This is going to sound like a really naive question, but I can't figure it out because I've never sub contracted anyone.
For examples sake, I get a school maintenance contract, and can fill out all that's expected apart from cutting the school playing field, as I don't have a tractor and flail. So I sub contract a local guy with the kit to do it at £50 a shot. I pay him his price, but probably charge the client a slightly higher figure. So, in essence the client pays more for a service that he could get cheaper if going direct to the sub contractor.
This is where I'm confused. Is this standard practice? What are the benefits, or pros and cons, here.
I hear it all the time. Companies looking to sub contract work out to others. Is this not essentially ripping the customer off, as they're paying two people for the service of one?
I'd like to understand this much better. Thanks
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Why would it be ripping off the customer?
I charge £100 for the job, my sub does it for £50. That's £50 for me for doing nothing. How is that not ripping off a customer?
But the customer hasn't had to find the operator, or do 2 sets of paperwork.
They have agreed to your price, it's up to you how you deliver it as long as it meets spec.
I know it feel wrong because gardenings a caring job, but business is business.
Over twenty years ago I worked for a medical equipment supplier, there biggest customer was the NHS. They charged 200% mark-up on some products! I was disgusted by it! Hope that's puts it in perspective for you.
Firstly, I wouldn’t be cutting playing fields with a flail mower, unless it’s one of these modern fine cut models. Traditionally flail mowers are for rough cut areas, not playing fields. You won’t get the required finish.
I use a sub-contractor. He mows three large playing fields for me totalling about six and a half acres. He charges me half the price that I charge the council. I priced up the contract according to what I normally charge to do the work myself. For the first year I did mow the playing fields myself and my pricing was not on the high side by any means for the time it took. But as I had too much on I asked someone I know if he could do it for me. He came back with his price. He has a large gang mower and so can cover the ground very quickly, much faster than I could. So he is still making his money.
That is how business works. You don’t imagine that when you buy a mower or a hedge cutter that the dealer is charging you what he pays do you? No, he is in business to make a profit, but also he has to cover all his costs, staff, rates, utilities etc.
So in this case you are the one who has costed the work, tendered, won the contract and has to see that the work is done, invoice the client, chase up any payments and generally deal with the client. You are entitled to make a profit. That’s why we do it, to make a living.
You have to remember that there are many in this trade who do not charge enough. They don’t charge the industry standard rates. If you have won the contract then the client knows that you are charging a fair price. They wouldn’t have taken you on if the price was too high. The fact that your sub-contractor will charge you less than that is up to him. You are not ripping anyone off because you are making money from your business activities.
Makes sense
When using subcontractors the main contractor takes on risks and has overheads.
Unlike those who think they can just take a percentage like letting agents and find a trader websites.
Like Vic, we sub out some large areas for mowing at half of what we charge the client. The guy that does it can't do all the other work that we do for the client so would be no good for the client. Making a profit as opposed to making a living is something I had to get my head around and still struggle with at times. You can be a good person and still make money from other people.
I suggest you watch some of Keith Kalfas's video's on You Tube. He's american but let's not hold that against him ;-) He talks a lot of sense and helped me to see things differently.
I've watched quite a few of Keith's videos. He seems to be expanding his business well, for the cameras at least.
Simply you are contracted £20,000 to cut said grass area. They think Adam Poole is awesome ( who wouldn't ) friday 13th Adam breaks a leg (bad idea Adam ) Adam tells the customer but offers to get the work done using a sub contractor friend (handy Andy ) He knows well. Customer likes honest Adam and trusts him as Adam won't employ any cowboy and tarnish his standards so let's Adam go ahead. Handy Andy charges Adam a price of £15000 Adam approves. Handy Andy does An ok job and Adam points out how to do a great Adam standard job and so does so. Customer is happy as usual. Adam sits back making money for nothing. Adam now thinks great I understand the use of sub contractors. The customer could use someone instead but might get a cowboy why risk it when Adam is awesome. There budget was maybe £22000 so they are under budget saving money on last year and Adam has ensured high standards even when Injured. Adam your awesome and cheaper but making £5k
Now Adam is loaded he wants to buy a round at the pub
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