Say what you want about subcontractors, but there are good ones, even great ones and, of course, there are lousy ones. They come at all different levels of skill and responsibility. But no matter how good they are, when it comes to installing windows, roofing, or siding, it all comes down to one thing: How they get paid. Invariably, subcontractors are paid by the piece, that is, by the square if it’s a roofing or siding job, or per opening if it’s a window.
What that means is that they have a motive for getting that job done fast. If the roof can be installed in a day and the weather doesn’t cooperate or one or two people don’t show up, it takes two days, and that’s a day they’re not paid for. It can come down to quality versus expediency.
Advantages of Employee Installers
Our company mostly installs using in-house employees, but we occasionally use subcontractors when we’re really slammed with work. Of course using subs is less expensive, but the benefits of using employees are greater.
1) Total control. We train our installers and we take advantage of every certification program offered by manufacturers whose products we use. Installers are paid via our payroll. If properly managed—that is, by us—they’re going to do the job the way we want it done. Their interest is in doing the right thing, as opposed to the quickest thing. If we hire a subcontractor, those workers don’t work for us, they work for him. Their thinking is: How quickly can we get this done, collect a check, and get going?
2) Customer experience. Our motto is that we want that jobsite to look better when we leave than it did when we got there. That goes over big, and it doesn’t take a lot to do. In my experience, you can put a window in upside down if you’re courteous and do a good cleanup. On the flip side, you can do a fantastic installation and, five minutes from greatness, leave behind a messy jobsite. That mess is what the homeowner remembers and will talk about to friends and neighbors (and write about online in a review).
3) Problem resolution. Getting a job done on time is always important, no matter what form of labor you use. But where it really counts is when crews discover a problem. Say, for instance, there are rotted windowsills or there's a drainage issue behind walls that are being resided. Time is always money, but if you’re being paid by the piece, you have no incentive to stop, identify the problem, and then find and implement a solution. What some do is cover the problem over and hope that enough time elapses that it can’t be traced to their work. What we do is to immediately notify the homeowner, propose a change to the scope of work, and write up a change order.
4) Long-term loyalty. When crews are on your payroll, you have people working for you who are loyal to your company. They arrive on the job in your trucks, wearing your shirts with your insignia. They represent you.
5) Consistent quality. I’ve worked with several excellent subcontractors over the years. But they can be great on one job and then, say a year later, not so great. A few years ago, for instance, we used a roofing subcontractor who was outstanding. When we recently used him again, we ended up having to pull his crew off the roof. He’s only as good as the people who work for him—and that can change daily.
6) Service follow-up. I know a guy with three different magnets for the three different companies for which he installs. Depending on the job and the company he’s working for, he slaps the appropriate magnetic sign onto his truck. But once he’s done, and if there’s a service issue on the work he did, the homeowner is going to have to navigate through the general contractor’s office to find that subcontractor and try to get him to come back out to fix the problem. Good luck with that.
Selling the Employee Idea
In-house labor is going to cost you gross margin points—at least five or six of them. That’s something that works or doesn’t work as part of a business model. It’s one variable among others in calculating your selling price.
But it’s also one that’s easy to explain. So, for instance, if I’m selling against a company that installs using subcontractors, my materials may be the same, my overhead (including insurance costs) may be the same, my sales and marketing costs may be the same, but my price is higher because I install using employees.
The prospect may look at two (or three or four) prices and conclude that I’m trying to make a way-high profit on the job. Sometimes a homeowner may say: “Hey, your price is X higher than Competitor A.” Or they might say: “Mike, we read your reviews and really want to use K&B Home Remodeling but XYZ Home Improvement is willing to do the job for less.”
That’s why, in selling it, I need to get out in front of that issue and explain that there’s a difference in what we’re paying for labor. But no matter who brings it up, identifying that difference then opens up the subject of why we use in-house crews rather than subcontractors (whenever we can). I tell homeowners that I know the name of every person who will be working on their job. I assure them that whoever’s in charge can speak English—because that’s a concern, especially in affluent neighborhoods. Before the start date, we will email them a photo of our production manager, our foremen, and our crew.
In the old days, I had a sales pitch. We were the best and our product was the best, and if that hit a roadblock, then I dropped the price and moved in for the first of multiple closes. Today my sales pitch is transparency, the simple truth. This is what we’ll do and this is what it will cost and this is why it will cost that much. When I’m done explaining what we’re going to do, and how we’re going to do it, I point out that, in addition, we have all our own people. They’re paid by the hour, and they’re craftsmen. The customer who’s indifferent to that may not be our customer. Or, if they’ve done their online research, they may already know it.