[molson]

Hi everybody,

Every time I come here I get a little smarter. Thanks for that.

We're a growing design/build firm that is having a hard time figuring out a good way to compensate outside designers who would bring us install work.

We currently have a contact who has a Masters in Landscape Arch from an Ivy League school, is talented, smart and claims to have a client base that he'd like us to work with. If I had enough work to keep him busy, I'd hire him as a staff designer but we're not quite at that point yet so...

He doesn't want to act as a Contractor on the jobs, so what would be a good percentage sales commission after he's collected his design fees?

Is there a commission percentage that is standard in this situation?

If you've been in this situation, how did you do it? Or if you've done design and passed on install for a commission, how did that work? What was the number?

Really hoping to hear about some experiences here.

And again, I must close with gratitude as I really have learned a lot here.

Thanks,
Oly

[molson]

digging back through some of the archives I see there have been some somewhat sketchy discussions about this topic. I might be even more confused about it now.

If anyone feels like they have some info that could help but doesn't want to get involved in a weird thread... maybe you could PM/email me?

Thanks

[agla]

The big thing is whether he is getting the leads on his own and bringing those jobs to you, or if he is taking your leads and closing the deal. In the first case, he is bringing you work that you would otherwise not have which has significant value. In second case, you are getting him work and trusting him to close the deal with your potential client and giving him work he otherwise would not have.

A designer or LA working as a project manager should get between 10% and 20% from the client to manage the entire job. That includes hiring the subs, inspecting the work, approving the work for payment, and handling the entire job. Your guy wants to put the design on paper, hand it to you, leave the client to deal with you on his own, and walk away with a paycheck. The design fee should be significant enough to appropriately compensate the designer whether you need to subsidize it on top of what the client is kicking in or not.

If the designer is responsive to the client it will be up to your pricing and scheduling to close the deal or lose the deal rather than the designer. I wish people would throw another % on top of design fees if they got the work, but they are already paying me for my best effort whether they get the job or not. I should be doing all I can to be getting my landscape contractor clients the job within my normal operation. The more that I am successful at doing that, the more work they bring me.

If the designer/LA is selecting contractors for their own clients they should be getting paid by the client. It would be highly unethical to be hired by the client to make unbiased decisions on which contractor to hire and accept any form payment from the contractor. It would be illegal for the LA to do it on top of being unethical.

A designer/LA can not function unless his work is being properly built. Finding contractors who they can work with is extremely important. If they are finding you to be good to work with, then the benefit should be mutual. They should not hire someone because they kick back money, but because it completes the job.

I wish people did hand over extra cash when they landed the jobs that I design, but they don't. However, they have done a ton of work on their own before the design is complete. They have lots of hours into it and often pay for the design before getting the money from the client (or invest their own money in the design hoping to get the work) and they have turned over a hot prospect for me to nail down or to lose completely. They have to go through a lot of number crunching and show the client they are the right guys to build the job. The design supports the sale, but it is not the entire effort that makes the sale.

I recently had a job where the design went over $3k. The contractor got parts of the job, but other big parts were subbed out. I got paid. I did all I could to help land the job, but the developer pieced it out to either save money or because he liked the masonry work of another or whatever. The value of what I did was no different whether they got all of it or just the $100+k part of the job that they did get.

I'm all for getting paid 10% if a contractor lands the work that I got paid to design. Sign me up. But, I honestly think your designer won't turn his back on you if you give him a steady stream of design work. He just needs to charge enough for the work that he does.

[papercutter]

If you wanted to work out some sort of a spiff arrangement I'm sure your designer would love it. I don't think that's a standard arrangement, though, for the reasons agla mentions. There are just so many areas in the design/build process where you can REALLY eff up relationships and turn a good job into a nightmare. I try to keep things as simple as possible: I don't manage the installs on my jobs. If I do a design for a client, I'll recommend a contractor or two with whom I'm familiar, and once the homeowner pays me in full for my design I either email the contractors pdfs of the plans or drop a set off at their office (if I have a spare set already printed). From that point on, my rules are simple: questions via email only (I'm a talker- I can kill my billable hour % in one phone call), and any revisions or additional construction details are at my hourly rate. Want me on site for layout or general hand-holding? Hourly rate.

As far as I'm concerned, if I want to make additional money on the job after the design is done, I need to earn it by bringing some sort of value to the project. I'm with agla- if you want to pay me 10% of the gross just for referrals, I'll get a PO Box in your town and set up a "satellite office"! Especially with the market tightening and more guys competing for fewer jobs, I don't know many contractors that could sell an extra 10% of "fat" into the job to pay me and still close the deal.

[molson]

thanks a lot for your responses. both of your posts are thorough and thoughtful and brought some new thoughts to mind.

after having installed many, many jobs that we've designed in house, i hear your point, papercutter, about the myriad of possible "effed up" things that can happen when things get complicated... so i am trying to keep it simple. simple and fair for both parties. (if you get a PO Box here for your "satellite office", will you be needing any landscaping? you know who to call!)

and agla thanks so much for the point about the client hiring him as a project manager. i don't know how i didn't think of that, but i think that's actually the route i'm going to pursue first. that seems like it has the best of all worlds. he can get a percentage, the client gets the straightforward advice they deserve and we have clearly defined roles in the project.

thanks again you guys.

[jshilan]

Quote Agla "The big thing is whether he is getting the leads on his own and bringing those jobs to you ... he is bringing you work that you would otherwise not have which has significant value."

So in this first scenario, what do you think is fair?

Quote Agla "If the designer/LA is selecting contractors for their own clients they should be getting paid by the client."

In this next scenario shouldn't the contractor be pricing the job below his regular pricing (or bidding) the work which would offset some of the cost of project management to the client? Aren't the contractors costs truly lower since the designer will be doing all of the material selections, hand holding, conflict resolutions, etc?

Please let me know your thoughts.

[FungusMudGrub]

shouldn't the contractor be pricing the job below his regular pricing (or bidding) the work which would offset some of the cost of project management to the client?

Theoretically, maybe, but in real life I doubt anybody does. Unless the client is obviously a PITA, who factors in the time for handholding, etc? And to indulge in a gross generalization, if the installers need to have their work managed, then they're probably a lower priced outfit anyway. If they don't need to have their work managed, then why should they lower their price because the homeowner wants handholding by the designer?

[agla]

I don't think you'll find too many contractors that would feel like having to deal with a project manager being in control of them as making their job easier or more profitable. I believe that most would feel that the PM would interfere with their own methods, timing, and quality control as they are the advocate for the client. It would be the same as discounting work for a knowledgable client that is a control freak. A PM is supposed to be just that - a knowledgable activist looking to get the best results out of the contractor and protect the interests of the client.

A PM does not act as a foreman and run the crew. He just accepts and rejects materials and workmanship to make sure that they meet spec's. I think it is a burden for most contractors.

[Fine Edge]

I haven't seen any negative vibes yet by subbing out contractors. I can design a job and price it as I was doing it to make money and go with it to client. When they accept the whole package, I have several different subs in each area of expertise that can quote their portion of the job. Now I can go with the sub I feel most comfortable with.
But, I have never had any one of the sub-contractors give me grief or tell me to stay out of their way. I work with them to find the BEST application method as the project progresses. I guess I'm sorta lucky in the respect that I've had the time to do all of the pavers, retaining walls, stonework, base construction, irrigation, lighting, pruning, drainage, planting, electrical, concrete, etc...

What I've found over the last couple of years of subbing out different companies is that there is a definite lack of "educated" professionals actually doing the work.
Unlike papercutter, I want my designs to come to fruition and look exactly as I had designed them. That requires being on site, checking on the quality of work that the subs are doing and filling in all the little areas that always seem to come about on some of our bigger projects.
Not to mention being able to redesign on the fly when areas get reduced, enlarged or deleted.
The more we do, the more confident I feel in getting the client to agree on our management fee.
I really don't want to waste my time on a design just to have it hacked by a bunch of unsupervised contractors. But, to each their own.

Simple case in point on my current project:
* Reputable landscape company does the planting and the guys plant all the B&B shrubs with burlap and twine wrapped around root balls.
* Same company turns the worst side of the shrub towards the main house and viewing area. Not htat our plants are bad but please pick out the best side for viewing.
* Irrigation foreman tries to water my annuals on the same zone as my shrubs.
* Mason decides to turn 2 of the 25 brick columns on a different angle than all the rest.
If I wasn't there, the whole job would have been a waste of my time from a design standpoint.

If the home builder can get 5 - 10 % on the landscaping budget around here, you can bet I need to convince the client to give their portion to me on top of what I' charge them.

[agla]

I don't think there is a big negative vibe from contractors. I was just illustrating why having a PM above them does not make their job easier to the point where they would discount it. The difference to a contractor of having a PM or not is whether the contractor has total control or has to answer to someone rather than being in full control. I don't think losing control and answering to someone else is going to make too many contractors discount their work.

Project Managers, who truly manage the project, earn every bit of what they make as it is work and huge responsibility. I don't think the mason was all warm and fuzzy about straightening out his mistakes and I don't think he discounted the work for the privelege either.

PMs stick with the guys that they know will work out well in getting the job done (that is why it is hard to "get on" with architects and LAs who are managing good projects). That means that the subs are pretty darn good at what they do both in terms of craftsmanship, business relations, service, etc,... They have to be keepers or they won't be hired again. When you are that good, you are not going to be cheap and the PM is not going to replace you with some guy who he does not know just because he is cheaper.

The PM needs the good sub! Hear that Molson? If that designer is a PM and if you do excellent work, are timely, and are easy to do business with he needs you or someone else like you for him to be effective.

[papercutter]

[quote=Fine Edge;56665]
Unlike papercutter, I want my designs to come to fruition and look exactly as I had designed them. That requires being on site, checking on the quality of work that the subs are doing and filling in all the little areas that always seem to come about on some of our bigger projects.
Not to mention being able to redesign on the fly when areas get reduced, enlarged or deleted.
QUOTE]

Just to clarify- I'm not happy about the jobs where it leaves my desk and the project goes in however it goes in. Unfortunately, I get some of those because I'm a strong believer in what I offer and I hate to turn down jobs when I know that I can take them where they want to go- even if they budget is a little light. So if we sign a contract for $X in design fees, I always make sure they get $X+1 in value from me. BUT, I've had to discipline myself on these jobs that the second my hours have eaten up the money, the clock stops and I'm off the job. On these jobs, there's no fat to cover my project management or really even checking in, unless I'm in the neighborhood. But they're a good distraction when I get bogged down on my bigger projects, it gets my name out in the community, and sweet little Mrs. Johansen was able to get a way nicer front yard than Larry's Mowing, Pavers, and Moon Bounce Rentals Inc. would've given her without my plan.

What I was *trying* to point out was that I bill as a consultant to be around on my bigger jobs. I have one breaking ground in New England this fall, and it's budgeted for me to make flights up for site visits and such. On local jobs with real budgets, when I quote a design fee I always include X number of hours for me to meet the installer on site for layout, setting grades, and minor field adjustments. How is this different from project management? Because I would only feel comfortable running a job if I was the GC. I've "managed" jobs before, but when the checks aren't coming from you it can undermine your authority when you say "this is wrong, fix it." I don't have a class A contractor's license, nor do I want the attendant headaches right now, so I choose to consult on an as-needed basis. It's a model that may not work for everyone, but I like it. It's fair, it's transparent, and it makes certain that everyone on the job site has a clearly defined role. I guess it's a personality thing: I have found I'm a more effective consultant than PM, so I go with what works.

Anyhow, sorry to derail- I just didn't want the perception floating around that I'm a draw-and-forget kind of designer, because that's not me.

[Paul]

I have a question. Does anyone here really know what project management entails?

[agla]

Scope of work would dictate to some extent, but on a good size project it starts with permitting, putting together the design with specifications as bullet proof as possible, prequalifying bidders, putting it out to bid, awarding the bid, inspecting and approving materials before they are installed to see that they meet spec's, monitoring and keeping the project on schedule, reacting to problems that arise and finding solutions for them either through adendums to the design/spec's or through change orders, analyzing and approving change orders or addendums, Inspecting and approving workmanship, releasing or holding back payment as a result of inspections, settling conflicts of schedule or any other kind between various subs, all the way through a final punch list, then the completion of the project, the warranty periods of the work, and any Certificates of Compliance, ..... and about anything else that can come up.


.... or you draw a plan, pocket an additional 10%, and hand it over to a contractor. Just kidding.

[TrickyDick]

Unless I'm missing something, in the context of this thread a PM is a GC, responsible for pretty much every aspect of the project as agla summed up nicely. To me PM conotes one person and GC an organization with more infrastructure but that isn't important. They need to have the same qualifications and licensing and have the same responsibilities. Paul what was said that made you ask that?

With regard to the original question...if the designer is being paid by the client and you are being paid by the client then you owe the designer nothing other than to do your best work and try to faithfully execute thier design. You can give them 10% (I think the right term for it is a kick-back) if you want. I give them a nice Christmas present. It should be a mutually beneficial relationship and neither of you should have to do anything other than good work to continue it.

[papercutter]

Paul- yes, why?