Fairly making money by sub-contracting - New Business Startup

[puffy]

So far job-hunting sucks but I'm always trying. My background is really web development/programming and business but I love electrical installation with a passion but never seem to landed that job so I've decided to give the business side of me another go.

This post is no way advertising but rather to get your deep opinion on the subject.

I am building a website, an interactive one. It will no way, shape or form be similar to ratedpeople. I've used it, never liked it. So let us not discuss that business here. About the website/ mobile app:

1. User logs in
2. User selects house type etc
3. User tells us what needs to be doing etc
4. Maybe pictures / video of the areas etc - this is important to the business

This business will solely sub-contract the job out and we would take 10% - 15% off the profit (when all expenses removed) would that be reasonable? The difficulty I face is that most jobs require an onsite quote. Since I know technology very will, I can use a beautiful app for tradesman. It has killer features where the sub-contractor would do the site visit and finalise the quote based on the customer price range. The customer will select their budget so we know for sure that he/she would give the go ahead once we stick to the price range or give them some wow factor if we go above their budget.


The trust relationship

Sub-contractors will know the actual cost of the project that's why we say the business will take 10% - 15% as we will process all transaction online and with handy technologies which you will use and those techs cost money. Is the percentage range fair?

About the business

We advertise heavily. We give you t-shirts and mobile app. You invoice us after the job is completed. You get paid by BACs. We would minus CIS or you pay your own. Legal way of doing things will be reviewed. We have our own guys to sign off work. We make you happy, you make us happy. Win, win.

 

[hightower]

Well first of, the sub will know that customer can only pay upto 3k and he's prepared to lose 15% of that. It's like Im tell you you'll be paid "x". I dont know how the sub-contracting works but I will find out.

There will be a terms and cons that the customer will made very aware of that estimate my exceed their budget of 1k etc.

Not sure if I'm alone, but I just can't see how a job that would cost £3k could be achieved for £2.6k, unless it was done by monkeys. Don't be surprised if the only sparks that take you up on your incredible offer are the sort that fit back boxes with a JCB.

 

[Spoon]

Thanks hightower, you put it a lot better than I do.
This kind of sums it up really "I just can't see how a job that would cost £3k could be achieved for £2.6k, unless it was done by monkeys."

 

[puffy]

Not sure if I'm alone, but I just can't see how a job that would cost £3k could be achieved for £2.6k, unless it was done by monkeys. Don't be surprised if the only sparks that take you up on your incredible offer are the sort that fit back boxes with a JCB.

Im not saying the job will cost 3k nor am I saying it will cost 2.6k. All Im saying is, the website will have a budget range and the customer selects one. If they dont select then that means they're not interested. So if they selects a budget of between 2k to 3k, a sub would go out and make sure it's no more than 3k. I have no problem if they want to say it will cost below 3k. Also the customer will be aware that in some cases they should expect a little bit more than of the budget's max of 3k.

 

[hightower]

Im not saying the job will cost 3k nor am I saying it will cost 2.6k. All Im saying is, the website will have a budget range and the customer selects one. If they dont select then that means they're not interested. So if they selects a budget of between 2k to 3k, a sub would go out and make sure it's no more than 3k. I have no problem if they want to say it will cost below 3k. Also the customer will be aware that in some cases they should expect a little bit more than of the budget's max of 3k.

Why bother having the customer set a budget then, as if that's magically going to make the spark do the job at a cheaper price, if as you've admitted the quote could come back over or under budget. The second most important thing I think is being overlooked is most sparks won't quote, they'll only estimate. So what happens if the subby estimates within budget, but finds half way through the job that it's going to cost another £1000 because something unexpected came up?

I think you've created in your mind a simple solution for a problem that is anything but simple.

 

[Spoon]

the website will have a budget range and the customer selects one.

Please can you elaborate on this. There will be more than one budget range? So in your example there will be a 2k to 3k, then maybe a 3k to 4k then maybe a 4k to 5k.....??
Why would the customer pick the 4k to 5k when he can get it done for 2k to 3k? What is the difference?
or am I just reading this wrong....

 

[puffy]

Why bother having the customer set a budget then, as if that's magically going to make the spark do the job at a cheaper price, if as you've admitted the quote could come back over or under budget. The second most important thing I think is being overlooked is most sparks won't quote, they'll only estimate. So what happens if the subby estimates within budget, but finds half way through the job that it's going to cost another £1000 because something unexpected came up?

I think you've created in your mind a simple solution for a problem that is anything but simple.

True. Do you have an experience you'd like to share? Have you ever told a customer "hey James, I need to replace x because it's out dated so it will cost an extra x"?

This is why I take onboard your feedback strongly so I know and think this properly.

 

[hightower]

True. Do you have an experience you'd like to share? Have you ever told a customer "hey James, I need to replace x because it's out dated so it will cost an extra x"?

I'm a trainee, but I've worked with sparks that have had to - it comes up quite frequently in electrics, your tests can only prove so much but when you start scratching the surface a different story starts to appear.

 

[puffy]

Please can you elaborate on this. There will be more than one budget range? So in your example there will be a 2k to 3k, then maybe a 3k to 4k then maybe a 4k to 5k.....??
Why would the customer pick the 4k to 5k when he can get it done for 2k to 3k? What is the difference?
or am I just reading this wrong....

Yes. Different budgets. So if the customer selects 1k - 2k and need a rewire (their description) then that's a no no. We would alert the customer that an acceptable budget for what they want is x. This website will be "smart" based on your description you fill in.

 

[sean_ork]

All that will happen is that your rakeoff will be added to the quote, so it'll be that much more expensive than quotes gained not via you - you might see a dribble to work through your books, but you won't live off it. Youve assumed the customer will get all of the quotes for the job via you - that's just not going to happen.

Your business model is flawed, you do nothing to justify such a high % takeoff - all of your competitors are doing is encouraging a race to the bottom in terms of cost and quality - the customer suffers.

Youd be far more likely to earn a living, and encourage trades to sign up with a sub 5% rakeoff, if you could target your market at the high end where customers don't mind paying a bit more for a top quality job.

All you are trying to do now is to reinvent a broken wheel.

 

[Spoon]

Can you also explain how the quote system works as I all it can ever do I give a very very rough ballpark figure.
e.g. say I want a cooker point adding. How will it quote for this? It could bust be a simple cable going from consumer unit, then under the floor to the new cooker point. Or the floor is solid so has to go a different route. or the customer wants the cooker point fitted to an island in her newly tiled floor kitchen.

 

[sean_ork]

Can you also explain how the quote system works as I all it can ever do I give a very very rough ballpark figure.
e.g. say I want a cooker point adding. How will it quote for this? It could bust be a simple cable going from consumer unit, then under the floor to the new cooker point. Or the floor is solid so has to go a different route. or the customer wants the cooker point fitted to an island in her newly tiled floor kitchen.

It's a smart app remember, runs on smart phone so uses GPS to work out routes lengths, ground penetrating radar module plugs into headphone socket to determine structure construction. Also does post code lookup to calculate your travel costs (and the chances of you getting your van nicked), and plots route to nearest cafe.

 

[Spoon]

It's a smart app remember, runs on smart phone so uses GPS to work out routes lengths, ground penetrating radar module plugs into headphone socket to determine structure construction. Also does post code lookup to calculate your travel costs (and the chances of you getting your van nicked), and plots route to nearest cafe.

haha now that what I call a good idea..

 

[puffy]

All that will happen is that your rakeoff will be added to the quote, so it'll be that much more expensive than quotes gained not via you - you might see a dribble to work through your books, but you won't live off it. Youve assumed the customer will get all of the quotes for the job via you - that's just not going to happen.

Your business model is flawed, you do nothing to justify such a high % takeoff - all of your competitors are doing is encouraging a race to the bottom in terms of cost and quality - the customer suffers.

Youd be far more likely to earn a living, and encourage trades to sign up with a sub 5% rakeoff, if you could target your market at the high end where customers don't mind paying a bit more for a top quality job.

All you are trying to do now is to reinvent a broken wheel.

Our percentage takings are not finalised, it's just a placeholder value to work with. We will see what expense we accumulate running the website and app etc.

Just to shed some light, 15% will be very high, I agree but I just used that for now.

Can you also explain how the quote system works as I all it can ever do I give a very very rough ballpark figure.
e.g. say I want a cooker point adding. How will it quote for this? It could bust be a simple cable going from consumer unit, then under the floor to the new cooker point. Or the floor is solid so has to go a different route. or the customer wants the cooker point fitted to an island in her newly tiled floor kitchen.

I have not mentioned this part:

Research is needed to know what these sort of services costs. I wont offer "light buld replacement services" but rather re-wire services: services with high value. So a market research will be conducted to see what each services cost and things to expect then based on that, we based the selectable budget. Customer will select a dropdown of services and based on that a budget to choose from.

 

[Electric Magic]

I agree with many of the comments above. Letting the customer set the budget for the job is definitely the wrong way to go. I'll give an analogy: Person A has £200 budget to buy a TV. Trader 1 offers them a 32 inch HD LED Samsung with a 2 year warrantee, trader 2 offers them a 4k 50 inch TV, but its unbranded and the trader won't say where is from, or where they are from, etc. Most people would not be stupid enough to buy from trader 2. It's not like that with electrical work. Most people don't know their a##e from their elbow electrically speaking so more for less is an attractive option and so customers will set the lowest budget your site will let them. And you'll be able to find "electricians" who'll work to the budgets set, but unlike rated people who manage to distance themselves if your subcontracting cowboys you'll get the flack. And if you get good tradesmen and you're constantly telling customers their budget isn't high enough you'll not keep many of them. Time for a rethink methinks...

 

[puffy]

...Most people don't know their a##e from their elbow electrically speaking so more for less is an attractive option and so customers will set the lowest budget your site will let them. And you'll be able to find "electricians" who'll work to the budgets set, but unlike rated people who manage to distance themselves if your subcontracting cowboys you'll get the flack. And if you get good tradesmen and you're constantly telling customers their budget isn't high enough you'll not keep many of them. Time for a rethink methinks...

You have not got the concept, I have noted this in previous comments. They will select a budget (based on feedback we set values):

Title: Select work type:
{customer chooses full rewire}

Budget:
{customer selects "£2K - £3K"}

Description:
{Customer: I have a one bedroom flat etc}

The customer could also say "I have a 2 bedroom flat etc..." so based on their description we would determine the correct budget. If they selects the lowest budget and their description has "I have 2 bedroom etc..." we would contact the customer explaining to them x and y.