I took a call recently from a married contractor with four young children. He is unable to collect the final funds due from an owner for a large job. They are on the verge of losing everything. When I say everything I mean their home, their cars, everything. How did they get into this mess?
Joe Contractor got here by trying to be nice. He put a proposal together, everyone signed on the dotted line and the work began. Extra work was done along the way and no change work orders were written. Now they are down to the last payment of roughly $40,000 and the customer doesn’t want to pay. They are making up all kinds of reasons why, but the big one, and you have heard this one before I am sure, “The contractor is overcharging us. Too much overhead and too much profit. We aren’t going to pay.” Same song, same verse.
Joe went out of his way several times to be sure he got the owner the lowest possible price on various parts of the job. He wrote a fixed price contract, and when they asked for itemization, he gave it. How is he rewarded? Yep . . . “You charged us too much!”
Joe needs to get his thinking straightened out. Family comes first, then his business, then the customer. You can do all that and still have a win-win contract. He needs to get over the idea he is selling his services by being Mr. Nice Guy.
Joe needs to learn not only how to write a good contract with a good payment schedule, but also to have the discipline to follow that contract. Example: A final payment should never be more than 2% of the total contract price.
He needs to learn that the customer doesn’t need itemization and, all too often, misinterprets what it says. Giving itemization is like painting a big red target on your business and handing them the ammunition.
Last but not least, Joe needs to think through everything he does so that he never, and I do mean never, puts his family in jeopardy again. Hopefully he’s learned an expensive lesson. But in the meantime his wife is going through hell. Focusing on being nice instead of being a business person helps your customer, but not your family.