It’s interesting how friends, relatives, and other contractors try to rope you into their schemes by asking to borrow your license to build their jobs.
A coaching client who is a general contractor (let’s call him Joe) asked me recently about a situation. He’d gotten a call from another general contractor (we’ll call him Bill). Bill asked Joe if Bill’s specialty contractor could borrow Joe’s business license to do work on a job for Bill.
Confused? So was I. I never really understood the whole situation, but it smelled bad and got worse the more I heard.
Why should you let another contractor use your license to do the work you’ve been training to do for years? Putting it another way, if they’re capable and responsible, why don’t they get their own license?
Borrowing licenses has gone on for years. It makes sense to the one doing the borrowing, because they don’t have to go to all the trouble of paying the fees, taking the classes, or getting the bonds.
To make it attractive they’ll offer compensation. It might be a lump sum: “We’ll pay you $100 and you won’t have to do a thing.” It might be profit sharing; you get 25 percent for providing the license, they get 75 percent for doing the work. That’s always a good one, because somehow, after they pay themselves an hourly rate for their time on the job, there isn’t any profit left to share.
They often have a good reason, usually something like “I’m fully qualified and I’ve applied for the license, it’s just been held up by the state.”
Here’s the bottom line. Loaning your license to someone else is a dangerous practice. You and you alone will be the one who has to deal with the governing agency if something goes wrong. You and you alone will be paying for the corrections on the project. You and you alone will be paying the fines. They know where to find you because you have a license. The one who borrowed your license will be long gone.
There’s an upfront and honest way to do business, and if you’re smart, that’s the way you’ll operate. One of the things I tell those who attend our class is that you need to know when to say no. This is one of those times.
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.