Sub-Contractor Markup

Discussion in 'Landscape Architecture and Design' started by JimLewis, Dec 29, 2006.

  1. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,842

    How much do you guys markup work done by sub-contractors?

    I read somewhere once that a suggested markup was 40%. I can't imagine I would ever get away with that. My sub-contractors don't give me much of a discount on their usual rates. So, for instance, if I give a bid for a big project that includes an addition to a concrete driveway and my concrete guy gives me a bid of $2,000, which is about the avg. market rate, then I go and mark that up 40%, then I am bidding that part of my project REALLY high.

    I am just curious what is normal. I really don't use subs very often. But sometimes it's unavoidable and when I do I typically don't mark up that part of the bid by more than 10%, for fear of losing the job.
     
  2. RHayden

    RHayden LawnSite Member
    Posts: 123

    Depends on the sub of course, but usually 15-20%. No way I could come close to getting away with 40%.
     
  3. LB1234

    LB1234 LawnSite Gold Member
    Posts: 3,210

    I try and do 10%...but like yourself we do not/try not to use them often. It really depends on the amount also...if its getting the tree guy to come in and do the work and its 500-600 dollars than 10% is really not that much so I'll try and make 100-150 or around 25-30%. However, if I attempted to make25% off of a 5k job, that is a little outragious.

    Of course if I have to be present on site to supervise the work or whatever that it will be more.
     
  4. RedWingsDet

    RedWingsDet LawnSite Gold Member
    from Detroit
    Posts: 3,556

    It all depends on who it is and how much...

    For instance:

    My tree guy I have given over 20grand of work this year and not marked up anything. But he comes and cuts down the trees and trims stuff at my own property for free (were neighbors)...

    whereas the concrete guy I mark stuff up by 10-15%
     
  5. YardPro

    YardPro LawnSite Gold Member
    Posts: 3,563

    10-15% here.
     
  6. AGLA

    AGLA LawnSite Bronze Member
    Posts: 1,749

    One thing that often gets overlooked on this subject is whether you are managing the sub and taking responsibility for his work or just bringing in someone to do work that you can't or don't want to do.

    Selecting specialists, negotiating their prices, coordinating them among other subs, inspecting their work, and approving it for payment is Project Management. Project Management is acting as an agent for the client to manage the costs and success of the project. This is a tough job and you earn every bit of what you get for doing it and it has a great deal of responsibility and accountability. This can be worth a lot of money to a client. This is a Project Management fee.

    The other extreme is hooking up a client with another contractor that does something you won't do. The effort is little, the accountability is low, and it is not worth a lot to the client. Half the time the contractor is recommended because he is a friend or hooks you up with other work, thereby being more in your personal best interest than in the clients best interest. That is not worth a whole lot to the client and sometimes not in their best interest. The payment is a finder's fee rather than Project Management.

    There is a whole range of pay rate and responsibility when it comes to marking up subs. Everyone hears the Project Management fee rate and believes that it is "the going rate" that they should charge anytime a sub shows up on the job no matter how little management and responsibility they take on.

    Typically, when you hear high percentages as mark up of subs, it is actually a payment method for Project Management rather than a finder's fee.

    Like anything else, you can price yourself out of the market. This is especially true if your capabilities are less than what the job you are trying to get entails. Then you are in competition with others who can do the entire job without bringing in subs and the added markup. The subs are more a value to you getting to do broader projects than you can do on your own and more of a hassle to the client than one company that can do it all. Even without a markup the client would rather have the complete job done by one company. There is no value to them to have you do the job and mark up subs.

    The other side of the coin is that the client gets a set of plans. They could play general contractor an call in a bunch of landscapers to bid on it. On a small job the client can handle it. They could do it on a bigger job, but they don't have the knowledge, skills, or time to make sure that everything is done to specification and that work that involves specialists is coordinated properly. They don't know when a job is done adequately to sign off and pay for it. The alternative is to hire a project manager to act as an agent for them and coordinate the entire job. On a little or simple job it would be a waste of money, but on a big or complex job it saves money and ensures the outcome and is well worth the pay rate which should be more than offset by savings through good management. If it is not, the Project Manager is not going to be making a living for very long.
     
  7. garydale

    garydale LawnSite Senior Member
    Posts: 813

    I markup 20% on subs most of the time.
    However Ihold 10% retention until I get a release from the client.
    I make the sub responsible for any and everything related to his work from timeliness(meeting our schedule),cleanup,damages to other work etc.
     
  8. green horizons

    green horizons LawnSite Member
    from zone 5
    Posts: 144

    I think AGLA hit the nail right on the head. My experience is that the client sets the tone. Meaning, if he/she is aggressive and very involved, I'll simply refer them to a contractor that does the work in question and they can workout the details between themselves. This saves the client any mark up.
    However, If the client simply wants the work completed, doesn't want to chase down the details, contracts, etc., then he/she is paying me to do this, thus a charge of some sort (based on scope). As a rule of thumb, most contractors (locally) get 5-15% of the subs price (again, based on scope).
     
  9. drmiller100

    drmiller100 LawnSite Senior Member
    Posts: 562

    what he said. i livein a resort town. subs are tired of not getting paid. vacation home owners are tired of subs not doing their jobs in a timely manner.
    If the owner wants to manage it, i let them, and do my work and get done.

    if they want me to manage it, I can usually find subs for 30-50 percent less then they can, write them a check as they finish up their work on the job site , and i bill the owner when all done.
    Sub is happy, he got paid, he never met homeowner, and never will. I am happy as I get to talk to homeowner and sit on the receivables for 30 days or more, but some money to do that.
     
  10. PSUturf

    PSUturf LawnSite Senior Member
    Posts: 663

    We generally mark up sub contracts 20% but it can vary on a case by case basis. A large sub-contract with little oversight on my part might only have a 5-10% markup, especially if the total contract is large.
     

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