Contractors - got a question on job pricing

Ok - so contractors (and others in the know of such things) - got a question on a quote I recently got from a general contractor.

So basically - called a GC to quote doing some renovation work for us at new house - including kitchen. Part of this will be new cabinets.

Original plan was to use IKEA cabinets - but GC said “I got a guy” and referred us to them for cabinets/countertop. Get the quote from the contractor and includes his guys pricing for both (will be installed by the sub - not the contractor).

Now included in the quote is 10% markup for work done by subs - which overall I am ok with. I mean end of the day - contractor needs to schedule other trades in and work with them, they are responsible for the subs they use and if they make a mistake, etc - and when your talking a bill of a thousand or less - 10% isn’t much of anything.

But on cabinets and countertop - we are talking more than a few THOUSAND and those take less than 3 days to install and will be the last thing done (so not much scheduling conflict).

Am I being overly picky - or should they back this part out - or at least cut the percentage by say half on that total cost. I mean - what if I said - go ahead with all the work except cabinets/countertop and I’ll find someone to do that myself - kind of hard for contractor to say “ok - but now the price goes up 5 grand” to line their pocket. Things like some minor electrical/plumbing and HVAC - I’m fine with paying the contractor for handling - but given I’m paying the cabinet installer directly - what am I giving 10% to someone else for here ?

Just want to get a pro opinion before I go into this any deeper with the contractor. Right or wrong to mark up high cost/low involvement sublet work as a contractor so much ?

 

Great contractors and all their subs are well worth the prices they charge. The old adage - you get what you pay for - holds especially true for this sector of society. Get some opinions from the GC’s previous clients.

 

I am in the middle of a kitchen remodel myself ….and have found that using the subs from my GC has made the whole process much smoother…he also does not get involved as far as costs…I pay the subs directly
My cabinet guy does not do countertops …knowing that those 2 things need to mesh as far as appearance & even more so installation I did not want to bring in someone out of the loop.
I’m a small business owner and wanted to use some of my ‘connections’ …but have been very pleased with my guys
subs
Enjoy the dust!

 

I get the reasons for O&P and don’t have an issue with them in general.

My issue is more so - why am I paying it here - the GC ISNT responsible for this part of the job - any issues, I take them to the cabinet company directly.

GC time/experience - those are why I am paying them/hiring to do the job to start with. You don’t get a “bonus” for knowing what your doing - that’s built into your rate. Kinda like taking your car to service and having them say “our standard rate is xx - but if you want my senior tech who is really good - it’s a 20% upcharge”. It just doesn’t work that way for tradespeople.

Again - dealing with issues as they arise - I’m good with that - but this goes in last - so literally any issues that arise would be handled by the cabinet installers as they would be the ones creating them.

Paying for a referral - I get it - but unless I’m getting a discount of 10% or more for dropping the GCs name to his guy - I think 10% is kinda steep.

Permits not an issue here - non zoned - out in the country.

Appreciate the comments though - like I said - I’m not 100% I will even say anything / will do some checking - again if his guy is saving me 15-20% - then I’d be stupid to rock the boat and say anything about the 10% - just go with it and live with paying less in the end which is all that matters. It just seems like a chunk of change for nothing - but again - if in the end I’m saving more - I’d be stupid to complain (and ultimately my thought is their price is fairly good for the scope of work to be done).

 

I get it - it is much simpler having one person manage the project and writing one (big ass) check.

Oh - it’s gonna be a challenge for sure - moving to new place AND renovating. Last time we did it we had an apartment and didn’t have to live through it - much bigger job though. This one is “small” - just a month or so and we can close off half the house where no work is being done. Still - gonna be a challenging month I’m afraid.

 

I kinda of agree with that - on claims I usually pay 10&10 (so 20) - BUT there needs to be 3 trades involved for subs too - if it’s just one/I usually would agree to 10 total to get it done. But again - that’s a slightly different game.

 

This right here. I'm a GC and run a $2.5M/year remodeling business. At a 10% markup your guy isnt even covering his true costs and breaking even. He's probably going broke building jobs and doesnt even know it. It's super prevalent in our industry. It sucks for the tradesmen as well as the general consumer. Creates massively misaligned understandings of value that residential construction tradesmen provide to our society.

No offense, but your attitude about paying a markup on something that "the GC ISNT responsible for..." is proof of how prevalent this problem is.

People have no problem paying 50%, 100%, and even 300% markup on other goods and widgets...but when it comes time for a skilled tradesmen to get paid people clam up tighter than a dolphin's ass. How much of a markup do you think you pay at the grocery store? The department store? The Toyota tundra parts dealer..? Additionally, I'd be surprised if you (or the GC in question) could articulate the difference between markup and margin. They are definitely not the same but are treated like they are far too often.

I don't want to be too soft on the GC here, either. It's his own fault if he's not being more savvy about how he prices his jobs and structures his business. Nobody is born with the knowledge of how to run a profitable business, but it takes a good deal of effort to change old habits and most guys aren't willing to do it. He also may not be trying to run a business. Maybe buying himself a job is good enough for him...I dunno? Either way, he's not doing himself or the rest of the world any great favors by operating like he is.

To answer your original question: If this guy is actually doing top quality work and managing the job (like a GC should be) at that sort of pricing, you're getting an absolute steal. However, my suspicion is that if he's pricing things in the manner you described he's ignorant of more than profitable pricing strategies. You're in lowest bidder territory with pricing structures like that and I'll bet he doesnt even understand the concept of "best practice". Any permits being pulled? Is he paying taxes appropriately? How's his insurance policy looking? Lot's to consider if you're truly a legit professional.

Hope things work out for you and him, though. It's a bummer to see things go sideways between contractors and the public. Just adds to fuel to the "contractors are pirates" fire.