To subcontract or not, that is the question...
Concreting Quotes
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Here's a case study of a bricklaying business who initially offered a single trade and then set up a subcontracting relationship to offer more to his customers and win more work.
The case of the missing concrete
I spoke to one particular business (I'm going to call it 'The Brickie' for ease of reference). They had one employee (the owner of 'The Brickie') and his wife who did the books for the company and took customer enquiries. We were talking about rollbacks, specifically because The Brickie was submitting an unusually high number of them, and we wanted to find out what the root cause was so we could work on improving the quality of the leads. It turned out that for many of the jobs the business wanted to quote on, the new wall (or similar) that was wanted would actually need a concrete base on which the bricklayer could work, and the customers weren't happy to co-ordinate two separate trades. About 50% of the jobs they were accepting were being rolled back, and 80% of those were being rolled back for this single reason.
In the end, this business wasn't comfortable to take on the responsibility for sub-contracting to a concreter. The Brickie felt that they couldn't take responsibility for managing a relationship with a concreter or two, didn't want to manage the quoting outside of their specialty, and wouldn't trust any subcontractors to do the work to the standards they'd set for their business (both quality and scheduling-wise).
Their concerns were valid and we supported them in their decision, but this case highlights that the numbers the business were playing with were significant. 40% of their potential new customers were being turned away.
A few months later we had another discussion with The Brickie. The business had some spare time (unfortunately due to not having enough work on) and was interested in using that spare time to trial a relationship with a concreting subcontractor. But being a new business they didn't know enough about subcontracting and also didn't have many contacts in the area. So we did two things - first we put together some guidelines on subcontracting, and pointed them in the right direction for setting up a solid business relationship. Next we showed them how to use the Service Central system like a customer would. They posted a job, had two companies responding immediately, and by the end of the day had meetings set up with those companies to talk about potential subcontracting relationships. As it turned out, one of the companies was also looking to develop a new relationship with a brickie so it was a match made in heaven.
Armed with their new relationship and the guidelines we developed for them, The Brickie worked everything out (contracts, quoting guidelines, payment terms etc) in a few evening meetings over the next few weeks, and was then ready to quote the first few jobs. For the first few, the concreter accompanied The Brickie to quote, and The Brickie learned what to look for - enough so that he could quote alone except in very unusual cases in future.
So how was their relationship structured?
Their financial relationship reflected the split of work - because The Brickie was sourcing new customers and racking up operational expenses on quoting, the concreter charged less than he would usually if quoting directly. This allowed The Brickie to keep the price competitive and still make some extra cash to offset the marketing costs and operational costs of quoting. For any work that the concreter brought to The Brickie, there was similar arrangement.
A contract was drawn up, and it included recommended clauses like warranties, quality standards, and outlined what would happen in a dispute. The costs of the contract were shared between both companies.
Relationship-wise, they chose not to become too closely entwined and didn't tie themselves to each other exclusively, although they ended up being almost exclusive at the end of the day - simply because they had an excellent, strong base from which to form their relationship. They had structured review meetings each month where they'd review the jobs, costs, complaints (if any) and availability. They shared their diaries electronically so that they could instantly commit to times when they were quoting for each other.
This was a story with a positive outcome, and we thought it'd be a good one to share with you all. But of course, realistically, not all subcontracting relationships work out. However, if you have a good base of a solid contract, and treat each other with respect, you'll go a long way to making the deal positive.
Read our full article on subcontracting here.
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