I'm a General Contractor. You Should Never Hire Me.

TLDR
I have been a GC for over a decade and, at my peak, ran about 50 projects and $5 million in annual revenue. My argument is that investors should learn enough to manage the work instead of remaining permanently dependent on a GC. That is not a rule that every investor should self-manage every trade on every job.

Table of Contents

The Dilution Effect

Here is a P&L from my general contracting firm. $1.7 million in revenue. Not even my best year. Bottom line, $56,000. That was about a 3% margin. In the source, I called that standard in the industry and disgusting; the page does not present one company year as an industry study.

Here is why it happens. Picture a bartender on New Year’s Eve. Arms waving, everybody demanding a drink. You are one of those people. You are going to wait.

My fixed costs as a GC ran about $12,000 a month. insurance, bookkeeping, CPA, legal, office rent, marketing, line of credit interest, payroll even when lean, equipment, tools, vehicles, utilities.

An average project was $40,000 with a 20% markup stretched over three months. That is $2,500 gross per month per project. So I needed five projects running at all times just to break even on overhead. I had to hire three or four more on top to take home a paycheck.

As soon as one wrapped, the revenue dropped out. So I was always lining up the next ones. That means I spent more of my time selling future jobs than managing current ones. A new customer does not want to hear “I can start in 90 days.” So I said yes to everyone. Then I had too many jobs to give any of them the attention they deserved.

Pro Tip
The paycheck is your power. Never give it away. Set checkpoints tied to completed work and hit them before you release the next draw.

I Am A Cherry Picker

Back to the bartender. Who gets their drink first? The pretty girl in the red dress, not the homeless-looking bearded guy at the end of the bar.

The 20% average markup is an average. Some jobs are 15%. Some are 25% or 30%. Guess which job wears the red dress. The 30% job.

And investors, ironically, are trying to get the cheapest price possible. In my own metaphor, that made me the homeless-looking bearded guy when I was buying investor work. The higher-markup homeowner job is more attractive to the contractor.

Worse, I wanted easy. The pretty girl in the red dress wants a fancy cocktail. Screw that. I want to twist off a bottle cap and slide it down the bar. Floors, paint, cabinets? Perfect. Floor plan changes, structural repairs, a scope of work that is not nailed down? Too much effort. And there are only so many guys who can do that kind of smart work.

Pro Tip
To become the attractive job, break down complex work into simple parts. Instead of “fix this rotted bathroom floor,” ask for three jobs: demo the bathroom, reinforce the joists, put it back together. Simple steps get simple pricing.

Why Contractors Follow the Current

The source is not saying every contractor is a swindler. Ross compares the incentives to a river. Water meets a rock and follows the easiest path. Contractors face that current even when they are trying to favor long-term relationships over short-term gain.

At its sharpest, the choice can feel like making one customer happy or putting food on the family’s table. Electricians, plumbers, roofers, and painters can face the same dilution problem as a GC. Ross had managed about 50 projects and hired hundreds of subcontractors a year at his peak, so this was also criticism of the system he had run.

The Hot Potato

Your hypochondriac buddy goes to the doctor with a headache. He is sure it is a tumor. The doctor knows it is probably just a headache. But if there is a one-in-ten-million chance it is not, the doctor is the one holding the bag.

So the doctor runs thousands of dollars of scans and sends him to three specialists. Not because he needs them. Because the doctor cannot take the risk.

That is how a GC answers your questions. You ask, “Can we just change out this electrical panel?” I say, “Nope. Rewire the whole house. Twelve grand.” You ask, “Is there a way to reinforce this foundation?” I say, “Tear it down. Build new. Hire an architect first.”

The fix is knowledge. You do not need to swing every hammer. You absolutely cannot lead with blind trust. When you know enough to ask the right questions, the hot potato goes away.

Knowledge removes fear.

The Scope Illusion

My wife took our van in for a Groupon brake job. $50, all four brakes. Thirty minutes later the phone rings. They took the tires off and realized the rotors were shot, all four tires were bald, and the battery was testing stranded. Funny how none of that was obvious until the van was in the air.

Construction works the same way. You sign a bid. I start work. I am not a home inspector. It is not my job to find every problem before we begin. But I am absolutely going to find problems once we start, and those problems have a hefty markup on them.

Your weapon is a financial contingency. In Ross’s example, a job expected at $30,000 carried $40,000. When the change order comes up, you can say:

“You know what, I have a guy I work with who specializes in this. I will have him come handle the extra. You just finish the scope of work we agreed on.”

Boom. That contingency is control. The power comes back to you.

When your back is against the wall, Ross says, you will make the wrong decision. The extra room lets you evaluate the change instead of accepting it only because work has already started.

Cost Plus Versus Bid

Two ways to pay a GC. Cost plus and bid.

Cost plus. I tell you my markup, let’s say 20%. Every dollar I spend, you pay me a dollar twenty. Subs, material, equipment, dumpsters, permits, everything.

Bid. We agree on a fixed price for a specific scope of work. Bid is $50,000 and that is what you pay, unless the scope changes and becomes a change order.

Ross’s blunt version was: each pricing model can lead to the same place—“you lose, I win.”

Cost plus rewards me for choosing the easiest subs, buying the most convenient materials, and spending money on anything that makes my life smoother. Every extra dollar I spend, you pay me 20 cents on top. My incentive is to inflate the base.

Bid gives me a strong incentive to finish below the quoted number. Obvious corner-cutting can come back on me, but a tight budget creates a real moral dilemma around work the customer may never notice.

Pro Tip
99.9% of the time I only accept bid prices up front. Nobody touches a hammer until I have a hard price and a written scope of work in my inbox. Then I manage the scope hard so the bid stays the bid.

The Hidden Agenda

The most important reason to never hire a GC is the one nobody talks about. My business depends on you needing me forever.

I hide the subs from you. I explain everything in complicated language. I use jargon. I only tell you what you need to know to keep paying me. I give you the fish and I hope like hell you never become the fisherman.

If you become the fisherman, I lose a customer. That is the incentive behind the source’s provocative argument. It does not prove that every GC deliberately hides information from every client.

The Fix in This Source: Manage It Yourself

The source lays out four ways to get a house renovated and ranks MIY highest for its intended investor audience:

  1. DIY. Swing the hammer. Good for one project at a time. I did this to start. It is a great fallback when times are hard. Do not build a business on it.
  2. Hire your own crew. W2 employees. Sounds great until the first mistakes start costing you money. Then you are paying for mistakes and carrying payroll.
  3. Hire and manage a GC. Now that you know all the tricks, you can do this. Set checkpoints. Break complex jobs into simple steps. Lead without blind trust. Carry contingency. Accept only hard bids. Also be aware of the hidden agenda.
  4. MIY. Manage it yourself. You are the GC. You recruit subs. You manage them directly. You write the scope. You hold the cards forever.

MIY is the source’s preferred answer because skills are knowledge times experience. It does not remove licensing, permitting, insurance, workers-comp, lien, contract, or worker-classification requirements, and it does not make self-management safe when the operator lacks the needed capacity.

Do not build a business where you need a GC. Build one where you are the GC.

FAQ

I’m brand new. Should I really try to manage my own subs?

The source favors learning to manage work, but it does not prove that a small cosmetic project cannot hurt you badly. Start only with work you can lawfully and safely oversee, and use licensed and insured trades where the job or jurisdiction requires them.

How many subs do I need to run a flip?

The source does not prescribe one universal sub roster. The trades depend on the actual scope, and regulated work still needs the licenses, permits, insurance, and inspections required where the property sits.

What options did the source give besides MIY?

Ross listed DIY, hiring a W2 crew, or hiring and closely managing a GC. MIY was his preferred fourth option for this audience, but the source also says DIY limits how many projects one person can responsibly run.

Is a 20% GC markup standard?

Ross described about 20% as his average on investor work, with examples from roughly 15% to 30%. He also said high-end homeowner work may carry much higher pricing. The source does not establish one universal market rate.

Can a good GC fix these problems?

A good GC can change the tradeoff through transparent pricing, clear scope, communication, and strong execution. The source argues that dependency creates an incentive problem; it does not prove every investor is always better off without a GC.