Subcontracting vs Direct Customers: Which Pays Better?
Subcontracting usually means steadier work with less selling, at lower rates and on someone else's payment terms. Direct customers pay better, but the marketing, quoting and admin are all yours.
The short answer
Direct customers usually pay better. Subcontracting usually means less selling and steadier work.
Working as a subcontractor for a main contractor tends to give you a more predictable flow of work without having to market, quote and chase, but the rates are usually lower and you are paid on the main contractor's terms. Working for customers directly usually earns a better margin and builds your own name, but you carry the marketing, quotations, customer contact and payment collection yourself. Plenty of firms do both.
Which suits you depends on cash flow, how much you like selling, and how you want the business to grow.
Side by side
How the two compare
Subcontracting
- Work comes from the main contractor's pipeline
- Rates set or negotiated with the main contractor
- Paid on their terms, which can be long
- Little or no marketing or quoting to customers
- Their customer, their relationship
- Construction Industry Scheme deductions may apply
Direct customers
- You generate your own enquiries
- You set your prices
- Deposits and balances agreed with the customer
- You quote, chase and communicate
- Your customer, your reviews and referrals
- You own the contract and the reputation
Subcontracting, honestly
Steadier work, on someone else's terms
The appeal is simple: someone else wins the job and you turn up to do your part. When a main contractor has a full order book, that can mean weeks of booked work with no marketing spend at all.
The cost is control. Your rate is negotiated against their margin, your start dates move when their programme moves, and you are paid when their payment cycle says so. On larger projects, retentions held back until completion are common. If the relationship ends, so does the work, because the pipeline was never yours.
There's also tax admin. Under the Construction Industry Scheme, a contractor may have to make deductions from a subcontractor's payments and pass them to HMRC. Check HMRC's current guidance for how it applies to you.
Direct customers, honestly
Better margins, and all the work around the work
Pricing a job directly for a homeowner usually leaves more in it for you, and every good job becomes a review, a referral or a repeat customer. Over time that builds a business with its own name, rather than one that depends on somebody else's order book.
The price is everything around the job: getting enquiries, qualifying them, site visits, written quotations, chasing decisions, answering questions while you're on the tools, and collecting payment. The admin cost of winning work puts that in perspective, and how to quote faster and win more helps with the part that decides most jobs. For ways to build the pipeline, see how builders get customers.
Running both
How firms mix the two without it going wrong
Know your commitments
Before accepting a subcontract package, check the programme against the direct jobs you've already booked. Letting a homeowner down to keep a main contractor happy, or the reverse, costs you either way.
Keep separate records
Track margin and payment times for each kind of work. It's often surprising which one actually pays better once waiting time and chasing are counted.
Protect your cash flow
Use deposits on direct work, and understand the payment terms on subcontract work before you start, not after the invoice goes in.
Shift the balance deliberately
If you want more direct work, set aside time each week for it. Otherwise the subcontract diary will always fill first. The getting more work as a contractor hub covers the routes.
Deciding the balance
Three questions that decide it
Can your cash flow wait?
If long payment terms would stretch you, direct work with a deposit may suit better. If you can carry it, subcontract work can fill the diary.
Do you want to sell?
Direct work means talking to customers, quoting and following up. Some tradespeople enjoy it. Many would rather not.
What are you building?
If you want a business with its own customers and reputation, direct work builds it. Subcontract work builds your skills and cash, but not your name.
A third arrangement
Direct contracts, without doing all the admin
Some contractor networks sit between the two. The Mortaro network is one. Contractors in our network are appointed as the customer's main contractor: the construction contract is between you and the customer, you carry your own insurance and provide the workmanship warranty, and you are named in the quotation.
What changes is the work around the job. We generate the enquiry, book the visit, present your trade-rate price as a professional quotation with our fee on top, keep the customer informed and administer the deposit and balance to you without unnecessary delay. See how contractor networks work and how and when you get paid.
It won't suit everyone. You meet our response and quoting standards, and we don't promise volume. The wider range of network types is covered in what is a contractor network?
Straight answers
Subcontracting or direct
Can I do both?
Yes, and many firms do. Subcontract work can keep the diary full while you build direct customers, as long as your commitments to each don't clash.
Do I need different insurance for direct work?
Your cover needs to match the work you do and who you contract with. Talk to your insurer or broker when the mix of your work changes.
Which gets paid faster?
It depends on the terms you agree. Direct work usually involves a deposit up front and the balance on completion. Subcontract work is paid on the main contractor's payment cycle, which can be longer and may involve retentions on bigger projects. Agree terms in writing before you start either.
For contractors
Tell us about your business
Your trade, the areas you cover and the size of work you take on. A person reads every enquiry, and if it looks like a fit we will send you the full application.