Sub contracting

sundancekid91

I'm just looking for information about sub contracting. I'm currently a chippy but I have built up a few contacts in the construction sector in London and there's a few jobs opening up where they are looking for workers. I can supply men for these jobs but I'm just not used to the business side of things. I have a company name registered and I'm in the process off being approved by the company but I'm just looking for some input from people who have done it before. Any opinions are appreciated. Thanks

pedroeibar1

You have a number of important issues to consider.
Credit risk exposure: – zone in on who your customer is and how creditworthy they are. The subbie is always the last to be paid and the first to lose out, because he is at the bottom of the payment chain – the QS/Architect certifies work done at whatever stage has been agreed, the bank makes payment to the developer, who pays the main contractor who then pays key suppliers and subbies. Regularly there are retentions, never paid until after a snag list has be completed at the end of the job. Meantime, the subbie has to pay wages, taxes, insurance, PRSI, etc., etc. Effectively you can be a bank for the contractors above you. More than two thirds of the postCeltic Tiger insolvencies were caused by subcontractors not being paid.

Export market:- The biggest cause of failure in all industry sectors is an unrealistic approach to and understanding of what entry to a new market entails. Just because we speak the same language does not mean that doing business is the same. It is not. Even on costings, London is horrifically expensive, accommodation, travel, etc.

Experience:- You have no experience in London (from what you’ve posted). If you are starting to work as an employer there you must be on the ground yourself. I would suggest that you go there and work for a few months as a chippy and then assess the position. Maybe use one of your contacts to get a foreman-type job where you can move between sites as a ‘problem fixer’. If there are problems later on and you have not been on the ground yourself with good local contacts and knowledge, you will have no idea of the cause or how best to resolve them quickly. After that should you decide to operate there perhaps you should consider starting at the bottom (say doing stuff like shuttering or first fix) until you get the hang of things.

Paperwork – as an employer you will need someone to do your paperwork/payroll – outsource that to an accountant to allow you concentrate on what you are good at. Investigate the insurance aspects – employers’ liability, contractors all risks, etc. – get a good broker.

Best of luck with it if you go ahead, from what I’ve seen London is booming in the construction sector and full of opportunities.

I would agree the credit risk is the biggest issue to overcome here. Theres always problems in constructions projects, and more often then not delays. And they can come from every angle.
Its important to understand all the conditions of your own contract with the developer, and be able to work them into the sub contract to protect yourself if the developer stops paying or is late paying . In this kind of situation your initial downpayment for the work needs to be decent because you dont want your subcontractor spending a load of cash/labour and then the developer not paying on time, that will cause a big problem. Then work more smaller incremental payments into the job (more then you usually would) as the work gets done so your sub contract is in cash-flow.
And I would say if your not on top of the sub contractor daily or have a guy managing them they are going to take shortcuts on the job, or may unintentionally even do bad work so management is important. Otherwise you might not get your retention, and thats probably all your profits right there.

sundancekid91

Thanks very much for the comments. Extremely helpful and I'm very grateful. I am working here since February so I would be on the ground for most jobs. I'm just looking to start small and take things slowly. My idea is to act more like an agency and supply the workers to the contractor.

pedronomix

sundancekid91 wrote: »

Thanks very much for the comments. Extremely helpful and I'm very grateful. I am working here since February so I would be on the ground for most jobs. I'm just looking to start small and take things slowly. My idea is to act more like an agency and supply the workers to the contractor.

you may well have to be licensed to provide such a service in England as there were some very naughty Irish players in that space in the past. I understand this may now be very tightly regulated. Check it out on the ground!!

and read this http://www.parliament.uk/Templates/BriefingPapers/Pages/BPPdfDownload.aspx?bp-id=SN00196

pedroeibar1

If you are going to act as an agency-type operation Pedronomix’s point is very important. Have a look here as that area is a minefield. I know you will think all this is overkill, that is not the way it really works (I agree it doesn’t, always) but all you need is just one incident with an awkward sod and you will find yourself in deep fertilizer.
In your position I’d source a good hands-on accountant over there who could mark your card, do the books, help organize payroll finance, etc., and keep you on the straight and narrow.

Kevhog1988

im a quantity surveyor over here. drop me a pm and ill have the craic with you. Very Very easy to get stung over here if you dont know the right contractors. I could probably give you a list of "subby busters" as long as your arm that we won't touch with a bargepole (I'm working for the family civil engineering/utility company). Also dont be fooled by connections you may have had from home, acquaintances etc. Ive seen more lads stung by other Irish contractors out here…. You need to tie them in knots with paperwork , purchase orders, get everything on email etc and then do not for any reason let your credit terms be any greater than net monthly!!!

Its a cut throat industry but there is scope to make money fast here.

allibastor

The problem with being an agency is you also need to have the money to bank roll wages of guys for 4-8 weeks before you get money back. I have worked in a small start up agency before, and the first few weeks/months are very tight. You then run the issue of having staff problems, in that all staff issues will run through you, so pay issues, PRSI social security costs etc.

it is less risk than sub work, but not by much.