USE OF LICENSE, Fair Percentage ?

[hugh6177]

So I worked for a company 15 years (got my apprentice card @ 14, been with them since age 17). A year ago I quit and moved two hours away to pursue selling electrical tools full time on Ebay, [Seller:electricdealsforyou, just FYI ] as I had been doing that for 3+ years on the side. It appears there is a shortage of electricians in the area I moved to, and I would like to pick up some of those jobs under their license. Long story short; these guys are like family to me, and I want to treat them right. We have already batted this back and forth, and they are open to the idea, but I want to give them an actual proposal. What do you feel would be a fair percentage of the PROFIT on a job for using a license; IF THEY ARE NOT SHARING IN THE LOSSES? IE, I assume the bidding risks, their only 'risk' would be liability/office expenses for handling permits? I guess I should add that these jobs would be one man jobs, ie residential/pole barns/panel changeouts/etc. And yes, I could get my master's and EC, but this isn't my primary income and I just don't want the headache...

 

[donaldelectrician]

Loui the Lip says 10%








Don

 

[John120/240]

these guys are like family to me, and I want to treat them right. We have already batted this back and forth, and they are open to the idea, but I want to give them an actual proposal. What do you feel would be a fair percentage of the PROFIT on a job for using a license; IF THEY ARE NOT SHARING IN THE LOSSES? IE, I assume the bidding risks, their only 'risk' would be liability/office expenses for handling permits? I guess I should add that these jobs would be one man jobs, ie residential/pole barns/panel changeouts/etc. And yes, I could get my master's and EC, but this isn't my primary income and I just don't want the headache...

What does your licensing authority say about this arrangement ? What is his insurance company's position on the matter ? You don't want the headache, but you want the benefits. Either be an employee of this friend or GET your own Electrical Contractor license.

 

[petersonra]

I don't know what you are actually proposing, or whether it would be legal in your area.

IMO, whatever deal you can strike up that makes it worth your while may well be "fair".

If you are somehow tied to the work via your license as some kind of principal (the profit sharing arrangement suggests you might well be considered as a principal), you probably have some liability that you will need to cover with liability insurance. For a small amount of work, the cost of the insurance may be prohibitive.

It is also possible, that you might not be able to find an insurance company willing to insure you with such an arrangement.

Personally, I am not sure there is all that much in this for you or them. They are not going to want to screw around with getting permits for a jurisdiction 2 or 3 hours away.

 

[JoeyD74]

The problem I see is they are 100% liable in the event something happens for 10 or even 50% of just the profit.
How are you determining profit margins? There is profit on labor, parts and then on the job itself all built in.
Lets take a service change for example you bid at $2500. Your hourly rate of say $35 for 8 hrs, 1 helper for $20, parts for $850, permit fee of $50. Job cost of $1340 so your going to give them a % of that total?

 

[Sierrasparky]

The problem I see is they are 100% liable in the event something happens for 10 or even 50% of just the profit.
How are you determining profit margins? There is profit on labor, parts and then on the job itself all built in.
Lets take a service change for example you bid at $2500. Your hourly rate of say $35 for 8 hrs, 1 helper for $20, parts for $850, permit fee of $50. Job cost of $1340 so your going to give them a % of that total?

Partnerships and Corporate contruction entities are formed all the time. The license holder usually holds a great portion of the risk.

 

[hugh6177]

Thank you all for your comments. They have helped me form a better view of what an owner might be thinking. In response to a few of the questions raised, here is some more info:
As a journeyman with my own van, I was responsible for basically every aspect of the job; from initial customer contact, estimates, planning/co-ordinating, parts list, installation, and inspection. The "shop" handled: incoming calls/requests for work, faxing the permit in, and collection of payment. As a smaller shop, everyone ends up wearing all the hats(except the actual $). They also provided the major tools as well as carried the overhead on parts. So basically the only things changing would be that I provide my own equipment/tools, handle incoming calls, pay for parts on my own and be responsible to collect payment. I'm sure the concept of using someone's license as an umbrella isn't new to most of you here, and I understand the reluctance by some to not have that happen. But really, it's no different than an hourly wage with profit sharing; with me being a higher up "employee" trusted to make any/all decisions I may be faced with. In fact, now that you guys have brought this idea up, I think that's just how I'll pitch it. Pay me minimum wage and a percentage of the profits... I'd still love to hear from any actual EC's as to any reservations/concerns/etc a proposal like this would bring to their mind...

 

[jaggedben]

In my state (California) what you are proposing would be illegal unless they were actually supervising you in the job in some way and/or paying you as an employee.

Just sayin'.

 

[hugh6177]

Lets take a service change for example you bid at $2500. Your hourly rate of say $35 for 8 hrs, 1 helper for $20, parts for $850, permit fee of $50. Job cost of $1340 so your going to give them a % of that total?

Here's what I was thinking, using an actual example from last year:

200A Service Change
Bid: $1,300

Costs
6 hrs @ $28/hr $168
6 hrs @ $10 $60
Parts $435
Permit $80
Total Apparent Expenses: $743
Total "Profit": $557

I was thinking I would offer them 30% of this profit ($167) for assuming the liability. The Expenses that a shop incurs such as overhead, unemployment insurance, vehicle insurance/repairs/licensing, tools and other "hidden" costs would be removed from their equation. The way I view it, they get a check every month for doing nothing; just as long as I don't burn anything down. (And they know my work). Final question: How many of you in Michigan are making 13% net on your bid price at the end of the year?

 

[Electric-Light]

Thank you all for your comments. They have helped me form a better view of what an owner might be thinking. In response to a few of the questions raised, here is some more info:
As a journeyman with my own van, I was responsible for basically every aspect of the job; from initial customer contact, estimates, planning/co-ordinating, parts list, installation, and inspection. The "shop" handled: incoming calls/requests for work, faxing the permit in, and collection of payment. As a smaller shop, everyone ends up wearing all the hats(except the actual $). They also provided the major tools as well as carried the overhead on parts. So basically the only things changing would be that I provide my own equipment/tools, handle incoming calls, pay for parts on my own and be responsible to collect payment. I'm sure the concept of using someone's license as an umbrella isn't new to most of you here, and I understand the reluctance by some to not have that happen. But really, it's no different than an hourly wage with profit sharing; with me being a higher up "employee" trusted to make any/all decisions I may be faced with. In fact, now that you guys have brought this idea up, I think that's just how I'll pitch it. Pay me minimum wage and a percentage of the profits... I'd still love to hear from any actual EC's as to any reservations/concerns/etc a proposal like this would bring to their mind...

Money laundering

 

[Fulthrotl]

Long story short; these guys are like family to me, and I want to treat them right. .....And yes, I could get my master's and EC, but this isn't my primary income and I just don't want the headache...

then treat them right.

either go to work for one of them as an electrician,
or pull your own license, and own your own stuff.

if you love doing this enough to do it as an employee,
you'll get the thrill of being a sparky without ANY of the
headaches of owning a business. show up, turn the crank,
and they will give you a check.

 

[jaggedben]

If the point is that you should get something extra because you are bringing in the sales, then the most sensible thing would be to have them pay you a commission on the sale on top of your hourly wage. That commission could be large or small but regardless of size would probably be legally legit. As far as fairness of the profit/loss question, maybe you give up some or all of the commission if your hours and/or materials go over what you estimated on the job. Finally, ask them to share the profit and loss numbers on your jobs so that in a few months or a year you can decide to ask for a raise if your jobs are making more money for them than for you.

 

[donaldelectrician]

10%

I have never seen a post that gets so much bellyaking . The dude asked for the going rate . I could show him what to do with his girlfriend also .

Why do you think 10% is not a fair Kickback ? That is 10% from experience . What do you think is fair ?

I will spell it out for you . TEN PERCENT .


Don

 

[donaldelectrician]

Have you considered , TRUCK & TOOLS . That may work for you . Same deal as far as responsibility , Just the Per Hour rate is different .
Say $65 to ? .






Don

 

[haskindm]

Highly illegal in this area. Your friend is "fronting" a license for you. If he would be caught in this area his license would immediately be revoked. Rules may differ in your area....

 

[donaldelectrician]

Highly illegal in this area. Your friend is "fronting" a license for you. If he would be caught in this area his license would immediately be revoked. Rules may differ in your area....

Working under Truck and Tools arrangement is Not Against the Law or Rules in any state or country .

Another way of working , is to get a % of profits when you bring the job in . There are many ways .





Don

 

[jaggedben]

Working under Truck and Tools arrangement is Not Against the Law or Rules in any state or country.

What exactly does that even mean?

If our original poster were in California (I realize he's not, and it may be different), then it would be illegal for him to do any work as a contractor 'using someone else's license'. Legally, he would have to be an employee of the company which holds the license, and all the payments, permits, etc would have to be on their books. Basically, they would have to be able to prove they are more or less completely following what he is doing if taken to court by the CSLB.

Now, how exactly they compensate him has essentially nothing to do with that, but if any jobs lost money that would probably have to be a loss on their books, as you are required to pay employees for hours worked and such.

 

[petersonra]

There are a lot of goofy arrangements people have come up with over the years.

The most critical thing to establish up front is whether there is an employer-employee relationship in effect. Most other things will sort themselves out if you can figure that one out.

Just paying people on a 1099 does not mean there is not an employer-employee relationship. It is very common to try and avoid various kinds of taxes by claiming some kind of non-employee status that does not really exist, and every year thousands of employers get caught in that web by tax authorities, OSHA, or labor boards. But, most don't get caught so it is an attractive option to many businesses.

If you are not an employee, then you badly need to have liability insurance to cover your activities. If you are an employee, usually the employer's liability insurance covers you.

 

[donaldelectrician]

Guys , Truck and Tools is nothing new . It has been around forever and is Totally Legal and compliant . So is doing a job for Salary , Expenses with the incentive to share in the profits . Nothing new here , and If it is new to you and you find yourself always short of experienced competent men , you might look into it . Some people live quite differently and enjoy this . How is your Golf Game by the way ?
Who runs your job trucks ? There is nothing silly about business .



Don

 

[GoldDigger]

The legality of Truck and Tools may vary from area to area. It has the greatest chance of being allowed if you have a valid journeyman or equivalent license in the area and the business has a contractor license. A lot comes down to supervision and whether you also need a business license.
Would the OP want to work with more than one shop, and is his new location under the same regulation or one with reciprocity with where he worked?