A friend of ours, Bob Strong, is the host of a handyman radio show in the Portland, Oregon area. He sent me a note recently about a call he took from a homeowner, upset about her invoices on a job. To quote Bob:
“She was concerned about the number of line items her GC was including on his weekly draw statements. We finally concluded that he was breaking everything out of standard categories and showing them as separate line items. He thought he was being very transparent; she thought he was trying to rip her off by charging her for every little item.”
Three thoughts:
1. This is a great example of what transparency does for your business. You think you’re doing a good deed, but all you’ve done is given your client bullets to shoot back at you. If clients want the details (i.e., itemization), then provide those details but charge for them. You’re providing an extra service and for that you should be paid.
2. She thinks he’s ripping her off by charging her for every little item? Dear lady, please explain to me why your contractor shouldn’t charge you for every little item? A good estimator will include every item in their estimate because if they don’t, they have to eat it when the job is done and the bills must be paid.
Let me put it another way. Try walking out of your local grocery store with a few little items for free. You won’t make it very far, and you’ll get a chance to talk to nice people in suits. If the grocer charges you for every little item, shouldn’t your contractor also be able to charge you for every little item?
3. Weekly draw statements. Once again, the downside of cost plus or time and materials contracts. The contractor is taking money out of his pocket for materials and labor, then once a week spending his time putting together detailed weekly draw statements in the hopes that his client will pay reasonably quickly. He’s building her job out of his own pocket.
With a fixed price contract, you estimate the job, develop a fixed price, write up a contract that includes a payment schedule, and make sure you get paid based on that schedule. Down payment, progress payment about every two weeks, and a final payment that’s never more than 2% of the sales price of the job. It’s more work upfront – estimating and writing a contract – but regular payments improve your cash flow and you won’t have to sit down and develop weekly draw statements, or worry about getting paid for every little item.
Our thanks to Bob Strong for sending his note along.
(Bob’s bio – In January 2008, Bob filled in for the regular host on the home improvement radio show, Around the House, and the rest is history. Every Saturday from Noon to 2:00, on FM News 101 KXL, he takes calls on air from listeners throughout Oregon and Washington seeking advice on maintenance, repair, renovation, and remodeling of their home. Handyman Bob is quickly becoming a trusted source of information for all projects “Around the House”. Reinventing himself once again, Handyman Bob has launched a voice-over business to provide background commentary on videos or Power Point presentations as well as messages on hold for company phone systems. To learn more, simply visit TheStrongVoice.com.)
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