20% of estimate labor costs?

Discussion in 'Irrigation' started by jcom, Jul 26, 2005.

  1. jcom

    jcom LawnSite Senior Member
    Posts: 791

    I currently subcontract the installs on my estimates. I design the systems, pull the pipe and disappear until time for electrical hookup, timer, and final adjustment. My subcontractor has to hire his own help is he wants it or he can do it himself. The price he is paid remains the same. I will usually structure some leeway as to how soon the jobs need to be done, based on homeowners needs.

    The current rate we work off is 20% of the estimate. I provide all the equipment, parts, and overhead and he is given a check for the 20%.

    He is well satisfied and I seem to be doing o.k. but we never want to give more than we need to. Is this labor % way out of line or in the ballpark.
     
  2. Dirty Water

    Dirty Water LawnSite Fanatic
    Posts: 6,794

    Whats wrong with just paying a few guys $8 an hour to install heads on pulls?

    If your doing all the hard work, why pay %20 for the easy work.
     
  3. jerryrwm

    jerryrwm LawnSite Bronze Member
    Posts: 1,274

    You might want to look at that set-up. If you are providing everything but the labor, you are going to be hard pressed to claim him as a sub-contractor.

    I agree with Jon - if you are doing the majority of the hard work and he is coming in a getting the head setting/valve setting, and then getting 20%, he is doing well. On a $3000.00 install he is getting $600.00 and it may take him a day with one or two guys, and two days by himself. Either way he is making about $300.00/day. Are you doing that well? You are going to have about $750.00+ in material for that job, equipment rental - $150.00/day, your overhead may be another $150.00, your time to design/estimate/sell - $150.00, permits and inspections - $100.00.

    Adding all that up, you're at $2000.00 leaving you $1000.00 for your labor and profit. These numbers may be skewed one way or the other. You need to figure out the numbers for your company.

    Jerry
     
  4. jcom

    jcom LawnSite Senior Member
    Posts: 791

    I failed to be more specific. My sub is there for the pulling also and I do not do that myself. It is included in our contracted (signed) price for each job. I hope this will satisfy the subcontrator aspect. I contract for the install and sub out the digging, etc.. He is not required to be there at any specific time or days so should take care of the employee aspect. Might be some flaws in my thinking and hope it does not come back to bite me in the ass.

    I am doing my best to stay away from riding herd on a number of employees as I enjoy spending time on golf course, fishing, etc. etc..

    I consider the hard work to be the holes and head install. The fun is starting a system and tweaking it to what I designed it to do.

    Thanks for the input.

    John
     
  5. Broker

    Broker LawnSite Senior Member
    Posts: 382

    jcom,

    That sounds good to me. You should have all fixed costs and should know what your profit margin is on every job. Instead of the labor being a variable.
     
  6. Dirty Water

    Dirty Water LawnSite Fanatic
    Posts: 6,794

    jcom, I think your asking for a lot of very poorly installed systems.

    On a side note...Can I be your sub?
     
  7. The thing I don't like about subbing out stuff is you take on 100% liability for something that you don't have anything to do with.

    Do you have a certificate of insurance from the person that you are subbing the work to?
     
  8. jcom

    jcom LawnSite Senior Member
    Posts: 791

    My sub knows that inferior quality will be the end of our contractual arrangement and as such we always have top notch installs. I have stressed this to the limit that less than ideal installs will not be tolerated. Our contracts specify that all has to be to my satisfaction on each install or checks are not going to be written.

    Without quality assurance from my sub I would not go this route. How much quality assurance do folks have that supervise on day to day basis? I consider myself lucky.

    I think I could get by with half hour to hour labor but I just don't want the headache which is where the sub out comes in. More young folk are calling wanting to know how I structure the labor/installs.

    John
     
  9. jerryrwm

    jerryrwm LawnSite Bronze Member
    Posts: 1,274

    I disagree. If you sub out a job or part of a job, you as the contractor of record have all the responsibility for the successful completion. It is up to you to see that the sub is competent and reliable. If they aren't then all things necessary to make the job right remain with you. Basically a sub contractor is an employee that you don't have to pay any taxes for.

    The work that a sub does is as critical as it is if you had your own employee on the job. Because let's face it. Even the best foreman and crew can FUBAR a job in the blink of an eye. It all depends on what kind of instructions and requirements as to quality of work you set forth. A sub contractor can be a wonderful thing provided you find the right one.

    Also, you need to check with your accountant concerning the status of a subcontractor that uses your tools and equipment. Maybe consider raising the percentage and then charging them rent on the equipment equal to the raised percentage.

    Jerry
     

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