Not the best with math so I’m looking for some input. I currently pay a subcontractors 70 percent if they go and take care of a customer by themselves. However, occasionally I will need their assistance on one of my jobs and when that happens I pay them 30% of the job. My question is when I have more than one subcontractor (I have a huge house coming up) help me with a house, what percentage would I pay each of them? If I had let’s say 2 of them helping out, would I pay each of them 15%? Or 10% if I had 3 helping me? I would be having to do less work so it only seems fair that my percentage should decrease as well.
Set your total ‘labor out’ price and divide it…
But at 70% it might as well be a 30% finders fee.
- you are paying someone way too much, to do what you can’t handle in the first place.
Question is, why are you so undermanned?
Here’s one way you could approach it:
Say you always want to take at least 30% of every job you sub out. Let’s call that portion “overhead”. But when you’re working on a job, you want to pay yourself for your time, as well. So you take out your 30% overhead first, and then you divvy up the remaining 70% in an equitable fashion. If one sub is helping you and they get 30%, you take 40% for your labor portion. Their labor portion is 75% of your labor portion (30 divided into 40).
So we can extrapolate further labor portions by saying that each guy gets 75% of what you do for labor (this is where the math gets a little trickier). This is the formula I would use. Let’s say L is the labor portion of the job (70% of the job total), n is your number of laborers, and x is your labor portion.
L/(n*.75 + 1) = x
For example, a $1000 job with 2 helpers would look like:
$700/(2*.75 + 1) = $280. Your total take home for that job would be $580 ($280+$300). Each helper would be paid $210. That’s more than if you just decided to split your usual 30% payout between the two of them, but you’re still compensating yourself for overhead, and paying yourself a little more for labor than they’re getting. You can always play around with the percentages, but hopefully you get the idea of how you could split things up so it always works out fairly. If you wanted to pay them the same amount for labor as you pay yourself (since you are getting 30% off the top, anyway) you could simplify your formula to:
L/(n + 1) = x
Using the same example of a $1000 and 2 helpers, this would work out to $534 take home for you, and $233 for each helper.
Well said!
Hire an employee bro…
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I think it’s ironic that whenever someone asks on the forum “how much should I get for doing sub work?”, everyone says a minimum of 70% of the job total. But when it comes to paying a sub, no one wants to pay out more than 50% of the job total. Go figure.
You gotta remember, not everyone is interested in hiring. Maybe it’s just not in their skill set or personality to handle employees. The point of subbing is that you get some benefit of having workers, but without a lot of the headaches and work of hiring and managing a crew. You potentially take on a few other headaches, though, like having less control over how the work is completed.
Personally, I think 30% is a pretty decent take for a job that I simply lined up and didn’t do any work on. I don’t have to pay any staff related expenses out of that portion, like workman’s comp, payroll taxes, etc, etc. It will have to cover marketing and other expenses related to getting the job, though.
I have been on both sides of this fence. And for us, having employees is the best.
If someone is working for you (subcontractor) and they get hurt on the job what happens? They don’t get workers compensation.
Also if you have subcontractors working for you on a regular basis they can be considered “employees” by law and you can get fined.
Also subcontractors doing work for you may end up not being the best reflection on your business, are they wearing your uniforms while working for you or their own?
Personally I couldn’t run my business as efficiently without employees, the average job we do is to big for one guy to finish in a full day. Many of them take 3-4 guys a full day.
Also paying a sub 70% of 75 Per man hour is $52.50 they get. You got $22.50 per hour… How is that worth it?
Paying employees between $13-$19 per hour, and add $3 per hour to cover workers comp and taxes,
So you would be making $42-$49 per man hour from each employee.
I agree that once in a while a sub contractor could be good for certain company structures and situations. But for us and many other companies employees are the best fit. Hope that perspective helps some to understand some of the pros and cons we have experienced personally.
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All good points. I think that if a company is going to rely on hired help on a regular basis, it probably makes the most sense to hire employees. But for occasional help with a heavy workload, I can definitely see the advantages of subbing.
Btw, 30% of $75 is $22.50. Personally, I think that would be worth it to me under the right circumstances, i.e., not baby sitting or dealing with anything beyond a little communication and paper work. So you can’t really look at it as an “hourly” figure, anymore. It’s more useful to look at the total take away from the job, measured against the effort put forth on my part to sub it out. For example, if I subbed out a $600 job @ 70%, my takeaway would be $180. It might mean 20-30 minutes total of my time quoting the job, lining up the sub, and dealing with payment. Throw in $30 expense for customer acquisition cost and office expense, and I’m looking at $150 for half an hour of “work”.
Disclaimer: I’ve not actually subbed work out, before. But I know those who have been on both sides of the street, and I’ve given quite a bit of thought to how it might work out. Personally, I want more control over the entire customer relationship than subbing can provide, so chances are if I ever did do this, it would only be for commercial or storefront accounts.
Yeah, okay… My question is… If you “sub” out a job here and there how do you know the “sub” is up to par with your cleaning standards? I can see hiring and taking a person or two under your wing to teach but to be so overloaded that you have to find a “sub” just doesn’t sit well with me. I have a business with a good reputation to keep up and the last thing I want is to land a high paying job just to throw someone into the mix that isn’t really familiar with cleaning windows. I know a lot of guys that need work but I definitely wouldn’t send them to any of my important jobs. To me, every job is important.
^ my $10 off was because its been a long day Alex. I got up at 5:00 am and ran a 10k in Grand Rapids.
But I think my point was still pretty clear.
I get what you are saying about making quick money from a sub. And I think you are right that commercial work and route would be the best suited jobs for sub work.
Just keep in mind that when you sub out work you are putting your own reputation on the line. That and customers aren’t getting “your” experience. They are getting what ever the sub worker gives them. And keep in mind he may be making 50-70% of the job, so do you think he is giving 100% of his best work? Something to think about.
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Thanks everyone for your comments…gives me something to think about. And thanks for the math! That clears things up for me.
