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View Full Version : What Price for Subcontracting?


tjr
11-03-2004, 09:32 AM
What would you do in this situation?

I have a friend who runs a lawn care business. He currently has around 50 accounts. His wife is from another country and sometimes in the winter he subs out his snow plowing and they stay with her parents for 3 months. He now wants to be able to go out of the country for several months during the summer and sub out his mowing. He would be around during spring then be gone Jun-Sep, then return for fall work and plowing. He has approached me about doing his work as a subcontractor during the summer months. (I will be a true subcontractor as I will have my own business, equipment, accounts, etc. so that is not an issue for discussion here.) The question is what pricing arrangement should I consider for mowing his accounts. I was thinking about an arrangement where he takes a certain percentage of the gross and then I get the rest. Annother factor to keep in mind is that I am starting my own business and even though I already have some accounts lined up I could probably use the extra work, so both of us could benefit from the right arrangement. What do you think make sense?

Thanks in advance for any responses.

out4now
11-03-2004, 10:56 AM
I'd be leary of a et up like that, especially if you're small. If that would be the majority of your income and something went wrong then you could be really hurting really fast. It has the potential to be instant workbase or instant problem. I would thin a percentage of the gross would be the way to go if you choose to do it. How will you be paid? He would owe you the $ if customers pay or not but outside the country I don't know how the collection would go if there was a problem.

tjr
11-03-2004, 11:44 AM
There would be a contract of at least 2 years in place. I have known this guy for quite a while and we are good friends, of course that could either be good or bad. I know being friends and doing business together don't always mix.

Any ideas of what percentage of gross would be reasonable?

I'd be leary of a et up like that, especially if you're small. If that would be the majority of your income and something went wrong then you could be really hurting really fast. It has the potential to be instant workbase or instant problem. I would thin a percentage of the gross would be the way to go if you choose to do it. How will you be paid? He would owe you the $ if customers pay or not but outside the country I don't know how the collection would go if there was a problem.

CathyLynn
11-03-2004, 12:46 PM
Sounds like the guy is trying to have his cake and eat it too!

One idea is to take on the work with him getting 10% and you do your best to bank all the rest except for actual expenses so that if and when you no longer have it you won't be hurt because you are not living off that part of the income. He can't expect to get much more than that if its all your equipment and so forth.

Remember, some good advertising and word of maouth and you could hustle up a lot of work on your own without his stuff so don't let him value it real high.

tjr
11-03-2004, 02:47 PM
Sounds like the guy is trying to have his cake and eat it too!

One idea is to take on the work with him getting 10% and you do your best to bank all the rest except for actual expenses so that if and when you no longer have it you won't be hurt because you are not living off that part of the income. He can't expect to get much more than that if its all your equipment and so forth.

Remember, some good advertising and word of maouth and you could hustle up a lot of work on your own without his stuff so don't let him value it real high.

Thanks for the input. I have a feeling that he is going to expect a higher percentage than is reasonable. I guess I'd better be prepared to get my own accounts if we can't get things worked out.

MMLawn
11-03-2004, 03:37 PM
Let me get this straight. You will be using your equipment, your wear and tear on that equipment, your gas, oil and trimmer line, your vehicle and your sweat and he still wants a cut?? I bet! For me it would be IF I decided to be VERY Nice to him, 95% for me (and I collect the Invoices payable to ME) and 5% for his doing nothing. But I doubt I would even be that nice and would expect 100% for what? Doing 100% of the work. If he didn't like it, well see how long he can keep customers without actually being there.

kootoomootoo
11-03-2004, 09:10 PM
[QUOTE=MMLawn]Let me get this straight. You will be using your equipment, your wear and tear on that equipment, your gas, oil and trimmer line, your vehicle and your sweat and he still wants a cut?? I bet! For me it would be IF I decided to be VERY Nice to him, 95% for me (and I collect the Invoices payable to ME) and 5% for his doing nothing. But I doubt I would even be that nice and would expect 100% for what? Doing 100% of the work. If he didn't like it, well see how long he can keep customers without actually being there.[/QUO

I think any number of the thousands of franchises in any business do this without any trouble. Usually more than 5% too. 80/20 is a good mix.

kickin sum grass
11-03-2004, 09:53 PM
tjr,
which part of cincy are you from?

zmowingmaster
11-03-2004, 10:10 PM
well, i do the subcontracting thing all year round,if the customer pays 25 i get 20 ,,,,30 i get 25 ,,,,35 i get 25,,,,some are like 55 i get 40,,,, or they pay 75 and i get 50 for it, it all depends on where the accounts are and how far from each other, i get 20 for all the accounts that pay 20. you know , i don't worry about collecting money from customers,just mow ,trim ,blow and go. when it is leaves season well, it is the same price all year round. some people might not like it that way, but at least it keeps me busy 6 days a week and i take the day off whenever i like, but i keep in mind that i am on scheduale before doing that. i use my own truck, trailor,equipment, and i have a helper whom i pay.i don't know, am i doing that right?... but so far so good.

zmowingmaster
11-03-2004, 10:12 PM
i forgot to mention, that i do plowing the same thing, my own truck ,plow and soon a salter :) , but here i got paid hourly

DuallyVette
11-04-2004, 02:32 AM
I think any number of the thousands of franchises in any business do this without any trouble. Usually more than 5% too. 80/20 is a good mix.[/QUOTE]

I think a franchise of any type would have a bigger profit margin built in along with all the expenses well accounted for. If I agreed to maintain his accounts, his cut would be - the return of his accounts when he returned. I'm afraid that I might be too busy with his work to develop my business.

tjr
11-04-2004, 08:56 AM
tjr,
which part of cincy are you from?

I am in the Loveland area.

tjr
11-04-2004, 09:07 AM
I think any number of the thousands of franchises in any business do this without any trouble. Usually more than 5% too. 80/20 is a good mix.

I think a franchise of any type would have a bigger profit margin built in along with all the expenses well accounted for. If I agreed to maintain his accounts, his cut would be - the return of his accounts when he returned. I'm afraid that I might be too busy with his work to develop my business.

If I have a multi-year contract in place to do his jobs through the summer it might not be so bad. I'm just starting out so it would give me some "instant" revenue during the summer and I would be able to begin adding some more of my own customers. My concern is whether I can handle all of his accounts and my own. Since I would be doing his through the summer there might be a chance as things tend to slow down a bit and I might be able to handle the extra jobs. One the contract would expire I have no guarantees, but that is the case with other large contract jobs. I certainly don't want "all my eggs in one basket" though. I am going to have to give this some serious thought.

Thanks for all the replies.