.
They also did extremely good looking work. I learned to do museum quality trim work from them. Time is not of the essence. I noticed a thread here about how long it takes to do crown molding. How about two men, two and a half days for one small room with no breaks in the crown? $3000 labor for one room, Crown only!
The strangest job I was on for them, one of the brothers was hired to watch the home while two subs were working. Not our subs, and not to perform any work. Just to watch. I went along, at $75/hr, to keep the boss company. He set me to looking for and fixing tiny little problems, like tightening up a gate latch, and oiling the hinges. I also got to vacuum and rake the carpet in the areas the subs worked and merely walked thru.
That was in the home above Charles Bronson's. $12,000,000 worth.
In that town, Hollywood Hills, Malibu, etc., it was braggin rights if you could get the brothers to work for ya.
Mike said, jokingly, that he wants $175K/annum. At $75/hr, two men at 1800 hours/ year plus himself at 1000 hrs/yr. He keeps half the cost. Thats $172.5K. You can't do that by competing.
If ya doan wanna compete, ya gotta be unique.
SamT
Sales and estimating skills are very very important. Its easy to take for granted how much we learn over the course of hundreds of estimates. I know from personal experience how hard it is to worry about long term planning or goals when you can't see where your next check is going to come from and funds are running low.
SamT's advice is great, canvassing is cheap and theres nothing better than talking to people face to face at their homes, you could get chances to bid on alot of other work while looking for painting jobs. Its not easy or pleasant but you gotta work with what you have. I would suggest carrying a cell phone with your office number call-forwarded to it..theres nothing more important for you right now than making sure every call is handled well.
If you live in a smaller rural area you might try to line up some work from some of the more prominent people/businesses at a reduced rate, once you get a few of them thinking about you and on your reference list alot of extra calls will trickle in.
You might try running some small classified ads in the local weekly's, the ones with community news seem to be better than the shopper types. Try to pick a catagory without alot of people in it obviously, sometimes they will add a classification for you if there isn't one, basement remodeling or attic insulating, or whatever you think might get people to pick up the phone.
Flea markets-if you have any in your area they can be a good value, pick up some samples from your local suppliers and get a booth, even a few leads will be worth the small investment.
Thats all that comes to mind at the moment, aside from saying it will get alot better as time goes by.
To be perfectly honest with you when I started out I MIGHT have been less than legit. I MIGHT HAVE even cheated uncle Sam out of a buck or two and did'nt have all the neccessary insurance. I kind of flew under the radar
I was talking to a friend one day about growing my business and he said "as long as you have to hide in a closet you will never be visible to the public". He went on to compare him and me, he put himself out there as a business entity and I just waited for the phone to ring.
He was right of course. So I had to start living the role I wanted to eventually become. Clean cut, fully insured, payed my taxs, name on the side of the truck... basically an overnight transition.
Let me tell you! Business took right off like a rocket and in the last 10 years I've been lucky enough to pick and choose my jobs. Now if I get some down time I dont call it a slow down, I call it a welcomed vacation.