Would you consider hiring subcontractors instead of hiring direct labor when talent is hard to find in your local market? My business has had a lot of success partnering with other companies to complete specific projects. In our service area, the collective workload exceeds the workforce so there is a general sense of camaraderie vs competition.
What are you seeing and what has worked in your business?
It definitely varies by business. I have a maintenance (landscaping and snow removal) and construction (mostly remodels, average job size $25k):
On the construction side of our business, we have a small base of employees, mostly carpenters and painters, who are great culture fits and versatile (for example - most can drive a plow truck). But the vast majority of construction expenses and billing comes from specialty subs.
From a financial perspective, many business owners - when looking at the cost of employees in pricing work - do not always acccount for their full cost beyond their hourly rate or base salary. The full cost includes:
Billable rates for employee should be based on target gross margins accounting for those additional employee related costs.
We avoid subcontracting at all costs. I rather slowly build a team over a long period of time to build a system I can control and train to my business specification. Also, I would rather interview 1000 people than use subcontracting.
We avoid using subcontractors. You never know the quality of work you're going to get from a sub contractor and can risk giving your company a bad name over someone else's work. If there's going to be a mistake, I'd rather have to fix mine/my employees work over someone's else's. A sub contractor may also not have the same level of care towards a client that you do resulting in them not wanting to go above and beyond.
We try to avoid subcontracting. We've noticed that most companies that rely on subcontractors end up sacrificing the quality of their work, especially in the cleaning industry.
It's nicer to work with an employee who feels like they're obligated to listen and follow rules
I’m in Calgary, Alberta and out of the 25 crews doing snow removal last year, 80% were subcontractors. Employees did some of the more delicate commercial jobs, but the main benefit of employees vs subs is I for the “no questions asked” aspect. With subs it’s up to them to take the route or the site, but I can take chances and experiment with employees.
The benefit of Subs is that most people who are responsible and reliable will end up opening their own company anyway. I take it a step further with subs who have suck for a few years and I will “trade” customers with them so they can focus more on my customers while other subs do their customers and everyone saves on travel time.
That’s a really smart way to balance the strengths of both subs and employees! Have you found that partnering with other businesses has been more effective than hiring direct labor, especially as your workload grows? Would love to hear how that’s impacted your business!
That’s “Stuck for a few years” not “suck” 😂
Sub contracting has its perks but also has its drawbacks. i would recommend subcontracting for the following reasons:
Keep looking for good hires, they're out there.
Great information.I totally agree with you.
Great breakdown of the pros of subcontracting! I like your point about using sub contractors for niche services and overflow work. How do you decide when it's time to hire in-house instead of relying on sub contractors?
Love to hear that there is that general sense of community over competition in your local area. Following along to hear more re: subcontractor experiences/thoughts!
