Working for general contractors is usually framed as the lesser option — thinner margins, no owner relationship, someone else controlling your schedule. That framing misses what is actually being exchanged, and for a great many trades the exchange is favorable. What makes it work or fail is not the rate; it is the contract and the paperwork.
In this article
- The trade you are actually making
- How to tell a good GC from an expensive one
- The subcontract terms that decide your margin
- Bidding without bidding against yourself
- Getting paid: the documentation habit
- Being the sub a GC protects
- Keeping a direct channel without breaking the relationship
- Two years, one sub
- Five numbers to track
- Frequently asked questions
The trade you are actually making
Working for general contractors is frequently framed as the lesser option — smaller margins, no relationship with the owner, someone else controlling the schedule. That framing misses what is actually being exchanged, and the exchange is often favorable.
What you give up: pricing power, direct client relationship, control of sequence, and a share of margin that goes to the GC's overhead and profit.
What you get: no sales cost, no estimating cost on speculative work, no collection risk from homeowners, no permit administration, no design coordination, and continuity. A sub with three good GC relationships has a backlog without a marketing budget, which is a structurally different business from one chasing homeowner leads.
Run it as numbers. A residential contractor selling directly might carry 12% to 18% of revenue in sales and marketing cost, plus the estimating hours on jobs that never close, plus a receivables problem with homeowners. A sub working for GCs carries almost none of that. A 22% gross margin with no acquisition cost frequently produces more net profit than a 34% margin with a full sales operation attached.
The failure mode of subcontracting is not thin margin — it is one GC representing 60% of your revenue. When that relationship changes, through a lost bid, a new estimator or a slow year, the company loses most of its work in a quarter. A useful ceiling is that no single GC should exceed 35% of annual revenue, and the discipline to enforce that is what separates subs who survive downturns from those who do not.
How to tell a good GC from an expensive one
Not all general contractors are worth working for, and the differences are visible before the first job if you know what to ask.
Payment behavior. Ask other subs directly — not whether the GC pays, but how many days after invoice, and whether retainage is released on time. Talk to two subs in a different trade, who have no reason to protect the relationship from a competitor.
Schedule realism. A GC who calls you in when the site is not ready is charging you for their planning failure. Ask how far in advance they give notice, and how often that notice changes.
Change order handling. How are extras approved, by whom, and how quickly? A GC who instructs verbally and processes change orders at closeout is a GC you will finance.
Scope clarity. Do their subcontracts define scope precisely, or do they use catch-all language making you responsible for anything reasonably inferable? The second is a transfer of risk that shows up as unpaid work.
Backcharge culture. Ask specifically whether they backcharge, for what, and whether it is discussed before it appears on a payment. Backcharges applied unilaterally at final payment are the most common way a profitable job becomes a break-even one.
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The subcontract terms that decide your margin
Subcontracts are drafted by the GC and are written to protect the GC. That is normal and not sinister, but it means the sub who signs without reading has agreed to terms that determine profitability more than the price did.
Six provisions to read every time:
- Payment timing and pay-when-paid language. Some contracts condition your payment on the GC being paid by the owner. The enforceability of these clauses varies significantly by state, and the difference between pay-when-paid and pay-if-paid is enormous. This is worth an attorney's read once, and the reading applies to every contract you sign afterward.
- Retainage. The percentage held, when it is released, and what triggers release. Retainage is your profit sitting in someone else's account, and a 10% hold on a 22% margin job is nearly half the profit deferred.
- Scope definition. What exactly is included, and what is explicitly excluded. Your exclusions belong in the contract, not in your proposal, because the contract supersedes.
- Change order procedure. Who authorizes, in what form, and within what timeframe. A clause requiring written authorization before performing extra work protects you as much as the GC — provided you follow it.
- Backcharge provisions. Notice requirements and your right to cure before a charge is applied. Without a notice requirement, you learn about charges when the check is short.
- Schedule and delay. What happens when the GC's delay costs you money, and whether you have any remedy at all. Most subcontracts give none, which makes advance notice provisions the practical protection.
Bidding to a GC without bidding against yourself
Subcontractor bidding has a specific failure mode: the sub who wins on price because their scope was narrower, and then performs the wider scope anyway because the GC assumed it was included. The bid was never actually lower — it was just less clear.
Four practices prevent it.
Write exclusions before inclusions. Most proposals list what is included and leave everything else ambiguous. Reversing it — a short, explicit exclusions list at the top — forces the conversation before the number is compared, which is the only time it can be had cheaply.
Bid the drawings you were given, and say which set. Reference the drawing set by date and revision number in the proposal. On a job that goes through three revisions before construction, this single line determines whether later changes are extras or your problem.
State your assumptions about access, schedule and site conditions. How many mobilizations are included, what access you assume, what you assume other trades will have completed, and what happens if the site is not ready. Unstated assumptions are always resolved against the sub.
Give unit pricing for likely extras. A short schedule of unit rates for the additions that always happen turns a future negotiation into an arithmetic exercise, and GCs value it because it makes their own change orders to the owner easier to defend.
One judgment call worth making deliberately: decide which GCs you will bid to and which you will not. Bidding everything looks like hustle and is usually a hidden cost — estimating hours are real, and a sub who bids twenty jobs to win two is running an unpaid estimating department for the general contractors who never intended to use them.
Getting paid: the documentation habit
Subcontractor payment disputes almost never turn on who was right. They turn on who documented.
Four habits protect the money:
Confirm verbal instructions in writing, same day. "Confirming our conversation this morning: you asked us to relocate the panel to the north wall. That is additional to our contract and we estimate $1,840. Please confirm in writing before we proceed." This single email has saved more subcontractor margin than any negotiation skill.
Photograph conditions on arrival and at completion. Damage caused by another trade before you arrived is your problem unless you can show it existed. Dated photos settle it.
Track your own delays with dates and causes. A log showing you were called in on the 9th, the site was not ready until the 14th, and your crew stood down for two days is what converts a dispute into a claim — and often into a payment.
Submit clean, complete pay applications on time. A significant share of late payments are caused by the sub's own paperwork being incomplete, and a GC's accounting department will not chase you for it. Match their format exactly.
Mechanics lien rights are one of the strongest tools a subcontractor has, and they are also the easiest to lose. Many states require a preliminary notice within a specific number of days of first furnishing labor or material — miss it and the rights are gone regardless of how much you are owed. The deadlines, forms and recipients vary by state, so learn your state's requirements once and build the notice into your job-start routine rather than treating it as a step for troubled jobs.
Being the sub a GC protects
Good general contractors have a short list of subs they call first, give better schedules to, and defend when the owner questions a price. Getting onto that list is worth more than a rate increase, and the qualifying behaviors are not complicated.
- Answer the phone and give a straight answer about availability. A sub who says no clearly is more valuable than one who says maybe and disappears.
- Show up on the day promised, with the crew size promised. Reliability is scarcer than skill in most markets.
- Flag problems early, including problems that are not yours. A sub who calls to say the framing is out of plumb before installing over it saves the GC a rework and becomes indispensable.
- Clean up. It sounds trivial and it is one of the most frequently cited reasons GCs stop using a sub.
- Price consistently. A sub whose numbers swing unpredictably makes the GC's estimating unreliable, which is the thing GCs fear most.
- Do not go around them. Contacting the owner directly, even innocently, ends relationships permanently.
Keeping a direct channel without breaking the relationship
The concentration problem has an obvious answer that most subs are afraid to use: sell some work directly. The fear is real — a GC who feels a sub is competing for their customers may stop calling. But the solution is a boundary, not abstinence.
Three rules make a mixed model work.
Never take work from a project you were introduced to. If you met the homeowner on a GC's job, that homeowner is not your prospect, ever, including two years later on a different scope. This is the rule that protects the whole arrangement, and violating it once is permanent.
Keep the direct work in a different segment where possible. Service calls, small repairs, or a different customer type do not compete with the GC's project work and rarely cause friction. A sub doing service work has a business the GC does not want anyway.
Say it out loud. Telling a GC plainly that you also do direct service work, and that their projects are not the source of it, removes the suspicion that develops when they discover it themselves. Most GCs are entirely comfortable with this once stated.
The reason it matters financially is capacity, not just revenue. Direct work fills the gaps between GC mobilizations, which are the days that otherwise cost you a full crew for nothing. A sub with even 20% direct work has a materially smoother cash flow than one whose entire schedule is set by other people's projects.
Two years, one sub
An electrical subcontractor, $1.4 million in annual revenue, working for six general contractors.
Year 1. One GC represented 58% of revenue. Verbal change instructions were common and about $46,000 of extra work was performed without written authorization, of which $19,400 was ultimately unpaid. Backcharges totaling $8,200 appeared at final payment on three jobs with no prior notice. Average days to payment: 68. Net margin: 7.2%.
Year 2, after four changes: a same-day written confirmation habit for every verbal instruction, preliminary lien notices filed as a standard job-start step, pay applications matched exactly to each GC's format and submitted on their cutoff date, and a deliberate effort to add two GCs to reduce concentration.
- Unpaid extra work: $3,100, down from $19,400
- Unnotified backcharges: $1,400, down from $8,200
- Average days to payment: 44, down from 68
- Largest GC concentration: 34%, down from 58%
- Net margin: 11.6%
The margin improvement of 4.4 points on $1.4 million is $61,600, and none of it came from raising prices. It came from being paid for work that had already been performed.
Five numbers to track
- Revenue concentration by GC, with a ceiling you actually enforce.
- Extra work performed versus extra work authorized in writing.
- Days from invoice to payment, by GC — this ranks your customers more honestly than margin does.
- Retainage outstanding, by job and by age.
- Backcharges applied, and how many arrived without prior notice.
Working for general contractors is a legitimate and often superior business model, and the subs who do well at it are not the ones who negotiate the best rates. They are the ones who read the subcontract, confirm everything in writing, preserve their lien rights as routine, and never let one relationship become the whole company.
Find the margin sitting in work you already performed
Send us last year's extra work performed, the portion authorized in writing, your backcharges and your days to payment by GC. We will show you how much of your margin is being lost after the job rather than during the bid.
Frequently asked questions
Is it better to work for general contractors or sell directly?
They are different businesses and the comparison is not about margin percentage. Selling directly means pricing power, the owner relationship and control of sequence — at the cost of 12% to 18% of revenue in sales and marketing, estimating hours on jobs that never close, permit administration, design coordination and collection risk with homeowners. Working for GCs removes nearly all of that and provides continuity, which is why a 22% gross margin with no acquisition cost frequently produces more net profit than a 34% margin with a full sales operation attached. The real danger is not thin margin, it is concentration: one GC representing 60% of revenue means a lost bid or a new estimator removes most of your work in a quarter. A useful ceiling is 35% of annual revenue per GC.
What should a subcontractor look for in a subcontract?
Six provisions decide profitability more than the price does. Payment timing and pay-when-paid language, since some contracts condition your payment on the GC being paid by the owner and enforceability varies significantly by state — worth one attorney review that then applies to every contract you sign. Retainage: the percentage held, when released and what triggers release, remembering that a 10% hold on a 22% margin job defers nearly half the profit. Scope definition, with your exclusions written into the contract rather than only in your proposal, because the contract supersedes. Change order procedure, specifying who authorizes and in what form. Backcharge provisions with notice requirements and a right to cure. And schedule and delay terms, which usually give the sub no remedy at all.
How do subcontractors avoid unpaid extra work?
By confirming every verbal instruction in writing the same day, in one short message: confirming our conversation this morning, you asked us to relocate the panel, that is additional to our contract, we estimate this amount, please confirm in writing before we proceed. That single habit has protected more subcontractor margin than any negotiation skill. Three others support it: photograph conditions on arrival and at completion, since damage caused by another trade before you arrived is your problem unless you can show it existed; keep a dated log of your own delays with causes, which converts a dispute into a claim; and submit clean, complete pay applications matched exactly to the GC's format on their cutoff date, because a meaningful share of late payments are caused by the sub's own paperwork.
How do subcontractors protect their lien rights?
By treating the preliminary notice as a job-start routine rather than as a step for troubled jobs. Mechanics lien rights are among the strongest tools a subcontractor has and among the easiest to lose: many states require a preliminary notice within a specific number of days of first furnishing labor or material, and missing that window forfeits the rights regardless of how much is owed. The deadlines, required forms and recipients vary considerably by state, so the practical approach is to learn your state's requirements once, build the notice into the checklist that starts every job, and file it on every project as a matter of course. Sending a notice is normal industry practice and is not read as hostile by GCs who work with subs regularly.
Can a subcontractor also sell work directly without upsetting general contractors?
Yes, with a boundary rather than abstinence, and it is worth doing because concentration is the real risk in this model. Three rules make a mixed approach work. Never take work from a project you were introduced to — a homeowner you met on a GC's job is not your prospect, ever, including years later on a different scope, and violating this once ends the relationship permanently. Keep the direct work in a different segment where possible, such as service calls and small repairs, which do not compete with project work and which most GCs do not want anyway. And say it out loud, telling the GC plainly that you also do direct service work, which removes the suspicion that forms when they discover it themselves.