I waited until tip #21 to mention this, but contracts and change work orders are among the top reasons construction-related businesses fail. Or rather, not using contracts or change work orders is why they fail. Because without a clear contract and signed change work orders, too many contractors don’t get paid for the work they do.
I think the reason that contractors don’t use a proper contract or bother with change work orders is that their focus is on getting jobs built. Their day-to-day activities focus on getting parts and pieces together to assemble the job, make the customer happy and then move onto the next job. Construction is a time consuming monster that leaves the business owner little time to improve their approach to business, and that includes taking the time to bother with contracts.
So they grab a one or two page contract and use that to create a vehicle to work under. A one or two-page document, no matter how well-written can’t possibly handle all the language needed to protect the business owner in today’s litigious society. Then, during the course of the job, stuff happens. Changes are made but never recorded. And when the contractor tries to collect for the work they’ve done, their client’s memory becomes conveniently vague and the contractor doesn’t get paid.
I am not a fan of lots of rules and regulations, but so many more construction-related businesses would survive if every contractor was required to pass a test about contracts and additional work orders before they are allowed to hire themselves out to the public. They don’t need to know the laws. They do need to know what a solid contract should include, when to write a change work order, and understand the importance having a solid contract with legal language that’s been approved by their attorney before money changes hands and work begins.
Read Chapter 7 of Markup & Profit; A Contractor’s Guide Revisited. It starts on page 135, and the next 40 pages could save you a lot of money and heartache.