August 25, 2023

Keeping It Honest With Subs

Over the years, I have developed a pool of subcontractors that I rely on heavily. I understand their capacity, their price point, their strengths, and their weaknesses. Typically I work with the same subs job in and job out because the scope of my projects are so similar. I do not have a need for multiple electricians, plumbers, exterior contractors, etc. That being said, I do have relationships with subs I would like to work with in the future if the opportunity arises, or if the job calls for something more or less than my go-to sub pool can handle. 

While this business model ensures consistency and quality, it can present some trouble if not kept in check. If I use the same electrician on every job, they understand my needs, my standards, and my demands. It is convenient for both parties, and it can make for a great relationship. I have used some of my subs since my first year in business, but how do I keep these subs honest over the years? How do I ensure that their pricing is in line with the services they are offering? At some point regardless of your customer base you must remain in-line with your pricing. Even if you have the reputation to charge whatever the heck you want, you should still ensure that everyone is being honest and not overcharging for the sake of capitalizing on a situation. 

There are a handful of subs that I trust and never feel the need to check their numbers. For example, my plumber is the most honest and hardworking person I know. Oftentimes he will tell me that he has a number in his head for the job, but that he wants to wait to disclose it in order to see if he can get it done for less. I often tell him I do not want that of him, but that is another conversation. My plumber’s costs are clear and direct. He works by himself or with a single helper, and he is fair with his pricing. His business model remains the same year after year, so generally the rates remain consistent. I have other subs that have more employees, more overhead, and have re-structured over the years and this is where it is not as clear or transparent. I am certain their pricing has changed, but how do I gauge the change, and what is the value of said change?

If my electrician has hung up the tool belt and hired more people his pricing structure will change. Has the quality of work improved or degraded? Has the price gone up? Is the price reflective of the changes for better or for worse? Are my customers footing an overhead that does not bring value to the project? All of these are questions that you must consider and the only way to do that is to establish relationships with other subcontractors. Be open and honest with these new subs. Explain your situation and communicate that you may be looking for a new subcontractor. Explain why you are reaching out to them and be honest.

As I have begun to subcontract more work, I have realized how important it is to understand the market rate for yourself and for your customers.  If you have a sub that knocks it out of the park every job and they charge more than anyone else, then that is justifiable and warranted. If you are using a sub that is status quo yet charges a premium, you may be able to find a better sub for that price point or a less expensive sub for the level of execution. You must determine your needs, your program, your end goal, and your customers’ expectations as well. 

If you elect to use a different sub on a job, be respectful of your current sub and tell them why you are going a different route. If it is a pricing issue, maybe they can help. If it is a quality issue, maybe they were unaware and are willing to improve. If it is a scheduling issue, maybe they can restructure to better handle the volume. You want to do your best to not burn bridges. On our current remodel we are over budget and behind schedule due to significant unforeseen circumstances, so we are looking to save as much time and money as possible moving forward with compromising on the back end. I have entertained bringing in different subs to save some money or remain on schedule. We are currently using a different roofer than typical because they could handle the entire scope and were less expensive for a similar scope. I did my homework and it appears to be a cost differential due to overhead. In this situation I am willing to go with a smaller company to save the money and get the job done right. It is all give and take. 

Regardless of why you choose the subcontractors you do, it is important to always ensure they are being fair and honest. Once a year bring in someone new and gauge their perspective, timeline, and pricing. Ensure that you consider loyalty and relationships, but you have to do what is best for your business and your customers. Just because a subcontractor has been great for you for a handful of years, does not mean they are the best fit for where your company is today. There is no way to adequately gauge this without testing the market. It is a form of evolution. At the end of the day you may end up using the same team that you always have, but at least you know everyone is being fair and not taking advantage of the situation. You are offering the best product at the best price considering the totality of the project and scope. 

- Tyler Grace