In last week’s article Progress Payments: Keeping a Positive Cash Flow, I hope you noticed that the final payment on the payment schedule is 2%. Never let your final payment exceed 2% of the sales price. And your contract should include a finance charge clause for payments not made on time.
Keeping your final payment small prevents your client from trying to use the final payment as a club to get you to do more than is on the contract. This includes asking you to fix things that you didn’t break, or asking you to make changes that have nothing to do with the contract. Have you ever had a client who went beyond being picky?
Most importantly, it takes away the client’s ability to say, “I’m only going to pay half of the final payment. If you want more, sue me!” Or, far too often, “I’m not going to make the final payment.” Don’t think for a minute that doesn’t happen.
The 2% final payment gives you the ability to walk away from a client who is trying to cause problems. Look at it this way: if you priced your job to allow an 8% profit, you can walk away from the 2% and be happy with what you get if it means no more problems. Send them a letter and tell them the job is complete according to the contract, they are now in default of your agreement, and until you receive the final monies owed, there is no guarantee on any part of the job. Take the education you got and move on.
The finance charge encourages making all payments on time, including the final payment. If you’re asked to remove it from the contract before signing, that’s a warning sign. Don’t take the clause out of your contract.
Set your payment schedule as your cash flow requires for the job and stick to it like glue. If the client doesn’t like it or wants to change it, then maybe you should go find a customer that you can work with.
Send Me Your Quote!
One sales issue that’s been a problem for years is still a problem: homeowners who request that you email, fax, snail mail or just call them once you have a quote for the job.
I discuss this in our book, Profitable Sales, A Contractor’s Guide. There are a few different reasons behind this request.
- Your client knows they’re a pushover, an easy sell, and they’re afraid if they sit down with you they’ll buy. A sure tipoff that you are dealing with this type of person is if they have a sign on their front door that says No Soliciting.
- Your client doesn’t want to have to make a decision. Decision-making is tough. Deciding to build a new home, or remodel or repair an existing home is especially traumatic because it costs a lot of money.
- Your client just wants a quote; they have no intention of having the work done.
- Your client is pressed for time.
If you want to waste your time, by all means, send your proposals by fax, email or snail mail. But if you want a signed contract (and isn’t that why you’re on the sales call?), set the parameters under which you work at the beginning of the sales call.
“John, Mary, let me tell you how we handle our quotes. After we have talked about the home you would like to have built (or what changes you would like on your home), then we have a couple of other items we will discuss. We will need to set your time schedule for this job, who will be involved in the decision making process and what your budget is for the job. Then, assuming that we can work together, we will move to a design agreement. At that time we prepare the plans for the job and I do a lump sum firm price quotation. I then write the specifications and the agreement and we get everything ready to go to the city/county for a permit to build this job. Everything that we do is planned to eliminate any time being wasted. We do not email, snail mail, fax or phone quotes or any other information until we have a working agreement with our clients. I just want to be real clear with you right up front about how we approach our work with our customers, is that fair enough?”
Be prepared to make a stand because they may challenge you. You may be told they are going to compare all the quotes and if you are not willing to send your quote via the fax, email or snail mail route, you won’t be considered for the job. Doesn’t that sound like someone looking for the lowest bid?
I would excuse myself and be on my way to find a serious client. Not once in the thirty plus years of selling did I ever have a client call and tell me we were going to do their job when I didn’t present the quote in person.
If your client wants an emailed agreement because their time is tight, that’s fine as long as you already have a signed design agreement. You’ve been paid for your time and your work and won’t lose a lot.
But don’t forget that busy people can also be quickly distracted. They might want that project done but other things are taking priority. While they let your proposal (which should only be good for three days) sit on their kitchen counter for a few weeks or longer, prices change and your schedule changes. When they come back to you in three months with the agreement finally signed, your profit margin might not be what it was when you estimated the job in the first place. Now what are you going to do? It doesn’t take hours to present the proposal and get it signed. It could take weeks to get it signed if you don’t present it. Make it easy for both you and them to get the ball rolling.
One more thought. The contractor who volunteers to send out their proposal by fax, email or snail mail is often someone who can’t stand to be told, “No”. They simply can’t handle the idea of having someone reject their proposal. They take “No” as a personal rejection.
Gang, being told “No” is part of sales. Even the best are told No at least two out of every three calls they go on. Get used to it, accept it, or find something else to do because you’re going to be told no if you want to succeed in sales. Be happy when you get a No. Every No is one less No on your way to the next Yes.