Hey everyone, Gotta question. One of the main backhoe dudes in my neighborhood with a big client base has been sending me a lot of work. He got a full time job making a subdivision or something so he's been giving me all his odd jobs that are his usual bread and butter. So on the one hand I know he's a good guy and wants to help me out. On the other hand I know it's customary to throw other contractors something when they consistently help you out on the professional level. I've been giving him periodic wads of cash somewhere between 5 and 10 percent of what the jobs bring in. Both as a thank you and an acknowledgement of his help. He's seemed happy enough until now but I've never had this kind of arrangement on a consistent basis before. Any advice or insight? What would be an acceptable percentage? Thanks!
I’d say 5-10% is fair. I’ve been the middle man of several rather large deals and the standard seems to be 10%. If you’ve done quite a bit and he’s happy you’re probably in the ballpark. Hell just ask if he’s happy or what he might want to change.
One thing would be to never do work in the future for any of those referrals without going through him.
is he standing good for libertys on damage for your work? if not what you paying is enough I think
Huh, that's an intricacy I hadn't thought of, good point though. Thanks.
He may be a good guy and is helping you out, but if it was me, I'd find a way to ween this guy out of my life. To me its a partnership and he has NO skin in your game, but thats my 2 cents.
I have never expected any kick back and only recommend those that are competent , having received the majority of my work over the years by word of mouth.
I do an itemized bill to the customer. I can't figure out how to itemize an illegal kickback. I've had several people lead me to a job in the past, then ask for 10%. My standard answer is: I'm fine with you acting as GC. I send you my itemized bill, you pay it. As GC, it's none of my business what you charge for my work. In truth, a GC standing between me & the customer saves me time & material. The customer can't easily change the job, "oh, I want just one more thing." 25 changes later & 5 days extra work, they think the price shouldn't change.
What % are you making on your work? Joe H
Huh? Like a hunnert percent, or I guess 75-80% after subtracting my daily operating costs. Then I guess throw dude 5-10% as he keeps the work coming.
G-pa, I know I'm wary of strangers with candy as well that's part of why I started this thread. But I am thankful for the work and that's worth something. He never said he wants cash out of me but I don't want to owe him some huge unspecified "favor" down the road either. He's a nice guy known him from around the way for a while but haven't worked with him before really. It's becoming apparent he's got an enormous client base and now at the beginning of dry season he needs to keep them serviced some way some how while he's busy making that subdivision so that could be where I come into his plan. I'm starting to infer that his plan could be to try to work for/with me in the future. I have one old junker hoe and am planning on getting another old junker hoe cuz I don't like losing work when I'm broken down. No better way to make the phone ring than have a breakdown. Anyway he's known that's my idea for a while and perhaps he's deluging me with work so I feel inclined to do this sooner rather than later and put him as an operator in one of the old hoes. That way he works here in his neighborhood again instead of an hour to the south. And we sort of get a bizness going together that could grow further. It's not a bad idea however I'm generally wary of getting in deep with friends and buddies from around the way. But if I've got a little bit of capital and he's got the customer base... I dunno it's just idle speculation at this point but I think I have gigs almost every day this week. Worked today Sunday, if briefly. So who knows where this will go
Funny, I subtract my costs, Pay myself a bit for my labor, I only make a little profit over expenses. I have customers willing to pay waiting. I just can't afford to pay for work.
Finca SDR ; Do you really need him to keep busy ? Or is the convenience of him steering jobs to you worth giving away $50 to $100 per thousand dollars you earn ? Lets see, you earn $10,000.00 and he gets $1000.00. YIKES !!!!
Tinkerer, yeah, at this point I can definitely use more work. I'm not against cutting someone in for that, market share and customer base is something that you build in any business, same as skills or equipment. I think of it as along the same lines as advertising or marketing
Oh, yeah, I forgot to mention that I grab several big bills from each job and put them in this big metal piggy bank I made and welded shut. So I don't spend it on sweets and candies. That's the next backhoe fund. So perhaps my final take home is only 40-50%. I'm really bad about the accounting. Every time I try to keep books it seems to jinx the machine and it breaks. So I don't keep books.
Sounds like you're helping him out too. If he can't help his customers, then he'll lose them in the future.
Your in a different country so its going to vary but around here all businesses are constantly referring to others no payment is expected its a comes around goes around thing Like its no point in loading the D8 to put in a flowerbed might as well refer a trusted landscaper a year later he might be referring someone that needs a D8 to push a road in ect Its the same with mechanical work or any other type of business If someone wants to make money on the job they can take it on and hire a subcontractor to complete the work that may or may not turn out well The only real solution is to sit down with him and find out what each other wants from this relationship and do it fast before it gets any deeper
Sounds cheaper than advertising if you're getting the majority of your work though him. The other thing is it lets you do the jobs instead of having to look for the jobs or try to get jobs on your own. Giving up some income is better than having no income at all. Kind of like Shark Tank. Some people don't want to give up too much equity but on their own they'd never make it. Teaming up with the right person can really pay off in the end.
Look at this the other way around. Would you expect a kickback if you referred him to somebody? For instance, a person asked you to do a job you were not comfortable doing or simply aren’t able to do? Good relationships with a few local contractors works 2 ways.
If I had to give up 10% of my profit to someone else... I think I would just pack it in and go to work for them.
Welder Dave understands the mindset, I've just got work beating down my door and I don't have to worry about it, negotiate, discount, or anything. Doghead, if I sent a job or two periodically someone's way I wouldn't want anything. However if I kept them working week in and week out I might appreciate a little acknowledgement of that. Like I said before, customer base is something one builds same as skills equipment and infrastructure. It doesn't matter if I'm growing beans or welding houses or digging big holes. The clients came a long time after I got the skills to do the job. So that's something I would be guarded about sharing totally freely and am willing to pay (what I perceive as) a nominal amount to express gratitude for.
Now that you have explained your perspective on the situation I understand why you are doing his overflow of work. The kickback makes sense because it may keep him from abandoning you and finding someone else.
Friend, you don't have a clue what your operating costs are and you think you are running a business? No offense but you need to get a handle on what your costs are and what you are actually making before you go off buying another clapped out machine to double your troubles. You can not run a business with no books to tell you what's going on. All the money that comes in the door is not profit. Joe H
Thank you and I know you are absolutely correct. However after my first fuggin like $2k transmission repair saga was finally over, I've been lucky to not have serious mechanical problems. Not even the engine rebuild was that expensive. Been able to get used tires. Thing needs about $50 of diesel, grease and oils to generate $200 - $300 of cash in a day. Then I put $50 away in the piggy bank, go buy diesel and use the rest to buy building materials for the farm and pay my farmhand. I'm kind of a simpleton on some levels, but every time I would keep a record of how many thousands of dollars I was bringing in the transmission would blow again. So I stopped and been lucky so far. My success is owed in large part to my mechanic who teaches me as well. Thanks to him I'm not helpless now.
And maybe I'm not running a business, maybe I'm just a goober with a tractor that people give money to to dig big holes...
Finca SDR; Do not belittle yourself for anything you do. You aren't a simpleton from what I have read of your accomplishments. I know where you are coming from. If doing work for others is giving you the rewards you are happy with, you are a lucky man. A small scale business like you are running doesn't need detailed book-work. As long as you know how much money you have going out for expenses and and how much you have left for yourself after that, you are OK.
There's a reason most contractors have bookkeepers and such. It lets them do what they know, run the equipment.
Thanks Tinkerer, that's kind of you to say.
OK, it's a hobby that generates income. That's fine, but if you start buying more equipment and taking on more work you need to know if it is making money or not. If it's just a couple hundred dollars now and then that's a whole lot different than running a business. Even those who try hard fail at running a business , a side job cash operation is another deal. Stay where you're at, buying another clapped out machine probably isn't a recipe for success. Joe H
I'm so confused. From your original post I got the idea that this guy had a successful backhoe business (IE owning equipment) building subdivisions and was throwing you work, which in customary Costa Rican fashion a cut is expected - I understand the kick back culture as the wife and I lived there a few years and have family retired there. So why is a guy that has a huge customer base building subdivisions looking for an operators spot on an old hoe?
Do you have tractor number 1 paid for? If you do then bookkeeping is easy. If its payed for, then put all income into one account except for 5%. Put that 5% in another account with the understanding you'll never touch it no matter what. Then work your machine, pay all your bills out of the remaining 95%. If at the end of the week you have money in this account you've had a good week. After a month another good month. After a year you have enough money in the 95% account to outright buy another older machine then go for it. If there is not enough money in that account then you should only buy what you can afford. Work your butt off and keep a positive flow in both accounts your ahead.
Actually it's my main deal to tell you the truth. My current hoe cost about 15 grand and it turned on and rolled back and forth. It did need some expensive repairs pretty quickly but I was able to start working right away. It's paid for itself more than once in the three years I've had it. I am keeping my eyes open for another old hoe. A deere 310e would be awesome but whatever turns on, spins it's wheels against a backstop and will lift itself up is cool. (no major cracks either please). I'm an experienced operator by now and know a something about the mechanical end as well which should help this time around. I know $250 per day seems laughable by US standards but here in Costa Rica if I can do something that's not illegal that leaves $150 free and clear in my pocket for a day's work that's... out of the ordinary. If I was to hire someone else to drive the other hoe, then I would start to act like a bizness man and keep books and track of hour meters and so on. Once it's bigger than just me I'd have to. However my buddy that is the catalyst for this thread and the main candidate for going into business with in the future just broke the hoe he drives at the subdivision pretty badly. Cracked the boom-swing mount frame thingy it sounds like. Reminds me that if I get these big old rusty dinosaurs just cuz I like them I gotta be careful cuz they can break, and no one is going to baby them the same way I do. No matter how much more experienced this guy is. BTW thanks everyone for sharing your thoughts with me about this, it definitely helps me to figure out what I'm going to do moving forward.
However my buddy that is the catalyst for this thread and the main candidate for going into business with in the future just broke the hoe he drives at the subdivision pretty badly Yeah, things can turn to sheet in a rush. Your customers don't want to hear your hoe is dead, they want their job done. So keep on hobby biz and you'll be fine probably. By the way, 10% profit is what a hell of a lot of businesses consider a good return. Joe H
Cm1995: Dude is an operator, sometimes he has his own hoe other times he drives someone else's. Hoes make money here in Costa Rica so sometimes people with money but no other interest in the deal will buy a machine and hire an operator as a sort of passive income thing. Lotsa times these are the same type of people that play real estate and development games, so having a pet backhoe is useful for them as well. Right now my buddy is working for this guy that's hacking up a big farm. I dunno if it's a subdivision, commune for rich hippies, a cult, or whatever but he's been hoe'in it up full time over there. Until he broke the boom mount today but that's another story. But he usually works here in my neighborhood and is family with everyone. So he has a big client base that calls him regularly but right now he's indisposed. He had some old Komatsu but it started squirting motor oil and then it didn't work anymore so he's back to being a paid operator for now.
Thanks Grandpa, that looks like a good formula to follow. With any luck enough work will keep coming my way that I gotta start paying a little more attention. Yeah the first hoe is paid for, that is an upside to old clunkers is that you don't have to go deep in debt to get them. On an unrelated side note, it's funny how much cheaper old machines are down here than what I see in the US market. However, the hours are through the roof compared. But the things keep working. Permatex and arc welders hold them together.
Recently I had a contractor put new roof on my house. The installers were were from Honduras. The only guy that spoke good English was the lead man. They were all related (family). He saw my T/L/B in the backyard and wanted to buy it. "I pay Cash" he says. He had a friend that would haul it to Honduras for $2000.00 ! He wants to do the same as Finca SDR. With the exception he said he would have more work for himself and my backhoe than he could possibly handle. Machines are in short supply there he said. He knew parts would be hard to get, but he said he could still make a lot of money.
if you have a good enough relationship with him, why not just have a conversation and decide what to do? That way you don’t feel awkward giving him money that may or may not be enough and also so you understand what his expectations are.
That's cool, I hope that guy manages to get a machine back to Honduras. There are plenty of machines here in Costa Rica. Old new and in between. It's on a different economic level than Honduras and has been for some time. I don't think there's that much cash floating around in the hands of ordinary citizens there.
I I have but no one is really direct and to the point here. Us gringos can rub people the wrong way by being too "in your face" about establishing agreements and stuff like that. If you talk business straight up you get straight up retail price and little help. After almost 15 years I've kinda learned the local flow. "if you want to throw me something that's fine but we're here to help each other". Very nice but still leaves me confused. Anyway he broke the boom mount on the hoe he drives so I think I'm going to engineer a couple reasons to need a dumptruck in the next few days cuz he can "borrow" his bosses dumptruck and make and make at least some money that way.