hey guys this is Eric with painting
business pro and today I want to talk to
you about how in the world we pay our
subs fifty percent this is one of the
biggest questions that I get is how do
we pay fifty percent how is that even
possible
I can't believe that you only pay fifty
percent you should have to pay more
contractors won't work for that and why
in the world will contractors work for
50 percent when they could go and book
that same job we booked it for three
thousand we pay them fifteen hundred why
don't they just go book that job for
twenty three hundred and make an extra
eight hundred dollars so I want to dress
those two questions today is first how
are we able to pay fifty percent of the
job to our contractors and second why
don't they just go out and do this on
their own without us and make a lot more
money so we're going to kind of get to
that so to start out I first want to
address pricing so when we say we pay
our contractors fifty percent of the job
we don't just book a house and then cut
the price in half and pay the contractor
that I think a lot of people think that
we're just selling what the job however
we're selling it and then finding people
who are willing to do it for fifty
percent and that's not the case it's
actually the other way around we know
how much money we're going to have to
pay a good contractor to do a job so
when we're estimating a house the way we
estimate a house is we find out how much
we would need to pay the contractor on
that job so let's say this particular
house we know we have to pay fifteen
hundred dollars to a contractor so when
we know we have to pay fifteen hundred
we know we have to charge three thousand
so we double what we know we're going to
have to pay and so that's how we're able
to pay fifteen hundred dollars it's not
the other way around
so we're actually paying really good
prices to our contractors and sometimes
we don't pay fifty percent like there's
jobs where I pay 57 and 58 sixty percent
and we've learned from those jobs and
usually those are mistakes on our end
and we adjust our pricing so some you
know for example a year ago we lost a
lot of money on interior jobs on decks
and on fences so stain work and interior
work we didn't actually lose money on it
but we paid more than fifty percent on a
lot of those types of jobs so the next
year we raised our prices a little bit
for those kind of jobs so we are always
paying our contractors like a good fair
amount
if they get out to a house and it's not
bid well and it's too low like they'll
negotiate with us a little bit so that's
the first thing to understand is that
we're paying fair prices out so some
people might it might just mean like
raising your prices by like three or
four hundred dollars which we did you
know we actually did do that a year ago
our average job size went from about
twenty-eight hundred dollars up to about
thirty five hundred dollars and we
didn't see a negative impact on our
sales at all because we're delivering
really quality work and our price is
still in the ballpark with other
comparable companies to ours so any of
the larger companies that are reputable
that have warranties that are
professional that that people know about
like the companies that have really
marketed themselves they have to charge
these these similar prices to what we're
charging because it's expensive to run
this kind of business which kind of
brings me to the next point which is why
not just do it themselves actually
before I get to this I want to jump back
here so I mentioned we do fair pricing
so we're not stiffing contractors and
we're not selling jobs to the lowest
bidder we're charging a premium price
for premium job we do excellent work and
we keep good contractors around because
we pay them well and if we obey over
fifty percent we adjust for that subs
worse employees this is an interesting
point too is some people think that
subcontracting should be more expensive
or less or different from employees but
the truth is managing employees will
most times actually cost you more money
than subcontractors will and the reason
for that is when you're paying a
subcontractor you're paying a set amount
for the job so we know we can afford
fifty percent so we can pay that full
amount we can give them 50 percent if I
had to pay someone hourly I would have
to pay them about forty five percent
assuming they might go over budget
so that if they go over budget they get
up to fifty percent so first of all I
can't offer people as good of a starting
pay as with employees as I can with subs
so I can give them the whole 50 percent
here I have to buffer give myself a
little bit of a buffer in case things go
wrong but also with employees the bigger
problem is they aren't running a
business subcontractors are running a
business they manage the material cost
they manage their employees like they
are making profits so they're making
sure the job is done efficiently when
it's employees they don't really care
about that necessary
and most people have employees are
paying some sort of hourly wage the
problem with an hourly wage is they have
no incentive to get that job done fast
because they're getting paid every hour
they're working whether they're getting
it done fast or slow so the chances are
they're not going to be as motivated as
employees as subs are to get the job
done fast so the job gets done a little
bit slower the people who are on the sub
crew and the employee crew are both
making the same amount of money per hour
but these guys take more hours because
they're not incentivized so we actually
end up paying more than 50% when we're
managing employees so either way we're
paying workers somewhere in the range of
15 to 20 dollars an hour and we're
paying and buying the same materials and
when we add those up they need to equal
about 50% whether we're using subs or
you're using employees it doesn't matter
so why not just do it themselves
why do you contractors not just go out
and get jobs for themselves the first
thing is that we're running a different
business the business that is
subcontractors running is a business
where their focus mainly on production
we're literally handing them a job where
the colors are picked out the customer's
ready the job is scheduled all they got
to do is show up the next morning and
paint the house like that's the business
they're running we're not doing any of
that the business we're running is more
of a marketing and sales business and
guess what marketing and sales cost a
lot of money and a lot of time to do we
spend so from our 50% we spend 7 percent
just preparing the job you know that's
that's the production manager color
consultant confirming colors doing test
samples we're spending about 7% to get
the job ready we're also spending about
two to three percent on losses so
sometimes we pay more than 50% and
sometimes customers don't pay us the
full amount because the screen got
broken or something good that comes out
of our end not out of our contractors
and usually usually we're covering that
cost which is 2 to 3 percent so we're
already up to like 60% of the total job
now then we spend a lot of money on
marketing like how do you think we get
so many estimates set up well we've got
to find those leads and those customers
somewhere and not cost money to do and
we're going to spend anywhere from 5 to
12 percent on marketing depending on
what channel and every
we're testing on marketing this year so
that raises the price we also have sales
people like they work full-time doing
estimates to sell jobs so these
contractors have work that costs us a
lot of money to pay for a staff as sales
people next thing that we have is we
have administration accounting taxes
payroll and all that - and not cost
money as well so you can start to see
that we both have our parts in the
business if a contractor did want to
start doing what we're doing they
actually would have to start charging a
similar price to what we're charging if
they wanted to do what we're doing
because there's new costs that they have
that they didn't have when they're just
being handed all of the work so we're
running a different business marketing
sales customer service cost time and
money and some custom contractors they
just they either don't like the
marketing and sales side of this
business or they're not good at it so
either way though there's we just have
different roles I'm excellent at
marketing and sales and running a sales
team and preparing jobs and getting all
that setup and then we have contractors
that are amazing I like getting out
there and getting a job done and keeping
the customer happy and doing a great job
of that
and there's subcontractors you make
amazing money and make really good money
and have a great lifestyle and it's it's
just a different business that we're
running so that's why they don't do it
on their own feel free to you know and
ask more questions and stuff in the
comments I always respond to the
comments if you want to hear more videos
and stuff subscribe on my channel I will
keep putting some more videos out this
year and I think that's about it so I
guess the last thing I'll kind of leave
you with is this is not a this might be
new to you this paying contractors 50%
this might be a new concept however
there are companies all across the
country following this model I know a
ton of them personally I work with a ton
of them through painter choice and I
talk to people all the time about this
so I would just invite you to give it a
try give it a whirl and the thing to
keep in mind is we have to charge us we
have to charge the right price to be
able to pay the contractor and we need
to pay the contractor a fair amount and
if we do that our price should end up in
the ballpark of the
similar comparable companies because
everyone has to pay labor everyone has
to pay for materials how that money
actually gets paid whether it's with a
1099 check or a w-4 employee check
doesn't make a difference the money
still has to get spent and the business
still has to be profitable
whether we're subcontracting or these
employees doesn't make a huge difference
except that subcontracting is way more
efficient than managing employees so I
hope I've hope I've kind of sold you a
little bit more on the idea of
subcontracting because I wouldn't have
the business I have today if we were
doing employees and going the employee
route and we're it's really important to
us to keep our contractors happy so
we're not out here trying to step people
you know we want to make sure that our
contractors make great money and have a
great life - so that's it follow me for
more videos hope to hear from you soon
bye