Self-perform or contract out?

By Jeff Winke

Do it yourself or farm it out? That becomes a critical question for contractors to wrestle with in respect to some of the services they offer customers. One area of an asphalt paving contractor’s world where the question is particularly relevant is… when does it make best sense to contract out the striping, pavement marking, and stencil tasks versus doing it yourself?

But first, let’s establish the importance of pavement marking. It’s not just for aesthetics, but also ensures better safety, reduces liability, eliminates chaos, and boosts curb appeal.

Parking lot striping provide benefits. They can organize and maximize the available space for optimum parking. Parking spaces need to accommodate vehicles of all sizes, from sedans to SUVs. If the parking grid is faded or covered by snow, people park further apart other to avoid dinging their car doors. Clearly marked parking spaces are important because they show drivers how much room they have to park. Commercial property owners need to maintain pedestrian crossings, fire lanes, handicap parking spaces, and arrows that clearly mark the flow of traffic.
Acknowledging the importance of striping and pavement marking leads to the question of should this be a part of the services an asphalt paving contractor should offer or does it make better sense to contract it out as a specialty service?

“If striping and pavement marking is not your area of expertise, it may be wise to consider contracting out those services,” stated Cam Roberts, president of Laser Line Painting & Asphalt Maintenance, Prince George, British Columbia, Canada. “Contractors should be focusing on their areas of expertise, not trying to ‘do it all.’ That approach often causes profit to drop. However, if you have the capability of expanding financially and have employees to support that growth, you may want to consider bringing that service in-house, especially if you have difficulties finding a reliable subcontractor.”

Generally, contractors like having control over the work they produce.

“Adding a striping company makes sense when you are tired of calling other companies to do the work,” said Mark Estrada, senior VP, Marathon Solutions Group, LLC, Houston, Texas. “Sometimes, striping is a ‘make or break’ for many capex projects in our industry. From a commercial mill and pave to full road/highway projects, adding striping as an internal service promises you will have full control of the striping project from start to bill.”
Yet there are times when it may make sense to job out striping, pavement marking, and stencil tasks.

“While we try to self-perform all of our pavement markings, there are times when it makes sense to contact this work out to a trusted partner company,” stated Tom Eichholz, owner/CEO of A&A Paving, Roselle, Illinois. “Our sealcoating team also stripes our paving projects in addition to striping our maintenance projects; so in the thick of the season there can be times where there just isn’t enough time in the day for this team to do both, especially when projects are an hour or more away from each other. Running your guys ragged in order to complete striping tasks late at night is a recipe for disaster and for mistakes to happen and you should definitely consider having a ‘go-to’ sub that can help out.”

Eichholz continued: “We do not get a lot of requests for thermoplastic striping, so it doesn’t make sense to invest in the equipment. This is a good example of why subbing it out in order to complete the project makes total sense. Once the requests for thermoplastic striping start to grow, it will make financial sense to invest in additional equipment… we will then self-perform that work too.”

Clearly, with any service being offered there are business risks.

“It is only more profitable to self-perform your pavement markings when you have the infrastructure to support it,” Roberts said. “This includes equipment and the people on staff to do the work. You need to carefully calculate, not just the expected revenue for adding pavement marking to your self-performing services, but the cost of it in terms of the time needed, the potential learning curve for staff, the ability to properly market and sell the work, how to deal with warranty work, acquiring materials and equipment, and all the other things we tend to forget about!”

There are pros and cons with each approach—self-performing versus farming it out.

“Subcontracting out the pavement markings will reduce the operational strain on your business, but still allow you to market that service to prospective clients who want that service,” stated Roberts. “However, a properly run pavement marking a division in your company can operate at very high margins, and it should be considered if the company can support self-performing. There is a risk to self-performing a new service, as there is expenses and learning curves associated with it that will slow down profitability at first.”

Estrada offered his perspective on the plusses of self-performing striping and pavement marking: “By doing it yourself, you’re able to control every aspect of the project from start to finish. You’re also the ‘face’ of the expert service being provided, and the customer won’t ever forget that. But the flip side is that everything falls on you, whether it be positive or negative. Also, God forbid, if the project doesn’t go well, you will lose resources such as time and effort and there’s a good chance you might lose your customer.”

Estrada continued with his pros and cons of using a subcontractor. “The big pro is that it frees your team up to take care of other projects. Using a trusted sub-contractor grows not only a bond between two companies, but allows you to provide services that’s out of your menu of services. Of course, the con is you’ll need to answer for any mistakes and liability or quality issues.”

In terms of a good summary of the perspectives of doing it yourself or farming it out when it comes to line striping, pavement marking, and stencil tasks, Roberts said: “Pavement marking is a niche service, and therefore, can be done at high-profit margins. It is not uncommon for striping companies to have gross profit margins well above 50% for every project when they self-perform. Subcontracting it out will undoubtedly reduce the profitability, but when managed properly, can be an effective revenue and profit stream.”