The Subcontractor Dilemma - Page 3 - Machine Underground -Tractor & Commercial Equipment Discussion Forum

Dougster · 06-01-2008, 10:44 AM

Quote:

Originally Posted by LoneCowboy

If you get a bid to haul crap away for $300, then in your bid, your cost of hauling crap away is $360 and that's added to the total while you give them one thing.

And then... in your example... if I lose the overall project bid by $60 to some illegal alien with an unregistered, uninsured truck with stolen Rhode Island plates (very common around here), what do I do?

Sit there and say to myself that at least I bid the job the right way... by the book (i.e., by adding a subcontractor mark-up)... even if doing so knowingly cost me the job???

Lone - I do get your point on how the world should work... Duc's too... but sometimes it is better to win a job with a modest profit than to lose a job trying (unrealistically) to make a big profit.

Quote:

Originally Posted by LoneCowboy

On the insurance issue, while I surely think it's prudent, I think you worry too much.
a. What exactly are they going to get if they sue you? blood out of a turnip and all that.
b. Unless you really screw up, or they are on your job site, then it's your A$$. (the truckdriver runs over a fence, that's you. the truckdriver has an accident while leaving your job and going home, off the property, that's him).

Despite being dirt stinkin' poor, being sued and not having enforceable business liability insurance because I broke the rules would not be a good thing. They would go after the equity in my home, my vehicles, my personal property and all of my equipment. I'd probably end up left with my puny little 401(k) and the clothes on my back.

It would not be a pretty picture.

Dougster™

**Ducati996** · 06-01-2008, 11:08 AM

I dunno Doug cant see loosing a job for that little amount of money - I know its just a token example, but thats where the salesmanship and professionalism comes in to play (which you have I know). Once folks realize having uninsured, illegals working on their property, they are liable if anything happens. That scares them straight almost every time.
Tell folks up-front odds are I'm not the cheapest, but I'm the most complete, honest and professional, etc...

How myself and Brian described how things are done is the majority method across the nation. Dont believe me just go on the landscaper or construction websites, they all operate in similar fashion. Why take the risk if there is nothing in it for you? adding a percentage to sub work- keeping in mind their prices are competitive to begin with (and if need be having a few compete for the best pkg price). Thats how it works, if you have to compete with price so does the rest of the team. But make a profit on it already

**LoneCowboy** · 06-01-2008, 11:12 AM

Quote:

Originally Posted by Dougster

And then... in your example... if I lose the overall project bid by $60 to some illegal alien with an unregistered, uninsured truck with stolen Rhode Island plates (very common around here), what do I do?

Sit there and say to myself that at least I bid the job the right way... by the book (i.e., by adding a subcontractor mark-up)... even if doing so knowingly cost me the job???

Lone - I do get your point on how the world should work... Duc's too... but sometimes it is better to win a job with a modest profit than to lose a job trying (unrealistically) to make a big profit.

ougster™

You can't win every bid. I bet I win 1/3 to 1/2 of the bids I do. Some people are always going to go lowest cost (illegal everything). Well, I can't compete with that. Some people simplly don't have any idea what things cost. (so, you can seed this 10 acres for 200 dollars" Uhhh, no), can't win those either. Some people just wanna talk and see what things cost. They aren't really for bid, but you don't know that til you get there. Some people are just price checking so they can charge their neighbor (happens a lot with mowing, I'm sure of it. Wait til they see the next ad about to start "as low as $15/acre" (Beat that you CS'ers with an 8N and a 5' cutter) )

Take those out and what's left is your real customers.
Of those left, I bet we win 80% or more.
And it's almost never about price. People like you, they trust you, as long as you are close, it's really not an issue. If you are off $60 on a 2000 dollar bid, well, if they like you, it doesn't matter. If you are off $500 on a $2000 bid, well, that matters.

You have to define your competition. Your competetion isn't the illegals. You simply can't compete with them. Their cost structure is lower and they are only after low price and that's the customer they get.

You are top notch service and completely legal. "unlike some other vendors, we are registered and insured" That tag line should be on all your ads. (or something similar)

Don't sell yourself short. I get calls all the time for mowing. "so, how much for 1 acre?"
$135 (our minimum charge to mow, covers up to about 1.75 acres, used to be $120, gas is too damn much now)

it goes one of two ways.
a. "uhhhhhhhhhhhhhhh <huge pause> let me talk to my husband and I'll call you back"
Never happens, I know it's not going to happen and so do they.

b. "great, when can you get it done?"

You simply can't worry about the a. response. I don't make much at all on little plots anyway and I'm certainly not working for free. But, those b. customers will be back all the time and I take good care of them.

You can't compete on low price, stop trying. And about those big profits, where the hell are they? I haven't seen any yet.

Dougster · 06-01-2008, 11:26 AM

Quote:

Originally Posted by Ducati996

I get audited almost every year - haven't lost $1 each time. I play by their rules and win every time. You are doing the right thing and I admire that, I think now that you have insurance, you can shop around for a better deal since you aren't a first timer. The rates should be better as well since no claims and now a track record. I guess for a piece of mind $250 is fine.

In fact, there was a slight drop in cost for this year... mainly because billings were way down from my original lofty goals.

Quote:

Originally Posted by Ducati996

Again I don't have that limitation and no said clauses - thats my point that i wanted to make. I didn't have to pay extra for that...I would assume you went for a excavation coverage.

Correct. The subcontractor prohibition is probably less of an issue... or even pro forma/SOP... for other types of business liability policies.

Quote:

Originally Posted by Ducati996

I might have to give you a few proposals (with automatic margin built in for you to use as a template in excel) and invoices that show tax collected, non-itemized quotations/invoices with a general contract statement. Most had some type of sub (friend) that did some part of the work. Never had the customer pay them and no there is no record anywhere of their presence. No need for it and its legal, we are all licensed and insured, etc...Its normal practice in these parts.

Having a personal friend (or family member) do some work for you is a whole 'nother matter. I can appreciate that certain kinds of risks and formalities simply go away. Sadly, I am a "one man show" with no friends working in any dirtwork business area that could physically help me.

Quote:

Originally Posted by Ducati996

I sub out all my water sprinkler parts, paving (blacktop), portion or all of the brickwork, tree removal, debris haul away, etc...cash transactions mostly, sometimes barter nothing illegal about any of that.

In my current situation, I don't feel comfortable with any "undocumented" (or poorly documented) transactions no matter how big or small. Where I'm at right now, I even document needing 40 cents worth of nuts & bolts from the hardware store. No joke. I even enter 100.00% of my cash tips into my books (QuickBooks) and document every cent back to the client in his final invoice.

Quote:

Originally Posted by Ducati996

I do feel your too cautious and worried about litigation, and that might be choking you too much in being adventurous. Remember those that take the risks, get the reward most of the time. Cant make an omelet without breaking a few eggs. If you are really paranoid of the litigious atmosphere, then you need to network with a few lawyers and just start a friendly relationship with them and have their business cards handy to hand out when someone is an asshat.

I hate lawyers with a passion that only the victim of a hideous, life-altering divorce can even begin to appreciate. I think I am better off following the laws and rules (no matter how ridiculous) and staying out of trouble than breaking the rules and having to worry about how to defend myself.

Quote:

Originally Posted by Ducati996

Hope this helps, these are only suggestions. Im no Buffett so its just experience being shared, see if it can be applied somewhere for you if it works for you.

I think the bottom line is that I, as an excavator, can get into a mess of physical, legal and litigation trouble mucho faster than either you or Lone.

This is obviously reflected in my insurance terms and costs... as well as my need to follow the rules and document same to an almost extreme degree.

Dougster™

Dougster · 06-01-2008, 11:38 AM

Quote:

Originally Posted by Ducati996

I dunno Doug cant see loosing a job for that little amount of money - I know its just a token example, but thats where the salesmanship and professionalism comes in to play (which you have I know). Once folks realize having uninsured, illegals working on their property, they are liable if anything happens. That scares them straight almost every time.
Tell folks up-front odds are I'm not the cheapest, but I'm the most complete, honest and professional, etc...

How myself and Brian described how things are done is the majority method across the nation. Dont believe me just go on the landscaper or construction websites, they all operate in similar fashion. Why take the risk if there is nothing in it for you? adding a percentage to sub work- keeping in mind their prices are competitive to begin with (and if need be having a few compete for the best pkg price). Thats how it works, if you have to compete with price so does the rest of the team. But make a profit on it already

Gawd Almighty, I envy you two guys!!!

Don't you have to ever consider what the competition is bidding? And what it will take to beat them?

The $60 was just using Lone's example. The real numbers are much higher. I just bid a job last week where trucking would have been more than half the total cost of the job. A 15% markup on the trucking component would have meant close to a 10% overall bid increase for the job. It would have killed it dead as a doornail against other bidders who own their own dump trucks.

Dougster™

Dougster · 06-01-2008, 12:38 PM

Quote:

Originally Posted by LoneCowboy

You can't win every bid. {big snip!} You can't compete on low price, stop trying. And about those big profits, where the hell are they? I haven't seen any yet.

We know you are rolling in money Lone!

You can't fool us!!!

Indeed, some bids/projects are inherently unwinnable. I understand that. But after last year, I vowed that I would pursue every project within my geographical range with a vengeance. I take them all dead seriously now. And the fact is that I am competing against the illegals and down & out desperate big boys with their big, expensive yellow machines. In total, that's at least 2/3rds of my day-to-day competition.

I have no choice but to consider how, why and what my competition will bid on a job. It's the only way I have a snowball's chance in hell of winning a job. I put the blinders on and ignore my competition at my extreme peril. Likewise, I need to understand what prices my particular market will bear, especially in these weird times. It took a long time (and many lost bids) to get to the point where I have a pretty good feel for this. I know when I've calculated a number that a client won't pay and/or can beat by going to my competition.

I am uniquely placed in my market for certain delicate & difficult access jobs. That is very cool.

But for other jobs, I have no advantage at all over my desperate big yellow or illegal alien competition... and, indeed, the trucking cost thing is strangling me to death on any job requiring the disposal of LOTS of demo and/or fill material (i.e., more than can be reasonably handled in my dump trailer). Right now, I'd have to say that trucking costs are my biggest single cost-related problem.

Dougster™

**LoneCowboy** · 06-01-2008, 12:51 PM

so buy a truck.
Be a lot easier to haul stuff around too with a class A CDL.
Big old dump truck and a 25' pintle hitch flatbed tilt trailer

yeah, that's the ticket

Dougster · 06-01-2008, 01:02 PM

Quote:

Originally Posted by LoneCowboy

so buy a truck.
Be a lot easier to haul stuff around too with a class A CDL.
Big old dump truck and a 25' pintle hitch flatbed tilt trailer

yeah, that's the ticket

It *is* the ticket Lone... you are right... but not for where I am living right now.

Quite simply, it would take another waiver of my town's residential zoning bylaws for me to be able to park a dump truck in my driveway. T'ain't gonna happen. And the daily fine is staggering beyond the imagination for violations.

My obvious alternative is to pay for remote commercial vehicle storage for all of my equipment. Trust me, I have looked into this possibility several times... and so far, I cannot come close to justifying the annual cost.

What I really need is a working partnership with a local trucker.

And yes, I am searching!!!

Dougster™

Dougster · 06-05-2008, 03:58 PM

After more than a week on this dubious issue with the insurance folks, I am still not 100% sure what I would be buying for $250.00. The more they talk, the more I get confused. One minute, it sounds like I am already adequately protected regardless. The next minute it sounds like I am going to fry in hell for eternity the minute a subcontractor within 10 miles even sneezes.

As a result, I told them today that we would hold off on the rider until such time that the issue boiled back up to the top of the pot in a big way. For now, I will continue to have my clients write separate checks to separate parties and do the best I can with that approach.

With business practically nonexistent anyway, what difference does it make.

Dougster™