11/2025: How do you make your money? 

Image © Jose 2025

Some people find this question impertinent, almost offensive. I love the question and I’ve been watching closely how our general contractor makes his money. We all need to make money deriving from our work, and though someone might say intermediation sometimes does not add value enough for what it ends up costing, the entire world runs on intermediation, where layers and layers of people and organizations sit in between the producer and the end-customer. Intermediation isn’t inherently good or bad, it depends on whether it creates more value than it extracts. The key question is: Does this intermediary improve efficiency, convenience, and quality, or does it simply add cost without significant benefit?

We are working with someone we learned to like and trust, and there is some transparency in the way we relate. We were warned that general contractors put 30% to 50% on top of jobs performed by sub-contractors and on top of products & services that are not covered by the contract, and that is where it all begins, the contract.

We knew we had a deadline, and a limited budget for this particular stage of the project, so we were already in a disadvantaged position. We had tried to hire sub-contractors directly but soon realized we could not do this job and our daily jobs, let alone in the time frame we defined, and with little to no guarantee within budget. We talked to probably 20 different sub-contractors, in different domains, performing different services, and we realized that this was a process made to confuse beginners, rather than clarify or educate. But we did get an idea of the investment necessary to do the entire project, at least according to our knowledge and expertise. So, we asked for a budget from the general contractor, and we were surprised that he was within what we had identified as the necessary budget if we decided to do this directly with the sub-contractors. And that is where I started asking myself, where and how does he make his money.

The contract is the first piece of intelligence that works nicely in the favor of what we learned to be the “special assessments”. The contract provided was detailed, but how detailed does it have to be to avoid special assessments? Probably a contract that no one would sign. The contract is the first element where the expertise and experience of both parties come into play, the general contractor puts as much detail as he wants, leaving out details about things he either knows will always happen or suspects they will. A summary of the special assessments to date includes things like dealing with building structures as a result of plumbing and electrical work (which is covered by the contract), removing things that need to be removed so that new things can be installed (which is covered by the contract), etc.

We had estimates for windows and doors, he said he’s cover those with the same warranties, so this means he can get what we were going to get from manufacturers with at least 30% discount. Which also makes sense because he is putting in the labor.

The detailed quote submitted by the electrician and the plumber looked competitive and fair, this means he is getting a cut from what they are charging us, which again makes sense because he got them the job and he probably has 3 to 4 jobs running at the same time and he manages the crews between those jobs.

We did not want to do the entire renovation now, the house has two floors and we were focused on the living area on the second floor. But then we thought we should do the kitchen, so he stepped in. He identifies opportunities for improvement along the way, it’s those stairs that need strengthening, that floor that needs finishing, that celling that needs cleaning up, all things that make sense, and isolated do not seem like much, but when you add them up, they do. In the end, I realize though I still have 16 projects to do in the house, 12 of them by me, we have done almost 90% of the work in both floors.

I know you are all probably saying, duhh! That’s how general contractors work, that’s what happens to every renovation. I know. But what been interesting is that I still feel we are in control of the project and the process, and while the general contractor is smart in the way he operates, there is nothing that really surprises me, we are after all dealing with an old house, and a senior and wise contractor, and if we were doing this with subcontractors, we would still face the same issues, the same opportunities to spend more money than expected. So, for me the most interesting thing has been to see where he makes his money, with no judgement, basically acknowledging he must make money, within my limits that is. And while I may only see a part of how he makes his money, he is still doing alright, I know we will have added at least 30% on top of what his contract stated in the beginning.