Construction Business | The Secret to Making Money Managing Subs | Tyler Grace
Modern Craftsman
Modern Craftsman
4.9 • 1.1K Ratings
🗓️ 26 June 2025
⏱️ 25 minutes
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Summary
In this episode, Tyler talks about why he stopped marking up subcontractor quotes and started charging a dedicated management fee instead. He shares how this shift helped him finally make money managing subs, offering a blueprint for small contractors to treat their time with the value it deserves.
Show Notes:
Managing Subcontractors: The Secret to Profitability (0:00)
The Evolution of Subcontractor Management Fees (2:16)
The Importance of a Separate Management Fee (5:36)
Examples of Markup and Management Fee Calculations (8:27)
Justifying Higher Prices to Clients (15:53)
The Role of Marketing and Sales in Small Contracting (16:11)
The Future of Small Contracting (23:55)
Video Version:
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Transcript
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| 0:00.0 | It's bad at 35, 40%, 50%, but you drop down below that. |
| 0:04.7 | It's probably costing you money to put this work in place. |
| 0:08.5 | It's up to you to understand how to communicate, sell, and pitch the value behind those services |
| 0:15.9 | and create that value proposition for your clients. |
| 0:19.1 | If you don't, you will be operating at an enterprise |
| 0:22.3 | level at economy of scale returns, and that's not sustainable for a small business. We just |
| 0:28.8 | aren't putting enough work in place to do that. Welcome back to Midweek, Modern Craftsman. You guys and girls better lock in today because I don't have that much time and I have a lot to tell you. So I'm going to try and distill this to the least amount of words possible while creating the highest impact. We're going to start with the intro. |
| 0:56.8 | I am going to provide you with the secret to how to make money managing subs as a small contractor. |
| 1:04.2 | You heard it. You heard it here first. So for the first decade of my business, I relied, |
| 1:09.1 | I would manage subs, right, smaller bathrooms, |
| 1:11.1 | kitchens, uh, or smaller projects kitchens bathrooms. And I was relying on a small markup on my |
| 1:16.1 | subcontractors numbers, um, to create profit for my business or to cover the costs of hiring |
| 1:25.2 | those subcontractors. So it started just word of mouth speaking to other |
| 1:30.0 | contractors, people that I worked for right 20% charged 20% on top what the number is. I struggled |
| 1:37.1 | to make money doing that. So I slowly raised it up when as high as 40%. Still was just spending way |
| 1:43.2 | more time than I was getting paid for. So it really, it seemed to |
| 1:48.9 | no avail that it just, it wasn't working. So it wasn't covering my time. It didn't cover my site |
| 1:55.0 | visits, my layout coordination, miscommunication, callbacks, the hand-on management that was required. |
| 2:01.6 | So I was creating a ton of value for not only my clients, but my subs and really none for myself. |
| 2:08.6 | So today what I do, and this is the secret, is I treat my management, my subcontractor management as its own line item. |
| 2:18.3 | So just like a larger GC would, I include a standalone management fee in my budgets, |
| 2:25.1 | and I track my time against that, right? |
... |
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