Doing sub-work for friend-- questions

The Office
1

Hey guys,

A good friend of mine has a window cleaning/pressure cleaning business. He has worked on it since 2003, has about 400-450 customers. Last summer, he got into pressure cleaning…and now he doesn’t care for window cleaning (I don’t blame him, I am now finding out how much you can make with a good pressure cleaning setup). He has come to me a few times, offered me a job to go with him full-time I am weary with going to work full-time with a friend (Business/Personal)-- so I told him no…being friends and working together 5-6 days a week together may be a problem–(I currently work for my boss of 11 years, I am just looking to fill the void on my off days and Summer slow season).-- I work by myself 90 percent of the time, even with my boss (I call him the night before and get all the work for the next day, all the customers are familiar with me). I enjoy working for my boss, the way I look at it – He never has to worry about me showing up and doing a good job, and I never have to worry about collecting my paycheck—and I am entertaining the option of buying a percentage of his business when he decides to retire-- But that is a bridge I will cross when/if that happens.

I recently got myself licensed in 3 counties,a business checking account and am looking at insurance for myself just to get started making some money on the side-- My friend has come to me asking if I would be interested in sub-contracting these jobs for him. I have never done any kind of work other than hourly that shows up on a W2 for the last 11 years-- how exactly does this work? Somewhere between a 60/40 split I would feel comfortable with, knowing his prices he would make 40 percent “Not even leaving the house”. But here’s my question-- If I am my own business-- how would I subcontractor work for his? I have all of my own tools, my own truck, etc-- would the income I receive be able to use for MY business returns?

The reason I am asking is I am trying to get my own home. I am paying 1300 a month in rent, and when I applied for a mortgage I was told with my W2 income. (28k a year)…not much wiggle room. I understand I need TWO YEARS of returns if I am getting 1099’s or self employment income…I would like to pick up my own jobs on the side, and subcontract work from my friend’s business as well. I’m not talking going everyday, maybe 1-2 days a week for him to supplement my time I am losing from my current job in the summer (My friend has bi-monthly accounts year round to whereas I deal with snowbirds 6 months out of the year). I just want to be able to claim this money, and wondered if subcontracting will add income to MY business?

This is all new to me, all I have ever done is work hourly. I afford enough for a 1 or 2 bedroom condo currently, I may buy one when my lease is up in April of 2018-- and start showing more income returns so by 2020/2021 I am ready to buy my dream house-- all I need is the VERIFIABLE INCOME! The future is bright for me, I am only 31 years old and have plenty of knowledge gathered from these 11 years full-time. Paying 1300 a month on someone else’s mortgage is a tragedy-- I could buy a condo with my current income and just invest in that property to get me by until a few years down the road where I have more on the books VERIFIABLE income. My lease is up in 7 months so I start thinking ahead.

Any help or suggestions would be appreciated, the work that can go my way through my friend’s business is plenty-- he is also having a hard time finding employees who want to work and not just do “the boss’s work” (Patios, non-ladder work, etc)-- I’ve worked with him over the years but it has been under the table (Or should I say, I never worked for him, Uncle Sam). The opportunity is there, but is this a viable option or would I just be receiving a 1099 from HIS company?

Edit: I know this is something I should ask a CPA, but since I see so many of you guys on here-- someone has to have gone this route before! I make enough to live off of with my current job, all of this would be going straight into my business checking and never touched (except for taxes)—to further my purchasing power down the road. For some of you who are reading this and wonder, my boss is the one telling me to go do something on the side-- he fully supports it as long as I don’t interfere with his work (I signed a non-compete over 11 years ago-- would never think of it). My friend is dying to get some time off, he has too much work coming in and not enough men to get it done-- I feel this could be a WIN/WIN for everyone involved and HAPPY customers all around.

Thanks,
SeaBreeze

2

A 1099 is reportable income. So, yes, this would count as “income” for you/your business. You WILL need a good accounting program when you do apply for a mortgage, because they will want to see your profits and loss statements.

If it were me, I would want more of the price of the job. IF you are doing it solely by yourself, I’d want 75%. It sounds like he isn’t even advertising for windows, so 25% for doing nothing but calling you sounds like good money.

You will still need to carry liability being a subcontractor.

That’s my two cents.

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I would do 80/20 and noting less . I think that would be good for him instead of losing all his clients , but first find out his pricing

Also you are correct if you go from w2 to 1099 , you would need 2 years of self employed tax returns to qualify for a tradinational mortgage.

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I sub out work at 60%. All my subs have to do is go to the job and that’s it. They average $45-60 an hour so they are happy. They know we handle all the calls, scheduling, advertising, etc.

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Yes it will add to your business , but the bank will not take it into consideration unless it’s 2 years or more for qualification purposes

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I only give subs 30%.
When you get subbed (meaning I work on someone else’s job) you have to lower your cost. Maybe I’m doing it all wrong but its been working for me.

The way it is supposed to work, is if you are being subbed-you give your bid, your cost for doing the work. If the Prime tells you his budget or what he can pay then great if you can work with it. But never put yourself out and go lower than what you are comfortable working at. Because 9 times outta 10 they are looking for a sucker to clean up their problems, or they messed up with the bid and bid the job too low.

Friend or no, don’t be afraid to walk away.

Any job that is profitable is adding to your biz. But if you are looking to build your credit profile or show income? Hell no, it aint the way to go at all. Every single time I walk into a car dealership or whatever…I gotta show a freaken year of bank statements, show my bills etc…and I ALWAYS get denied. Its not regular income, it fluctuates too much with not much predictability.

If you incorporated, that’s different. The corporation “pays” you as an employee or CEO whatever. But its income. Not like the Sole Prop’s like me and you.

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Easy money!

Either side of that coin.

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Thanks guys, you have been a great help.

I think maybe I typed it wrong I already have a full-time window cleaning job that has a W-2. I’m talking about doing side work when I’m off of work and eventually building my own business up. My friends prices are a lot more than my current employer, he’s opened up the books for me and I see what he makes–even at 60% I would be making out very well.

For instance, I make 14.20/hour now. No issue with what my boss pays me. My boss has helped me out more times than I can recall and I respect the hell out of him. I’m just looking to add more…and I feel this is a good opportunity to get my feet wet. I don’t mind buying new tools for myself, I use the income that I’m already making from my full-time job.

As for the credit goes…I have a 9 year average credit history, my scores are in the upper 770s. I’m talking about buying something now something that I can afford on my own with my current pay and just go forward in two or three years from now all of this would show up and I’d move on to the next phase

Thanks for your replies guys I knew you people would be the one to ask however I will go sit down with a CPA and start figuring out all of these little tax holes. After I get my insurance first of course, I’m not touching glass naturally until everything’s 100%

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You have been working for this company for 11 years and only make $14.20 now?

That’s wrong

Wrong for your employer to take advantage of you

Wrong for you to accept it

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I don’t see it that way, I am grateful to have a job. I know down the road, all the experience I gather will only further propel me. Even if I went to go work for somebody else, I’d be starting at the bottom of the totem pole again. Why not start my own totem pole? The work is there, the need for help is also there.

It’s more of a mental hurdle than anything.

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You need to keep in mind that most window cleaning business owner are grossing 100 an hour resi, and 60+ on commercial.

That’s not a magical standard number everyone must shoot for, but it gives you and idea how much a business owner needs to make, in order to be successful at owning a business. As a W-9 guy (business owner) you will be responsible for ALL of your expenses, mistakes, and all that jazz.

If you think making 20 bucks an hour average is good money, being self employed, you need to get some lessons on business management. Your overheads are all YOURS when you own the business. As are taxes, that you will be paying both ways, not just the employee portion.

This isn’t to pick a fight or chase you away from the idea, even if you only plan on doing your own thing part time. But you need to know now, before it’s too late. All the things you take for granted, that your employer pays for, won’t be happening when you work for yourself. You will be paying.

Making “extra side cash” can turn into a big pile of debt quickly.

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Where did you get 20 an hour from? How would someone stay in business at such low rates? Lol… I may just be an employee, but I’m not stupid lol. I’ve worked for three other cleaners in my area over the last 12 or so years-- just have gotten comfortable for too many years lol.

That’s why in my head, starting out WHILE I have steady income will allow me to dictate what jobs I take. I’m looking at this as a luxury, considering the situation. Not a bad thing by any means. Just adding to my income, you’ve got to start somewhere.

I see where you are coming from, nothing I haven’t heard before-- trust me. The way I look at it, why not try? What do I have to lose?

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To some banks, I think regular sub work would look good on your mortgage app. Of course, as everyone has said, it needs to be a couple of years for them to care. However, if your friends business is reliable, that will appear as sustainable income to a bank.

Get an agreement in writing and consider a trial period where you can both walk away. That will help you learn if the after percentage is right for both of you.

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I would suggest keeping the sub money in a savings account for the purchase of your new home. A good credit score and work situation is very important, but having 10-15K cash down is pretty sexy as well. Esp as a first time buyer.

Also, don’t even think about quitting your regular job until you close in the house. You would make an uphill climb darn near impossible.

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I would also sit with a home loan rep

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You have to have a different drive to operate a business. You must hustle to get off the ground and work to stay there. Besides doing the work you must come home after and solicite, make calls, sell jobs, make decisions, schedule jobs, be financially responsible, pay bills, plan,plan, plan.

My intent isn’t to be mean but honestly if you are fine with working for a company for 11 years and still make an entry wage at $14 You can’t be to motivated to do better in your life. You need to want more out of your situation.

Again, no disrespect intended and yes I can possibly be wrong.

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I was typing a reply and was trying to edit it to add some more and I deleted my post-- I have been away for a few months, was just checking up on the forums.

What I was going to say to the above poster is-- None taken! We all have our own goals, my eye is on the prize and I love this business. In time, everything will come-- just have to keep reaching out there and networking. Things will work out, as long as my attitude stays positive. Every day above ground is indeed, a great day!

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A guy tries to sub me out. I quoted a job in june. He just got back to me. Asks for a requote AND if I could lower my prices…buddy you think I’m going to go stupid low for 1 store front? That’s in a middle of a mall. Maybe if I had a bunch of them. I took 8 bucks off my original price lmao. I haven’t heard back and I’m ok with that.

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lol. 4 months to get back to you, haha he got the low baller and they screwed the pooch. What a headache. You dodged a bullet on that one huh?

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I am thinking so