In-house maintenance vs 10% coordination markup at 600 doors

Question

I do HVAC and plumbing work for a management company that runs about 600 doors, mostly single family and small multi. They bill owners my invoice plus a 10 percent coordination charge, and they're now talking about bringing a two-tech crew in house and billing owners a flat hourly rate instead.

Rough volume from what I see: call it 1,800 work orders a year across the portfolio, average ticket around $240. So the markup is generating something like $43k a year. A loaded tech with a van, comp, tools and a phone is not cheap where I am. The math looks tight to me and I told them so, and the answer I got was "the parts margin covers it."

What I can't work out is whether the in-house version is actually a better business or just moves revenue from one line to another while adding payroll risk. Anyone here run both models and know where the crossover door count sits?

Rena Expert · Accepted Answer

Start with billable hours per tech, because that's what decides it. Two techs at 6 billable hours out of an 8 hour day, 230 working days, billed at $85 an hour, is roughly $234k of labor revenue. Loaded cost for two techs including wages, payroll taxes, workers comp for a trade classification, two vans, fuel, tools and phones lands somewhere between $190k and $240k in most markets. That's a spread of maybe $40k on the labor line, plus whatever parts margin you run. Your $43k of markup revenue disappears into the same range, so the honest read is that these two models are close to a wash on money and different on everything else.

What actually moves the needle is response time and turn time. In-house crews cut make-ready from twelve days to six or seven, and six days of rent on a $1,500 unit is $300 per turn. At 25 percent annual turnover on 600 doors that's 150 turns, so $45k of recovered rent that shows up in the owner's pocket rather than yours. You capture it as retention and referrals rather than revenue, which is real but slower.

Two things I'd press them on. Charging owners through an affiliated maintenance entity has to be authorized and disclosed in the management agreement, and in a number of states an undisclosed markup taken by an agent is treated as a breach of fiduciary duty; get a lawyer in your state to read the agreement language before anyone bills a dollar. And 6 billable hours is optimistic when techs are also doing lockouts, inspections and no-access returns. Track actual billable hours on the current vendor pool for ninety days before hiring anyone. If the real number comes in at 4.5 hours, the whole thing inverts.

derekj19 · Answer

The part that jumps out at me is the 1,800 number. Three work orders per door per year is fairly normal, so that's believable, but it's an average across a year that has a summer spike and a January spike. Two techs sized for the average are underwater in July and idle in October. The coordination markup doesn't have that problem because it scales with volume automatically.

carlos_nunez · Answer

The comp classification point is the one that bit a company I know of. Office staff and a roof-adjacent trade are not the same rate, and nobody priced it into the pro forma until renewal. Also if the techs are W2 the after-hours emergency rotation becomes overtime, which the vendor model buries in the invoice.

In-house maintenance vs 10% coordination markup at 600 doors

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