By Daniel C. Brown
If a remodeling contractor is the team's player-manager, then subcontractors act as special-team members who come into the game for certain "plays," such as electrical work or plumbing. And it's important that they be treated with respect as partners on the same team.
"Partnering creates loyalty with your subcontractors," says Steve George, general manager of Authentic Construction, a $3.75-million remodeler based in St. Paul, Minn., that does kitchens, baths, room additions, whole house remodeling, and an occasional new house. "If you as general contractor are constantly trying to get them to cut price and do extra work for free, then they won't be loyal to you," he says.
As partners, subs owe their loyalty to the general contractor first. Steve makes sure that both his customers and his subcontractors know that the subcontractors are part of the Authentic team. He doesn't want them to work directly with the homeowner. If subs are working on side jobs for the owner at the same time they are working for Authentic, it can get confusing as to whether that work is part of the original contract. The result could be erroneous accounting and bad feelings. (However, once a project is finished, the books are closed on it and the homeowner calls a sub to do some minor, unrelated work, Authentic generally has no problem with it.)
Money really can buy happiness
Paying subcontractors on time is essential to making them feel like members of your team, Steve advises. Moreover, he adds, "If we don't pay them on time, what incentive do they have to do us a favor when we need it?"
Authentic typically marks up subcontractors' bids when charging the homeowner. For example, if a subcontractor charges $100 for a certain job, Authentic may mark that up to $150, for a gross profit of 33 percent. In return for that gross profit, the general contractor is handling the marketing, the design work and the contract, as well as any warranty work. "If it is our responsibility to do the warranty work, we've got to have the gross profit," Steve says.
Another key to partnering is making sure the subs remain profitable. If good subcontractors find they can’t make money working for a certain remodeler, they’ll avoid that contractor. Steve suggests reviewing each series of jobs with the subcontractor to get a reading on the sub's overall profits margins. It's a way of checking how the sub is doing on jobs that you, as the general contractor, have estimated.
You might find, Steve explains, that on Job A, the sub did okay; on Job B he made really good money; and on Job C, he lost his shirt. "We want to make sure that the subs are comfortable," he says, "that they can make what they expect to make."
It's to everyone's benefit if the sub's business is financially healthy. In fact, it's one of the key reasons that partnering is so important. When it works, the subs and the remodeler make money – and the client gets good service and excellent value.
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