The last thing I want to do is cause a family problem, but apparently I did with one family. This note came from a husband and wife team.
The other day when we spoke you had mentioned the whole idea of giving a client a credit for their design . . . This is a hot topic with my wife and I. (wife is our designer)
She feels that our clients like it when they receive a portion of the design back and that’s one of the reasons we get the job. I have always strongly disagreed. We are running a company for profit. If I decide to pay my taxes on time the IRS doesn’t give me a 50% credit. Anyway, you get the idea.
We have two design agreements included with our book Profitable Sales, A Contractor’s Guide. In both of them, the language states that if the contractor is authorized to complete at least 90 percent (by dollar volume) of the work proposed, the design fee will be credited in full.
Many of our clients disagree and take this language out of the design agreement. Their thinking is that the design work is separate from the job. The client pays for the design work, and then they sign a separate contract for the job.
However, offering to credit back the design fee often makes it easier for the homeowner to sign a design agreement. It also makes it easier for them to hire you to build the job after the design is complete.
That credit shouldn’t cut into your profit because the design work should be included in the total job price. You aren’t working for free.
There isn’t a right and wrong here because both approaches are acceptable. Use what works best for you. Whichever way you go, be sure your design agreement clearly specifies what will happen with the deposit when the design is complete.
The knowledge and experience Michael Stone gained in his 60+ years in construction has helped thousands of contractors improve their businesses and their lives. He is the author of the books Markup & Profit Revisited, Profitable Sales, and Estimating Construction Profitably, and is available for one-on-one consultations as needed.
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