Well, we've been busting our butts for more than 4 years now doing only residential and we're still busting our butts...and we're still struggling to pay the bills...and we're still being treated like second class citizens by custom home builders. And you know what? We're still paying a monthly bill to stay in the Blue Book and getting lots and lots of ITBs everyday. So we're getting serious and deciding to get more aggressive about landing some commerical work. So here I am hoping to get some input from you guys.
I have three very experienced electricians. Two of them are licensed, two of them are commercial electricians, and one of them is highly experienced in residential and better than he'll admit at commercial. He's definitely not a stranger to it. The three of them together have about 60 yrs experience combined. That said, the field work is not my concern, winning the jobs and dealing with the "professional" end of things will be the trick.
I have no problems being professional but I need to figure out what GCs are going to expect from us as the electrical contractor. Some questions I have specifically at this point are (and these would be for anyone who is a small company doing primarily commercial work):
Do you typically sub out concrete cutting and patching or do GCs farm that out from the get-go?
Same with Fire Systems. Do you sub it out or are they already getting bids from Fire Systems installers separately?
These days, particularly in retail, are you supplying fixtures and lamps or is an owner or GC supplying those?
Its a few starter questions anyway. If anyone wants to help me out in this process simply by providing me with some input, it would be so appreciated. This is seriously a matter of life and death for us. I've been told time and time again that "you can't make no money doing houses son!" I've just had such a hard time breaking into the commercial jobs and I'm reaching out for help.
It sounds, from your post, your interested in mainly NEW commercial construction.
Is that all you want to do?
The rest of your questions would depend on what size job you are planning to do, and the time frame in which you have to do it.
For 4 guys, on a big job, yes you would sub out the fire alarm, concrete cutting, and so on, or hire alot more guys.
Fixtures, some supply them, others spec out certain ones and you have to supply them.
First thing first, ask yourself what kind of commercial work, and how big of a job are you looking to land, and how much capital do you have to work with. Large commercial jobs require alot of tools, and quite a bit of digging. Sub that out to start too.
What do they expect from you? The impossible, what else........
The company I work for, does mostly new construction commercial projects. Concrete cutting/boring, pole bases, bollard bases, fire alarm, low voltage wiring, and ceiling wires for our fixtures are always excluded in our default contracts. We will sometimes do low voltage, but not by default.
We supply all lamps and fixtures, unless there is a note on the plans about a specialty fixture the owner will supply.
Change orders are a bigger deal in commercial construction. On big projects we are not allowed to issue a change order, we actually send out a Change Order Request (COR). The COR is sent to the GC, then to the engineers and then to the architect and finally to the owner. If the owner approves the COR, an approved change order is sent back down the chain.
This may seem overly complicated, but it makes sure everyone is in the loop on changes. This process even happens if the owner in person asks for the change order. I'll still write it up and wait for an approved change order to come back before proceeding. Generals love to push you to do work before getting approval back, but that’s the only guarantee you will get paid for it.
One other problem with commercial are the draws, usually you will be floating one to two months worth of work before you get paid. On a large job that can be a sizable amount of labor/material you are financing.
With the crew you currently have, I would actually recommend commercial service calls. You would need a large ramp up in tools, capital, and manpower for a decent size commercial project. This considering the profit margin is often quite tight on new commercial. The profit margin is substantially higher for service call type work.
Think of it this way, on a 10 million dollar project the owner will know what they are doing. They will know exactly how much they can squeeze out of you. While the secretary will not know that the $250 copier repair could actually be done by someone for $210.
I'm not trying to get you down, just trying to help you see what my company has learned over the years. Such that we are trying to get back into a more service call type company, with a few smaller new construction projects to help balance things out.
It's hard to believe that you have talented people and aren't profitable. Commercial work and residential work have their ups and downs.
The receivables are great in residential, but it can be very profitable to go to a commercial job and work a long day without all the travel between small jobs. A loyal GC can be very good business, but one that isn't loyal will squeeze you until you're broke.
Tiger, residential can drag you down in little details, and burn money in the process. Most resi jobs seem like 5 trades with 2 guys each tripping all over eachother all day.
Commercial, in my opinion is a lot more meaner, cleaner and leaner. Whether its new, or TI's, you'll find that most GC's who stay in commercial are more organized. And for the most part, more efficiant. And it will be more about "Contracting" the work, rather than the "relationship" with the end customer you need to foster in resi.
As for core sawing, demo, and patch/paint. Just go ahead and permentley etch it into every contract as an exclusion. Too much liability. Many GC's use these items as changes to hit the customer with as the job goes on. Just make sure you're covered on paper that some "will be required TBD on-site". Go over what you think you might need with your bid, and they'll add it to thiers.
You will need to find the labor for the jobs though, get a fast track contract and not perform on schedule and you could be doing it for free. And you'll never be called back again. Relationships in commercial are built on performance, and speed.
Mark Heller "Well - I oughta....." -Jackie Gleason
Happi, I say resi work makes the payroll but commercial work makes a profit. I run about 75+% resi. I have 34 houses going right now and 4 commercial jobs (a gas station/store, a strip mall, a steel fabrication shop and an office/warehouse for an underground utility company).
The commercial work brings in over TWICE the profit margin when compared to houses. I have tried to balance the two mainly because resi brings a steady flow of income through the books.
I track each job by manhours and materials to keep a close look at the bottom line. You would be shocked to see how thin the profit is on a house if you have to make a couple extra trips. And it's usually things you have no control over (like sheet rocker cover ups, AC guys ripping out a light or smoke detector to make room for the return air, or the lighting supplier sending an order that is missing half the items)
I suggest start small and cherry pick your commercial jobs. Then they will be calling you. Dont drop what you have now and go all commercial. It's a steep learning curve that can leave you broke on the "fast track".
Re: Commercial Input#51621 05/05/0508:20 AM05/05/0508:20 AM
Wow! Really great info guys. Some things are definitely things I've thought of or have seen, as far as the residential stuff. I mean, if there is a way to lose money in resi, I've lost it that way at least once.
arseegee: I track man hours and material costs as well. Its painful to see sometimes when you add up the numbers and see that you paid to do a job. Even if its only 5 bucks.
Its funny, for awhile I was thinking how nice it would be to be doing really well so that I could take on the attitude of, "Hey, you wanna be difficult to work for? Well I don't need your business, so sit on it!" But the more I thought about it its like, well I'm struggling here and being treated like crap by this guy, so what's the difference? I'm struggling with him, I'll still be struggling without him...so sit on it! I guess its just real hard to stay confident in such an industry that feels like its just trying to beat you down all the time. And there is nothing more frustrating than having a builder pull up in his Escalade on his way to the airport to leave for his third Mexican Vacation for the year only to stop by and bitch to you about a $50 trip charge that you billed because HE failed to schedule his trades properly.
Ah, anyway - off the soapbox and back to the original topic. I have already set some guidelines for what kind of work we want to break into. We have actually done some real light commercial work in the past but for REAL small builders so it hasn't actually been for a GC doing million dollar jobs. But I figure we don't want any part (at this point) in new construction but rather tenant build-outs, improvements, remodels and the like. We are sticking to jobs under 5000 sq ft, and sticking to things like smaller retail spaces in malls and such.
My biggest concern is something that a couple of people mentioned and that is capital. What the hell is that? Joke, I know what it is, I've just never seen it. I guess I'll cross that bridge when I get to it.
Its good to hear you guys say some things that I was already assuming. To that I say thanks for the confirmation. I figured residential was good for cash flow and we've actually got a plan to keep our residential flowing. Oh and to clarify. I have three very experience electricians in addition to a couple of real good helpers that have acome a long way. I also have got one guy who is a very good residential electrician that is wanting to work for us so there is my resi crew. It will be a transition to say the least but I have some confidence after this post and a whole lot of hope.
Thanks again for all the input and I'm very glad to keep receiving it if anyone cares to follow my progress on this journey.
PS: I thought of one other question regarding the bid for a commercial work. How do most people bid their man-hours. I mean if they give you a time frame for the project do you allow for a guy there for 8 hrs/day for the duration of the job or do you actually try to "guess" at how long that job will take?
[This message has been edited by Happi_Man (edited 05-05-2005).]
Anyway, bid your man-hours/days accordingly, and buffer up for stoppages and such. And if you're familiar with progroms like MS Project that have time lines, think of all the items that require work by other trades to be complete for you to continue. And schedule along those lines. Like: Rough, so many days after completion of framing, etc. Or trim so many days after paint, etc. Buffer those too. Your hours and completion time allotments don't nessisarily have to match. You 'should' have other work going, so don't assume the whole crew will be available at one site when it time to go.
Mark Heller "Well - I oughta....." -Jackie Gleason
I certainly relate to your situation. I also started out doing a ton of resi work and had the same exact issues. I can offer this advice. GET AS MUCH COMMERCIAL WORK AS POSSIBLE. your labor rate will be able to be increased by about 10 to 15% or so. and you can do things like charge minimums. EX> 4 hr minimum for service calls @ $95.00 per hr. even if it takes you 25 min. to do the job. 1.5x after 5:00 pm, 2x weekends and holidays. remember your dealing with huge corperations. try that with a residential contractor and you will be sitting home with no work. the profits are greater. Also most commercial retail jobs will be tennant supplied fixtures, lamps, power poles, Energy management systems, etc..as far as Fire protection. Find a company to bid with you / thru you. when you get drawings, call him and get him his drawings out to him. just figure on your men pulling wire, terminating devices, and hanging panel. he handles supplying Specified system delivery and panel terminations and fire marshal walk thru. Good luck. Oh yea, the worst part of the commercial bidding is the damn time frame you have to bid. My first question is WHEN IS THE BID DUE. USUALLY 3 TO 5 DAYS FROM RECIEVING PRINTS. Also you can pretty much forget about recieving deposits. thats why you cannot stop residential work. Most Commercial work pays between 30 to 60 even 90 days after completion. TOUGH ONES TO FLOAT. like anything else getting started is the most difficult part.
[This message has been edited by northstar (edited 05-05-2005).]