A contractor who has done design work for years asked how to protect his design work.
I want you to know that I just read your book and it has changed my entire business structure.
I have a small dilemma I’d like to ask your advice on. I’m a residential building designer and also a general contractor. For the past 20 years I’ve done the design work for general contractors preparing the plans for new homes, additions, and interior remodeling I just got my general contracting license.
I’d like to ask your advice on how to structure the design work and incorporate it into the construction contract. I’m having a really hard time thinking this one through about how I can lock the customer in contractually so when the drawings are done I’m guaranteed the Construction. So they don’t take my plans and go to another builder with them, looking for a cheaper price.
Any advice or help would be much appreciated.
I want to thank you for the information you shared through your book, it has transformed my thinking about profit and mark up.
This is doable. In your design agreement, incorporate language that makes it financially wise to have you build the project rather than shopping for the cheapest price.
The language might look something like this:
If {CONTRACTOR} IS retained to build this job, then the sum of $___________ is received in full as a retainer for this Design Agreement as stated above. It is thereby understood and agreed by all parties to this agreement, that any design or budget work created under this portion of this agreement remains the property of {CONTRACTOR} and may not be used or relied upon by any other parties.
If {CONTRACTOR} IS NOT retained to build this job, then the sum of $________________ is received in full as a retainer for this Design Agreement as stated above. It is thereby understood and agreed by all parties to this agreement, that any design or budget work created under this portion of this agreement shall become property of Owner upon full payment of this agreement. However, said design and budget work may NOT be used or relied upon by any other parties to build this job.
When you fill in the blanks, put in amount in the first paragraph (where you are retained to build the project) that is approximately 4% to 8% of the potential sales price of the project. Put an amount in the second paragraph that is at least double if not three times the IS price.
Example:
IS = $ 3,695
IS NOT = Range from $7,390 to $11,085
There is a lot more to a design agreement; we have two samples in our book Profitable Sales, A Contractor’s Guide. When you discuss this with your client, point out the difference and explain that they are essentially getting a cash discount by using your services. If they balk, there’s a good chance they intend to shop the job. That’s when you decide if you want to continue working with them, or if you want to pack your stuff and head for the barn.
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.