How a reserved hours structure can sell a contracting crew's year before January and hold through a lumber price jump
Take a general contracting crew moving from a solo operator plus a helper to three carpenters on payroll. The structure that makes that survivable is signing investors to reserved hours agreements in December, ahead of the year. Structure: each investor reserves a block of crew hours per month, say 240 for a flipper doing about nine houses a year, and 160 for a landlord group doing turns and unit renovations. They pay for the reserved block whether or not they fill it, at a blended rate around 86 dollars an hour. Unreserved hours above the block bill higher, say 104 an hour. That gap is the whole incentive design. Clients fill their block because it's already bought, and they schedule the crew weeks out instead of calling on short notice. A plausible year one: 4,880 billed hours against 5,220 available, 93 percent of capacity sold. Gross margin on labor around 31 percent, materials handled at 12 percent markup on roughly 340,000 dollars of pass through. Net to the business after an owner's draw, around 71,000. The risk worth planning for: a client's draws can come off a lender, and a draw sitting for 26 days is common. Payroll runs every Friday regardless. A line of credit covers the gap but costs real interest, so it's worth rewriting agreements to net 10 from invoice with the reserved block invoiced on the first of the month, and adding a materials deposit on anything over roughly 8,000 dollars. On materials, both agreements should carry an escalation line. If the published index for framing lumber moves more than 7 percent between bid and order, the difference passes through with receipts. Clients rarely argue a clause they read when it was hypothetical. The lesson worth keeping: sell the block, not the job. The trap to avoid: pricing the reserved rate off last year's wages, since a competing offer to a lead carpenter can force an unbudgeted raise mid year.
