# Getting A Deposit



## MEL (Apr 7, 2007)

How much of a deposit do get up front?

Suppose you were doing a $10,000 project and about half of it was materials, how much of a deposit would you want to get?

How would you handle it when the prospect tells you that your competitors don’t require a deposit?


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## katoman (Apr 26, 2009)

The minimum I would do is 50% when the materials are delivered. That means they don't go on the HOs property until you have the cheque in hand. 

Then another 30% lets say when the job is more than half done. Balance on completion.

There are several threads already on this. I simply tell people I'm in the contracting business, not the financing or gambling business.


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## 480sparky (Feb 1, 2009)

Depends on when I need to spend the $5k on the materials.

If this is a standard home build, I'd divide the material between rough and trim, and get maybe 25% of my material in a deposit, another 50% after rough-in, and the remaining at the end.

But if I have someone who wants a $5k generator, then it's 100% up front.


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## aptpupil (Jun 12, 2010)

not sure how it is in other places, but in california my understanding is that you're not legally allowed to ask for more than $1,000 or 10% of total contracted price (whichever is less) before the work starts. definitely benefits the consumer more than the contractor. probably different everywhere else, though.


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## primetimeon (Mar 16, 2009)

Yes, in California you can not ask for more then 10% or 1,000 wich ever is less. the state board seems to only favor the consumer out here and the unlicensed only get a slap on the wrist. I ask for another payment the day I bring materials on job site.


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## MEL (Apr 7, 2007)

katoman said:


> The minimum I would do is 50% when the materials are delivered. That means they don't go on the HOs property until you have the cheque in hand.
> 
> Then another 30% lets say when the job is more than half done. Balance on completion.
> 
> There are several threads already on this. I simply tell people I'm in the contracting business, not the financing or gambling business.


We do roof replacements and most jobs are done in 1 day.


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## Darwin (Apr 7, 2009)

Every situation is different. 

Scenario #1: Client arranges material and delivery and pays cost directly to supply house. I recommend suggestions for product. No material mark-up. Labor cost is separate. A $250 non-refundable deposit is required to hold them to schedule. 

Client costs: ($250 due at contract signing)+($5000 M&D)+(4750 draw payments)=$10,000
.......................................................

Scenario #2: Client wants me to arrange material and delivery. They pay a flat fee or % of total material cost for my time. Material and delivery cost is paid directly to supply house with full disclosure. Labor cost is separate. 

Client costs: ($250 due at contract signing)+($5000 M&D)+(flat fee or % material procurement)+(4750 draw payments)= $10,000 plus M&D procurement fee.
.......................................................

Scenario #3: Client wants me to arrange material and delivery but _does not want to pay me for procurement._:sad: Material and delivery cost is paid directly to supply house. Labor cost is separate. In this scenario, I'll add in 10% of the total material cost for M&D procurement. This added cost will now be reflected in their total labor charges. 

Client costs: ($250 due at contract signing)+($5000 M&D)+(10% material procurement)+(4750 draw payments)= $10,500.

These ways, I'm not financing their projects. You just have to figure which is the best course of action when writing the contract so you won't get burnt.

Ps. _about draw payments_: I require the _first draw_ (roughly $1,700 or 33% of remaining labor cost) due at the beginning of the first day of work, on a 3 or 4 day job. All information included in this post can be adjusted to fit the client.

And if the client balks at added fees for material procurement like in scenario #3, I then will re-adjust my labor costs to include it _there_. This is proprietary; I'm in business to make a profit and maintain a fair environment. Sorry about that.

For 1 day jobs, you can substitute "draw payments" to "final payment due".


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## BamBamm5144 (Jul 12, 2008)

Mel, I take 25% so on that job it would be $2500.00.

I have never really had anyone ask me to not pay it. I guess if someone would disagree I would simply tell them everyone else whose house I have roofed did pay it and I can not get your job scheduled without a downpayment.


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## wellbuilt home (Oct 22, 2007)

On a larger job i get 2000 down and break up payments 30% 30% 20% 10% 5% substantial completion 5% completion .
For a 10,000 job 2000 deposit 4000 when we start balance on completion . 
Most one day roof jobs get a$ 2000 deposit balance when complete . 
If the owner doesn't want to put up a deposit get paid in full before you start . :laughing: John


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## Mike Finley (Apr 28, 2004)

MEL said:


> How much of a deposit do get up front?
> 
> Suppose you were doing a $10,000 project and about half of it was materials, how much of a deposit would you want to get?
> 
> How would you handle it when the prospect tells you that your competitors don’t require a deposit?


With a good contract you don't need any deposit do you?

There are home improvement businesses I know of that advertise no money until the job is done.


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## William James (Mar 5, 2010)

I agree with Katoman on this one. You want to ensure that you, at the least, don't get burned on materials. That's the smart-way. But, im not smart. Nor do I do $10,000 jobs by myself, yet. 

On lower contracts, say $1000 or less, I go by my read. (but sometimes I'm off, not yet for a job though). If it's a day or 2 job, it's good to get 50% up-front. But sometimes I won't. And, Sometimes I think Mike's being facetious. Reminds me of me, with more experience. But, he has a point. But then you need to get lawyers involved in order to get the whole enchilada. They could always claim bankruptcy! It's better not to use credit to get jobs. Might screw yourself!


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## WarnerConstInc. (Jan 30, 2008)

Mike Finley said:


> With a good contract you don't need any deposit do you?
> 
> There are home improvement businesses I know of that advertise no money until the job is done.



Because they have the money to do it.

I would think they charge a little extra for being the bank too, or string out suppliers.

Just saying.


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## Electric_Light (Nov 25, 2007)

WarnerConstInc. said:


> Because they have the money to do it.


Or that they don't have a cash flow problem.


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## Scribbles (Mar 10, 2009)

Depends on the contract, most small jobs 1500 or less no deposit, over that 25% but clearly stated in the contract that it is refundable minus cost of material restock and balance of work completed. And in Cali you need to return 100% if less than 3 days of contract sighing. Even if you did all the work, cool off period they call it. Normally I split the job into a lot of little payments, I don’t like getting checks over 3500, if you can’t eat it don’t do it.


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## Wayfarer Doors (Feb 2, 2010)

I don't have a cash flow problem, everytihng I order(all is custom) is paid with my credit card when I pick it up, so no immediate cash out of my hand.
All deposits go into a special account untill the job is done.
I always charge 50%("no" exceptions).
Final amount due upon completion. 
Never been stiffed, rarely had complaints about the deposit, but I once told someone, "I'm trusting you that you won't back away after I've ordered your custom windows and doors, and you have to trust me that I will order and install your goods.


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## Electric_Light (Nov 25, 2007)

You have to keep in mind, just as you don't really trust customers with payments, they equally don't trust contractors with finishing as agreed. Trades that furnish materials along with workmanship usually have a markup on materials. With the reward that comes with markup, they also assume the risk if something happens. 

If you order custom windows for me and you've already got cost + profit and have total control of my money and you/another trade breaks it, it gets stolen, etc you've already got my money in hostage and I'm vulnerable to get pushed around. "replacement can't be ordered until we get insurance money/whoever responsible for pays up" where if I haven't paid for it, I can tell you that I'm not paying for materials that did not get installed and it is a lot easier to deduct late completion penalty from payment as allowed by contract than it is to try to reclaim money that's already been paid for breach of contract. 

Obviously, heavily biased contracts(with HO vs contractor contracts being heavily contractor sided and government contracts being heavily customer sided) in favor of one side don't go well with the other side.


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## TNTRenovate (Aug 19, 2010)

50% no matter what the scenario. 50 upon completion. This way I am not out materials or most of the labor cost. The HO feels good that they are holding my profit and costs and I feel good that I can pay my vendors upon delivery and write checks to the subs. I am a firm believer in not robbing Peter to pay Paul.


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## Mike Finley (Apr 28, 2004)

WarnerConstInc. said:


> Because they have the money to do it.
> 
> I would think they charge a little extra for being the bank too, or string out suppliers.
> 
> Just saying.


Right, but I'm just making the point that there is no right or wrong, every example exists in the marketplace from Home Depot where you pay 100% up front, to a company like Excel Roofing that collects nothing until the job is done, to every thing inbetween.


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## pinwheel (Dec 7, 2009)

MEL said:


> We do roof replacements and most jobs are done in 1 day.



I'm a floor guy & am usually in & out within the week. Materials are paid for when I put them on the job, balance paid when they're satisfied with my work. Knock on wood, I collect 99% of what's owed me. My way's not for everyone, but it works well for us. Course, the vast majority of our work comes through word of mouth referals.


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## bheg (Mar 22, 2011)

primetimeon said:


> Yes, in California you can not ask for more then 10% or 1,000 wich ever is less. the state board seems to only favor the consumer out here and the unlicensed only get a slap on the wrist. I ask for another payment the day I bring materials on job site.


Yes here in Cali it can be tough sometimes. I always make the customer feels comfortable by not allowing them to pay me for anything that I have not yet completed. If you do your contract right all you have to do is place a lien on their property if they renig 

Although all cabinet shops that I have dealt with require a 50% deposit at time of signing contracts and they get away with this by saying materials are ordered. My accountant says this is fine. Lowe's has required a customer of mine to pay 100% of her countertop when she ordered.

I did a kitchen for a high profile attorney and he did not really have a problem with the 50% on his cabinets. Although if we had screwed him I am sure he would have made our lives a living hell.


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## TNTRenovate (Aug 19, 2010)

txgencon said:


> I can't imagine asking for a deposit. New home construction projects have progress payments dictated by the interim lender and those seem to me to be front loaded enough to always have funds available throughout the project. If I can't manage my projects well enough to live with the "system", I'd quit. Some of my suppliers bill at the end of the month and payment is due by the 10th of the following month. Some are net 30 days for each purchase. Reputable subs know how interim draws work and have reasonable expectations. I haven't had any problems obtaining a draw with the time constraints I have to work with.
> 
> I obtain a credit score for any project over $5K. If a potential client's credit score is under 700 and they are a total stranger, I simply won't work for them.


So you obviously only work though an interim lender...that doesn't help the conversation much now does it? Most remodeling projects are paid out of the HO pocket, just in case you didn't know.


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## txgencon (Jan 4, 2011)

TNTSERVICES said:


> So you obviously only work though an interim lender...that doesn't help the conversation much now does it? Most remodeling projects are paid out of the HO pocket, just in case you didn't know.


I can see how you could have read it that way (my bad). But I meant that I use the same concept for MRO and remodeling projects, too. I use a draw schedule patterned after an interim lender's draw schedule and adjust it to fit the project and incorporate it into the contract. I would imagine that the clientele with whom I'm used to working would be offended at a request for a deposit even though many of not most of them could pay the entire amount up front if they wanted to (remodeling or MRO, that is). I guess everyone here (referring to subs) are just more laid back. Most of my subs just ask me to mail their payment to them rather than coming by to pick it up or me taking it to them.


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## TNTRenovate (Aug 19, 2010)

txgencon said:


> I can see how you could have read it that way (my bad). But I meant that I use the same concept for MRO and remodeling projects, too. I use a draw schedule patterned after an interim lender's draw schedule and adjust it to fit the project and incorporate it into the contract. I would imagine that the clientele with whom I'm used to working would be offended at a request for a deposit even though many of not most of them could pay the entire amount up front if they wanted to (remodeling or MRO, that is). I guess everyone here (referring to subs) are just more laid back. Most of my subs just ask me to mail their payment to them rather than coming by to pick it up or me taking it to them.


Well I guess that you are just in a class above us all! Good luck to ya!:thumbsup:


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## tedanderson (May 19, 2010)

The unofficial rule around here is 1/3 upfront, 2/3 upon completion. And if that first 1/3 does not cover your materials and operating expenses, you aren't charging enough for the job.

But typically I'll try to get at least half although I've asked for as much as 70% upfront due to the fact that cost of the equipment and materials far exceeded the cost of the labor. And I had to explain to the client that I should have charged $7000 when I only charged $5500 to be competitive.

So I figure that whatever you take as a deposit, it should be enough for materials, equipment rental, and other minor expenses to finish the job. Even if you decide to take a draw at the half-completion point, it's wise to keep yourself in a position where you don't have to go back to the HO and say, "I can't finish because I am out of money"


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## Nail Ace (May 15, 2009)

PA. 1/3 is all you can ask for per HIC rules. Really puts a hurt on the little guy. Also at the in of the job if the HO is not happy you have to give back the deposit till problem is resolved.


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## Redneckpete (Feb 22, 2008)

I primarily do foundation repair for my retail customers, average job being between 5k and 15k. I don’t ask for a deposit, my quotes always say that I require 25% on start date, but I always wave that requirement on start date, and just tell them to pay me when I’m done.

I also work exclusively by referral. That means I’ve fixed a basement for a family member, friend or neighbor. I don’t advertise, have an unlisted number and don’t return cold calls.

I’ve never been stiffed for a job in 10 years in business. I’ve had a few real slow payers, but I’ve made their lives absolutely miserable, up to and including calling the person who referred them.

Works for me.

Pete


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