Managing Trade Partners

After many discussions about managing trade partners with remodelers from all over the country, the general consensus goes back to the age-old Golden Rule: Treat others as you want to be treated. Simple enough, right? Well, with that goes a laundry list of other best practices on how to get the most out of your trade partners.

For a number of reasons, including cutting down on overhead, expanding their services or being able to take on more work, remodelers are relying heavily on their trade partners to grow and better their businesses. With that said, maintaining a solid relationship with your trade partners is essential to business success.

Rule of thumb: Pay on time
With every project, Jim Scott, president of Home Sweet Home Construction, gathers his office personnel, project mangers, sales force and subcontractors. Yes, even his subcontractors are asked to sit in on their meetings. “I treat all of our subs like they are on the payroll,” says Scott.

Like many remodelers, Scott devotes some of his design/build remodeling company’s success to his quality team of subcontractors. “I have about one-third of my company subbed out,” says Scott. He utilizes his crew of subs to perform much of the work throughout the year — everything from plumbing and electrical to framing and HVAC. And because they are so vital to his business, he places a lot of trust and respect in their relationship. “The biggest thing for me is respect,” notes Scott. “If I give them my respect, they’ll give me theirs.” With this, Scott explains that this translates to paying on time, open communication and proper scheduling.

When it comes down to it, subcontractors are self-employed individuals just as remodelers are. They have their own bills to pay and schedules to maintain. Being an “easy” partner to work with will increase the level of respect between the two.

“My subs are working for themselves and I can definitely relate to that. They have bills to pay just like I do and paying them on time is something I promise to do — again, it’s all about having respect.”

Scott Gregor, CR, CGR, CAPS of Master Plan Remodeling-Design Build, Portland, Ore., adds to that by saying, “I try and respect their time; I don’t run them around or bid needlessly. I use SF (square foot) pricing to estimate costs for budgets and then have them quantify once we get a project close to signing AND the most important thing: PAY THEM ON TIME, all the time.”

Tom Sertich, owner of Kirk Development Company, Phoenix, Ariz., says on top of paying them within a week and a half of completion, he also makes certain the job is ready for them when they arrive.

“It is very important to have the job ready for the subcontractor. Too many companies make the sub wait or puts them off when they show up at the job,” adds Sertich. “This can destroy a good remodeler/subcontractor relationship.”

To sub or not to sub?
With the positives comes the negatives. A company can increase its capability through the use of subs. Increased sales without the increase in payroll, equipment or other overhead is one reason why this service can work to increase profits.

“Subs are my greatest asset next to my own employees,” says Gregor. “They allow me to take on more work as required and are willing to expand my services with their knowledge.”

Scott echoes Gregor and says that “subs know the harder they work, the more work they will get; this is a big benefit of subbing work out.”

Working with trade partners is no walk in the park. Although it helps eliminate the overhead of having a plumber or electrician on the payroll, it also forces the remodeler to relinquish some control. Now, some of that pain can be eased if there is an open communication policy between remodeler and subcontractor.

With residential remodeling continuing to be extremely hot in most markets, quality subcontractors are becoming difficult to obtain or if you already have them, keep.

Scott devised a creative approach to finding this crew of subs. “I’m originally from Illinois and know how cold it gets. So, I put an ad in the paper in Illinois asking ‘Are you tired of the weather?’ This prompted a few to take a look at the beautiful weather we have out here in Phoenix and believe it or not, it worked.” Scott also offers a “competitive” relocation package.

Make scheduling right
Scheduling can also be a factor in working with subcontractors. The fact that subcontractors work for multiple remodelers makes scheduling them an important aspect.

“We work with only written bids and send out a notice of job starts as soon as we sign the contract with out client,” says Kelvin Pierce, president of Commonwealth Home Remodelers, Inc., Vienna, Va. “We keep them constantly updated about scheduling and changes to scope of work.” Pierce also provides a full-time project manager who sets expectation for the subs and inspects their work on a daily basis.

Part of the family
The key to success in working with subcontractors is to treat them as extensions of your own organization. This means that you must communicate as effectively with them as you do with your in-house teams, and ensure they comply with the same policies you set for your own organization.

“I view my subcontractors as extensions of my company,” says Gregor. “I think contractors too often abuse their subs and this breaks down the relationship. The other thing is I want them to be profitable — not exuberantly so but within reason so that they are in business for a long time, too.”

Joining forces and acting as a team, remodeler and subcontractor, is the mission of College City Remodeling. In their combined efforts, CCR states in a letter to all their trade partners to “note that we are asking all trade partners to amend your terms to contribute 1 percent of all invoices for the sales and marketing co-op contribution, as well as, amending terms to include a 1 percent discount on all invoices.”

“In an effort to stay competitive and secure high exposure in the marketplace, we have incorporated an aggressive marketing co-op and payment terms policy,” says Bjorn Freudenthal, CAPS, general manager of College City Remodeling. “As you all know, competition is fierce and we want to make sure that we, as a team, emerge successful.”

Protecting your good name
When a subcontractor is sent out to do a job for you, your company’s name is on the line. If you’re going to hire a sub, Scott recommends that you ensure he or she is qualified and able to reflect well on your company. This might mean checking referrals, going through a detailed interview process before hiring and performing a post-completion survey to your clients about satisfaction. “We have a large database of all of the subs we use and have used in the past; this helps us keep record of who worked well and who didn’t,” adds Scott. ““My subs are part of our team, they are part of our family and get treated just so.”

Another way to make certain your company’s reputation isn’t ruined is through open communication. An open dialogue with your subcontractor is fundamental in creating a successful partnership. Being upfront about your company’s policies regarding appearance, jobsite professionalism and also being clear on the actual job itself is essential to an open and friendly relationship.

At CCR, trade partner breakfasts are held quarterly to help keep an open dialogue as well as monitoring goals and objectives for the year. “The more we stay in tune with our network the better our terms are, and processes and procedures are followed more thoroughly, says Freudenthal. “Mutual goals are set and achieved with higher degree of buy-in.”

Beyond the breakfast meeting, monthly, quarterly and annual get-togethers, CCR also phones all their trade partners to discuss the following:

  • 2005 business volume and relationship (increase/decrease)
  • Survey results and internal Trade Partner evaluation results
  • Terms and pricing
  • Co-op opportunities
  • Trade Partner Referral
  • Trade Partner Training
  • NARI memberships

Like Scott’s Friday morning meetings, Pierce also invites his subcontractors to a “subcontractor” meeting on-site during their final pricing to get their feedback and allow them the opportunity to see anything they need to see to prepare their bid. “We provide them with a detailed set of CAD drawings of the project and written specifications at that meeting,” says Pierce. “We also have the project manager, the design team and the estimator at that meeting to answer questions and solve problems.”

Praise your trade partners
Boost company morale by acknowledging the good work being done. Too often, upper management gets caught up in the daily grime of the workday to take a second to praise a job well done.

At College City Remodeling in Lakeland, Minn., Freudenthal takes an extra step and awards his trade partners at monthly, quarterly and yearly meetings.

CCR also incorporates a “Best Suggestion” contest to help improve their business. “Best suggestions are produced by our subcontractors as their way of giving input to our remodeling process. Typically our vendors have great ideas of how to: save time, increase profitability and enhance customer experience,” explains Freudenthal.