When customers start talking about liquidated damages in construction, it’s time to ask why.
When you provide a dishonest client a cost breakdown of their job, things can go wrong.
Quoting a firm fixed price is riskier when material costs are increasing rapidly, which is why your contract needs to address unexpected material cost increases.
It can a challenge to finish a project, especially when it was priced too low for a difficult client and with a weak contract.
Almost all conflicts contractors face could be avoided or quickly resolved if there is a clear, detailed construction contract between the parties.
A compendium on change work orders on a new home, remodeling or renovation project; why they matter, how to price them, what to include, and more.
Why cost plus and time & material contracts should be avoided, for both contractors and building owners.
Pricing changes for a change work order isn’t easy when the scope of work isn’t clear.
Time and Material contracts are full of risk, especially on larger jobs.
If you’re a business owner and take on a project out of the goodness of your heart, recognize you might not get paid and will be funding the project.
I don’t think writing a check is old fashioned, but there are so many advantages to using a credit or debit card that it’s become the preferred payment method for many.
Some people are used to snapping their fingers and having others jump. It’s irritating, but you have to remember that they’re writing the checks.
I want to share a recent phone conversation with a contractor concerning a problem they were having with a client.
I’m not a fan of working with government agencies, but some situations are unique.
When clients try to change the terms of the contract, you don’t have to go along.
Over the years, I’ve seen contract language evolve, shifting more and more responsibility to general and specialty contractors.
Is it a good idea to have a service agreement to cover small jobs under a certain amount?
Avoid losing money by recognizing some of the games that building owners play to avoid paying.
Michael discusses a ploy some building owners use to not pay for all of their change work orders. It happens in both residential and commercial projects.
You shouldn’t sign a contract that stipulates what you can charge, even if it’s just on the change orders.
We discussed design agreements last week; today we’re going to look at them from another angle. The first step is setting the budget with the client.
A contractor who has designed projects asked how to protect his design work.
There are things you can and should do when a client tries to dodge making payments.
There are two schools of thought on pricing handyman projects and service work: T&M or flat rate pricing. They both have advantages and disadvantages.
“Let’s see what the contract says about that.”
We often hear from contractors dealing with a client who, for whatever reason, has decided to change the terms of their contract. Other professionals have the same problem.
Not all of your clients are honest. There are even a few who have no intention of paying you for the work you do.
A contractor asked for my opinion on a request he recently received. It’s not a win-win proposition.
If you’re doing service work, make sure your client knows what to expect before you start.
A call came in from a friend recently. It seems that a client of his wants to cancel a signed design agreement.
I’ve written before about clients who decide to make changes to a contract. Last week I heard from two different contractors who had to deal with this, and I want to share their stories.
Your contract should call for arbitration, not mediation, to settle disputes.
If you want to lose money on a job, agree to let your client do part of the job or provide their own materials without setting clear boundaries.
When I’m working with a group of contractors, I often ask how many are providing a Right of Rescission form with their contracts. Many contractors aren’t even aware of the document or realize its importance.
A construction allowance is a dollar amount included in the contract for a particular item. There are two types of construction allowances: material and installed.
Many building owners want a Cost Plus contract because they believe they’ll have more control over the total cost of the project. It’s your job to educate them on the downside.
At least once a week I hear from someone who can’t get paid for work they’ve done.
There are two benefits to documenting your jobs. One is protecting yourself in case there is a disagreement about the project. The other is providing information that will help you when you’re promoting your business.
We’d like to share an email received from an anonymous homeowner. If you believe that it’s smart to provide an itemized invoice, this will make you reconsider.
It’s important to manage the payment schedule on your jobs, but not all jobs are the same.
A design agreement allows you to get paid for your work. Don’t waste your effort or your time.
Retainage clauses, removing the finance charge clause on the last payment, “we’ll pay you when we get paid”.
What do you do when a client calls about a problem they created? Preventative measures make the difference between a profitable job and losses.
The popular belief is that contractors are the villains and homeowners are the victims. But if you’ve worked with the public for very long you know there are also dishonest clients.
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.
We used to get three payments on jobs. 1/3, 1/3, 1/3. That’s not a smart business practice.
It's easy to ask someone to do something; it's harder to hand over money. Your client isn't committed until they've written the first check.
If the payment schedule is adjusted after you’ve started a job and they aren’t willing to pay what’s owed, file liens. You must protect your right to be paid.
Stay ahead of your clients. Write a detailed contract that protects you from as many unpleasant scenarios as possible, and work from written agreements with both your subcontractors and your employees.
A selection of issues that should be written into every contract to protect your profitability.
If you are going to deviate from a standard fixed price contract, look at your approach from your client’s point of view. Make sure they know what to expect and what you’ll do.
Commitment language in your contracts, payment schedules that help cash flow, right of rescission language. With a few extra comments.
Many construction-related disputes can be avoided with a well written contract. Here are a few of the things that need to be included.
What if you agreed on a price, now customer wants all receipts for material? Without a clearly written fixed price contract, it's a problem waiting to happen.
Too many contractors use a poorly-written construction contract, or no contract at all, leading to different interpretations of an issue.
Last week we discussed having signed Change Work Orders (or Additional Work Orders). Today we’ll discuss 4 mistakes often made when writing Change Work Orders.
An example of what transparency does for your business. If clients want the details (i.e., itemization), then provide those details but charge for them.
Cancellations happen, even with the best of salespeople. Clients have all kinds of reasons to cancel an agreement, and you need to be prepared.
I’ve talked about the need for a contract, and the importance of a clear payment schedule, because without a well-written, clear contract, you’re headed for trouble.
A good payment schedule keeps you paid for the work you are doing. If you're using a 1/3, 1/3 and 1/3 schedule, you are financing most of the job out of your pocket.
A very nice gentleman called me last Friday. He related a story about his home remodeling project. It was done a Cost Plus job, the "plus" was negotiated at 18%.
If you want positive cash flow in your construction business, make sure you're using the right payment schedule on your contracts.
Invoicing is one way clients delay paying. "Thanks for doing that work, send me an invoice, okay?" Why do contractors agree? Maybe they believe everyone does it.
A specialty contractor said, "A general contractor called and asked me to send a lien release. If I do that, he will send a check for what he owes me."
A friend was doing an insurance job, repairs to an exterior wall. The siding had been improperly installed, and around here, if you don't keep water out you'll see rot.
Does a job have a “life expectancy”? I believe it does and you should be aware of the warning signs.
In case you don’t think it’s important to have change work orders signed and paid BEFORE making a change, read this note I received from a homeowner yesterday:
A young couple came to us for coaching in February, just two months ago. While their P & L was not all that bad they could and wanted to do better.
I took a call from a married contractor with four young children. He can’t collect the final funds due from an owner for a large job. They are about to lose everything.
During a presidential debate, one of the …
An earlier post of ours is getting a few homeowners riled up. The post discusses homeowners who have contacted us, unhappy about the prices their contractor is charging.
Got a phone call recently from a contractor doing a job in the $150K range. Everything is fine, contract signed, and the job is going great.
I have read several posts on forums late …
I often hear from contractors having problems with their customers. Many of these problems are because of the written contract they use for their jobs.
A client decided to change the rules of their contract. She decided not to pay the full amount or on time as the contract specified.
I am serving as an expert witness this week for a new home builder in our area. There are many issues in this particular case, but there is one overriding problem.
A question arose this morning on a call from a contractor. Should you write a contract on all the jobs you do, regardless of the size of the job?
A young businessman called. He was in a state of shock after checking his books over the weekend and found over $11,000 in receivables, much of it over 30 days.
A coaching client was working with a potential customer who wanted a remodeling job on a cost plus basis instead of a fixed fee contract.