Sub-contracting

[sturgisjr 14]

I didn't know where to post this so I picked this area. I wanted to know how sub-contracting works and how I would profit from this. I am curious in 2 ways, to hire a sub-contractor and to be a sub-contractor.

For hiring a sub-contractor, lets say an interior/exterior painter...how would that work? How do I profit from this.

How do you become a sub-contractor for someone else?

Does doing this idea bring in more business and more money or does it bring in more business and not enough money?

Any advice on this topic will be appreciated. I do wood restoration and would like to add interior painting as one of my services but wanted to know how sub-contracting works in this area as well as knowing how being a sub-contractor for a painting company works.

Thanks,

Brian

[RyanH 14]

A subcontractor is basically an employee that is classified as a non-employee for tax purposes. They are generally self-supervised and have their own system of doing things and the only requirement is that they meet your expectations of job quality. The concept of sub-contracting can be very beneficial if you do it right. Done incorrectly it can be more work and less profits.

Suppose you see a lot of potential for house painting and you are in a position to land many jobs doing this. Unfortunately for you, you rock as a deck restorer but suck as a painter. You can find a painter who does really good work but is not booming on the number of accounts he has. You find the jobs, quote and close them yourself, then pay him a percentage of your quote to do all of the work. The caveat is that you are not directly supervising him and you take a hands-off approach to how he does his work. He is also not bound to work only for you....he can work either for himself or others since he is not employed by you.

You profit because you get paid for doing virtually nothing, they benefit because you are providing job leads they would otherwise not have. If you are a good salesman and can sell the job, and convince the painter to do the job at a cheap enough rate, you can profit. Hell, even $100 just to close the deal is not bad. The benefits to you is you are not responsible for maintaining the sub-contractor's records for taxes and you don't have to file a W2 on them, just a 1099. You write off the amount you pay him as an expense and you pay taxes on your percentage of the cut.

If you want to be a sub-contractor, then flip everything I said around to put yourself in the contractor's shoes. It gives you freedom in that you are being your own "boss" and keeps you from being tied down by a single employer. It also allows you to take a vacation when you want instead of being limited by a fixed number of days each year.

A painting company could sub-contract a pressure washing job or deck job to you and you benefit in the ways mentioned above.

Ryan H.

[Paul B. 523]

Very nicely put Ryan!

I would like to add, that when you hire a sub-contractor, make sure they have liability insurance and worker's comp. Also, make sure you write a contract for your sub-contractor for each project (describes their portion of work, how much they will get paid and how fast they need to complete the work and other specifics such as paint brand and color, specifications, etc.). Keeps from having mis-understandings and serves as a document for the IRS if needed.

I have all my subs fill out a W-9 to verify their Tax ID No. and I keep it on file.

With insurance, I ask for verification and I check every 3 months or less depending on how well I know the sub.

[newlook 265]

The only thing that could be added to what Ryan and Paul said is the customer service angle. One ingredient that is needed to be successful in the subcontracting areana is to ensure that the subcontractor shares the same approach as it relates to customer services -- providing outstanding customer service and of course doing great work! If the subcontractor does a bad job....this will reflect on you from the customer. Before agreeing to give someone a shot at working as a subcontractor......ask them for references, visit their last 3 jobs and look at what they did. What are their credentials and etc.

Good luck!