Converting EE's to Sub Contractors

Discussion in 'Business Operations' started by bullethead, Jun 23, 2007.

  1. bullethead

    bullethead LawnSite Senior Member
    from Texas
    Posts: 273

    I know I probably will not get any public responses regarding this - but if you or anyone you know of has successfully operated their landscape company solely through the use of subcontractors (i.e send em a 1099). I would love to hear about it and how it was handled. It is something I am strongly considering. You can send me a pm.
     
  2. rodfather

    rodfather LawnSite Fanatic
    Posts: 9,501

    Why would you want to do that other than simplifying things to the point you do nothing more than administrative?
     
  3. PaperCutter

    PaperCutter LawnSite Bronze Member
    Posts: 1,953

    Can you be more specific? Will they be using their own trucks and equipment?
     
  4. bullethead

    bullethead LawnSite Senior Member
    from Texas
    Posts: 273

    I am wondering if I rent or sell the vehicles, current equipment etc. to my foremen; have them get their own DBA's, get their own insurance etc.. Basically - I kind of want to spread the love and put some of the onus on their back. I am also butting up against the overtime restrictions - if I hold them to 40hrs, they get upset cause they want more hrs & money, if I run OT then my bids are not completely accurate and my margins shrink. Also, having a hard time finding good ee's that are legal. Was thinking I could set them up as subs and say here is the work I have, you need to bid it and go for it.

    I build pools as a part of some of our landscape projects and I have kind of enjoyed it - because just about every facet of the pool is performed by a subcontractor. I just go out and suprevise them to a certain extents and address questions. If I don't have a pool going on, I don't have a crew of guys staring me in the face asking what we're doing today, I don't care if their truck breaks down or their blowers get stolen, I don't care if it rains today, etc.

    With our current labor pool(or lack thereof) and related overtime issues - I realize I would be giving up some control, but it might be worth it.
     
  5. cldc2007

    cldc2007 LawnSite Member
    Posts: 12

    ...what would keep them from running side deals with the homeowner and cutting you out completely? then you would be out of that work once they figure out that paying you sucks....it's a tough call.....i did meet a guy who did that, he paid his guys 85 per day and if they showed they worked if not oh well, but your clients would care if their scheduled work was not done....
     
  6. bullethead

    bullethead LawnSite Senior Member
    from Texas
    Posts: 273

    On the landscape construction side of my business - I know they couldn't land the jobs that I do. On the maintenance side - I have the volume, steady supply of work (they would have lower margins, but higher volume).
     
  7. cldc2007

    cldc2007 LawnSite Member
    Posts: 12

    ...nice....what kind of fee would you have them pay you?...you have to make something out of it....also, what are you paying general laborers that mow, weed eat, prune, etc, but have a really good knowledge of what they are doing...
     
  8. PaperCutter

    PaperCutter LawnSite Bronze Member
    Posts: 1,953

    I worked as a designer for a company that did what you're proposing. When things were good, it seemed like a genius way to run lean. When they were bad, it was very VERY bad and seemed like a house of cards.

    The owner set the rate we'd pay for work- i.e., $3/sq ft for laying flagstone, $1.55 per 5 gal plant installed, etc. and we bought and supplied all the materials and we got the markup on them. All the sub had to do was show up and do the work. And there was the challenge. Because they were getting paid so little, our subs took all the work we would give them, which was sometime 7-8 jobs a week. Of course they couldn't do them all, so they'd start a job, tear up the client's yard, leave a bunch of tools and move on to the next one. This "marked their territory" so that we wouldn't reassign the job, since they had already "started."

    There was zero accountability. If a sub screwed up, he was backcharged. Backcharge him enough, to the point where he's not making enough on the job, and he'll stop showing up on that job. Go-backs to fix mistakes after the job was paid were a joke. We had fifteen sub crews and one in-house crew that was actually on the payroll. That in-house crew worked 60 hrs a week fixing our subs' mistakes.

    It can work, I guess. I know it's how pool contractors work, but it sure didn't work that well for our landscape jobs.

    Dave
     
  9. bullethead

    bullethead LawnSite Senior Member
    from Texas
    Posts: 273

    Thanks, that's the kind of feedback I'm looking for. I know of one Landscape Architect here in town that is set-up sort of this way. He uses a big landscape construction co for his installs. However the Co he is using is in a labor pinch, not unlike myself, and I am wondering what or how he is doing now.

    The pool scenario works because that is the way it is across the board - so you have multiple subs aggressively competing for the work. Keeps quality higher or allows you to easily dump one for a better one. With landscaping, it's almost always done in house - so, though there are many co's, most are working on their own projects. I would end-up being limited to my group of former employees - and I am just trying to see if it would be manageable or realistic. Ohhh - the allure of just sending out 1099's, no more payroll taxes, no more broken trucks - I'm in search of the Holy Grail of landscaping.

    The home building and pool building with the sub contractor system are in an enviable position, at least to me.
     
  10. PaperCutter

    PaperCutter LawnSite Bronze Member
    Posts: 1,953

    It's a tough call, because what's a problem for you right now (labor) is also the driver of your business (production). My business- which is providing design, drafting and rendering services to contractors- is easier to outsource, because it's not required on every job and a designer is a big, scary overhead position to add. Labor, on the other hand, is the engine that drives your business. It doesn't matter how much work you're selling if it's not getting built. That's what drove designers away from the company I was talking about. I was selling $200K a month but not getting paid, because my commissions came AFTER satisfactory installation- which was taking forever. Never again...

    I get what you're trying to do, but if your market is like ours was (in the Southwest US), market prices are lower than they should be so the guys you can get for subs- and still make enough profit to pay YOUR overhead, as well as your time babysitting them- probably won't be the shining stars.

    Dave
     

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