# Paying for profit



## denick (Feb 13, 2006)

Mike,

The whole concept is hard to understand when you give just a piece of it out at a time. Why don't you buy everyone a copy and have a book study group? 

I already have a copy.

I think Pipeguy would appreciate the concept in the book.


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## ultimatetouch (May 27, 2006)

George Z said:


> Companies can be successful doing it both ways, we just like employees..


Thats all I was trying to say. I dont know which rode I will take yet.
I have always subbed work out. I have one full time guy and two part timers. Subbing out just seems simpler to me. I think its fair to say that we all have different types of bussinesses George so what works for you might not work for me. You could still be anal and control you just have to watch how you do it legally and with taxes so they are not percieved as employees.


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## ultimatetouch (May 27, 2006)

Mike Finley said:


> Interesting thoughts floating around here.
> 
> Am I sensing that there is a sense that subs are cheaper than employees?
> 
> ...


Mike doing a bathroom around here is a pain. You have to have a licensed electrician and a lisenced plumber to get the permit. I dont know if its like that by you? I take it its not. Aquiring a electrical license is not that hard but getting the plumbing lisence is a bit trickier I think. I am not trying to take anything away from you and George you guys obviously have been around longer then me and are more established. I would think you could sell another job while somone was doing the tile if you subbed it out. I would say tile is easy and reasonable to sub out. You are probably getting done a hell of a lot faster doing them in house.


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## Mike Finley (Apr 28, 2004)

We do sub out tile.

I'm not sure what you are saying as far as not being able to permit bathroom jobs?

I pull the general building permit for any job, bathroom, kitchen, basement... if it has electrical or plumbing work - depending on the municipality I either fill in the name of the plumber or electrician to do that work on the building permit and the municipality verifies they have that contractors licensing information of file and it is current, or I have the sub send in the individual elec or plumbing permit itself, which I fill out for them and fax to them and they just sign it and fax it in.

It doesn't sound like we have to do anything much different then you are.


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## dirt diggler (May 14, 2006)

Mike Finley said:


> Interesting thoughts floating around here.
> 
> Am I sensing that there is a sense that subs are cheaper than employees?
> 
> ...


Mike - sounds like you do a good bit in house (from this and past posts)


Do you do enough jobs to keep a plumber/electrician billable year round??



you know though ...


Let's say your plumber charges $80/hr. (Sub) Plumber being hypothetical

let's say you have enough jobs to keep everyone going on a 50-week year (xmas time off)

if you have the workload to keep a sub charging $80/hr ... 

$3,200/wk (80/hr*40) = $160,000 year

so subbing out the plumbing - you spend $160,000 


Now ... you get an in-house plumber ... what's he get for a salary? Round here, any kind of "leadership" (i.e. foreman, tradesman) position is probably going to get anywhere between 35-60K. 

Let's say $50,000 though. Better yet, for math purposes, $52K


So you've hired a plumber. He makes a salary of $52,000 working for you. 


You have enough work to keep him billable

Let's say (for math purposes) - it costs you $75,000 a year to keep him as an employee. Insurance, taxes, payroll, benefits, etc.




if you're able to keep him billable all year --- you're going to pay half as much for the employee ... as you would the subcontractor that you would have hired.




Am I waaaaaaaaay off on this?? it's late and I'm thinkin out loud





but this kind of *somewhat* proves --- or gives good reason to figure out further ---


that "let's just sub it out" might not always be the most economical way to go



(now ... what'd be cool ... charge out at the sub's rate ... because chances are, your competition will be too)




i think i figured out why larger construction companies have crews ...


in other words ... you can reach a point, or a size of business to where hiring subcontractors does not make economical sense

i could be way off


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## ultimatetouch (May 27, 2006)

Mike Finley said:


> We do sub out tile.
> 
> I'm not sure what you are saying as far as not being able to permit bathroom jobs?
> 
> ...


So Mike Im confused do the plumbers and electricians work for you or are they on there own. I thought you said you did electrical and plumbing in house. Or do you just fill in the names of the contractors and then send your boys out there. I know guys do that here all the time.


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## Mike Finley (Apr 28, 2004)

Dirt your thoughts are right on the money. I have my doubts I could get a master plumber or electrician for 50K a year around here, but your logic is sound. Since on a 3 week job, the electrician and plumbers put in maybe 1 day apiece out of those 15. So I would need a crap load of jobs going all at once in order to keep them busy. Unless they wanted to do work outside thier trade on other days.:laughing: 

Ultimate - plumbers, electricians and some other tradesman are independent contractors, I hire them as subs. Plumbers and electricians because we have to becaues of the rules, and other tradesman such as tile setters, glass companies and others because of economy of scale. We do not do electrical or plumbing in house, in Colorado like most places those trades require a master license. There are some other posts on here I made that describe all the tasks we do in house, which are alot.


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