# Upfront Payment To Contractor



## Tscarborough (Feb 25, 2006)

If it works for you, why would you care what anyone else said or thought?


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## go dart (Dec 6, 2005)

theres a huge difference between new home bldg and remodeling. a mortaged new home pays draws thru the bank. but i remodel and don't care how much $ you do or don't have, i'm not ordering 800.00 sink and faucet sets, 7000.00 cabinets and scheduling templates without a deposit allowing me to operate on my customers $ not mine. done this for 20 yrs. the prospects that won't agree become the next guys prob not mine.


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## Joasis (Mar 28, 2006)

Maj and I have similar markets. I make my living on our work, I don't need or want the material mark-ups, nor do I want to frame my income level based on projected sales. Fine with me however others do it, but what I do works for me in my area. What you guys do there would work for a very short time here. The local pirates that follow that business model are about all gone now, I have a 9 month backlog of work, and my customers are quite happy with the arrangement. The option is available that I will, if they absolutely insist, purchase materials and give them a one check option. If I were doing that, I would have to have a substantial down. 

Here is another example of how contracting is different across the country. If I had to put up with the BS I hear you guys deal with in California or the east coast, I would go back to teaching school.


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## Kristina (Apr 21, 2006)

Oh Maj, I didn't mean to imply you didn't know what you were doing. I was even going to add that it must be a different kind of market where you are, which is COMPLETELY understandable.

We live in an area with a bunch of overpaid pencil pushers who move out to the "country" to "get away from it all".  

They wouldn't know the difference between a 2x4 and a 2x6 even if they were accountants. Seriously, a buncha stupid smart people out here.

I'm sure it's a regional thing. It's standard around here to do the markups and 67% is what's recommended by the state in the Contractor's Guide. :thumbsup: 



maj said:


> I know it must sound strange to most the rest of the country, but here goes, and take it easy on me this time for heavens sake.
> 
> Mostly, the big difference is the regional thing again. As I have stated before, I am in a small rural community. Almost everyone knows everyone. If there is someone new in town, it doesn't take long before everybody is trying to find out who they are & what they do.
> 
> ...


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## Kristina (Apr 21, 2006)

I dunno, but I get the vibe that you think we are ripping people off or something by charging mark up on our materials and labor. Our work certainly is where we make our money as well and we definately don't push clients to purchase more materials than necessary to make our living.

We use Cost Estimator software which automatically determines area rates for materials and labor. We plug in a percentage of mark up and it adds that to our cost. This is how we come up with our pricing.

What do you base your labor costs on? Is it hourly? By the task? Perhaps your "labor" costs come out to more than OUR "labor" cost and combined with our markups, we end up about the same (adjusting for differences in cost of living). 

It's not at all underhanded and I resent the implication that it is so. I'm not criticising how you do your pricing. Understand that the way WE price is on the up and up simply because that's how we work. Pirates. That's a bit harsh dontcha think?



joasis said:


> Maj and I have similar markets. I make my living on our work, I don't need or want the material mark-ups, nor do I want to frame my income level based on projected sales. Fine with me however others do it, but what I do works for me in my area. What you guys do there would work for a very short time here. The local pirates that follow that business model are about all gone now, I have a 9 month backlog of work, and my customers are quite happy with the arrangement. The option is available that I will, if they absolutely insist, purchase materials and give them a one check option. If I were doing that, I would have to have a substantial down.
> 
> Here is another example of how contracting is different across the country. If I had to put up with the BS I hear you guys deal with in California or the east coast, I would go back to teaching school.


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## dsnAK (Feb 26, 2005)

Kristina said:


> We use Cost Estimator software which automatically determines area rates for materials and labor. We plug in a percentage of mark up and it adds that to our cost. This is how we come up with our pricing.
> 
> What do you base your labor costs on? Is it hourly? By the task? Perhaps your "labor" costs come out to more than OUR "labor" cost and combined with our markups, we end up about the same (adjusting for differences in cost of living).


There is nothing wrong with a mark up on materials. Everything we buy is marked up. My mark up helps pay for warrenty work, adminstration and a little profit. Profit is not a bad word.


I would be weary of relying on any software to determine my labor rates - WAY to many variables. I keep 15 min incraments of my days so I know exactly how long it takes me to do a task in specific circumstances. I record them and keep them for reference for other jobs. I remodel and no computer knows how long it takes to protect a chandelier hanging 23 feet in the air. I do not compete on price - only service and quality.

There are several ways that you could include all of your overhead and profit in your labor figure and this has been discussed at length other places - let me know if you want more information.

As far as the topic at hand - my deposit is minimal and I keep progress payments very frequent and at very defined times.

Glassbuilt said it best - If you do not trust your contractor - do not hire them, don't waste either's of your time.


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## Mike Finley (Apr 28, 2004)

It amazes me to no end to ever hear anybody in business stick there nose in the air about somebody marking up materials.

Ignoring any simplistic thoughts about marking up materials is something "you might get away with", something "pirates" do or whatever else has been mentioned.

The facts are if you are a business that isn't marking up your materials you are the exception and not the rule. Before anybody gets their hair standing up, let me just give the pat statement first - whatever you do is fine, what works for you works for you and nobody is trying to tell you have to do anything different -

However, marking up materials is a legitimate business practice. If a customer asks me do we mark up something they are told right to their face - Of course we do. Why, is there some other business you can name that doesn't mark up materials? I haven't had a customer come up with an answer yet.

Why can you mark up materials? - Notice I said "Why can you" not "why should you"

There are costs associated with -
Getting to the materials
Selecting materials (anybody cull wood when pulling it? or select a box that hasn't been opened?)
Hauling materials
Storing materials
Returning materials

Further there are costs associated with warrantying materials and guaranteing materials you install.

Costs associated with floating the money to purchase materials.

These costs are all legitimate and not something somebody is getting away with.

I send all my customers to the tile manufacturer and often I refer to them as a tile warehouse or tile wholesaler. Contractors get discounts on tile and every once in awhile I get a customer who asks if they are going to be getting the tile at a discount because of going through me.

The answer is, yes I get a discount on tile because I purchase a lot of tile and am a steady and guaranteed customer to the tile manufacturer. However if you want me to pass the discount along to you, all you need to do is select your tiles as you normally would and instead of being done with the process, you will now need to 


Place the order for the tile -making sure you are getting exactly what you need. Make sure you double check the sku numbers and verify the quantities.
Pay for the tile
Go back a week later to pick up the tile when it comes in
Make sure you verify the order is correct, check every box for damage and verify colors and die lot numbers are correct, because you are now responsible for the quality of the product, not us.
Bring tile to job site and have it stacked and accessable in the order it will be installed
Deal with any issues that come up such as broken tiles in the middle of a box and being short.
Please make sure you understand the paragraph in the contract you signed about work stoppages caused by customer supplied material defects.

I haven't seen a customer born yet that will go through what we go through for the discount. They understand the mark-up and why it is legitimate.

Like I said, I'm not saying that you have to mark up materials, you certainly don't. But material mark-up is legitimate 99% of the time and not just something - some contractors get away with.


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## dsnAK (Feb 26, 2005)

Absolutely Mike...




Mike Finley said:


> [*]Please make sure you understand the paragraph in the contract you signed about work stoppages caused by customer supplied material defects.


I am trying really hard to not install owner supplied materials. Many people show up with inferior products that can never be installed correctly. I hate call backs due to inferior products - like the 8' steel french doors hung on 5/8 FG stock for the jamb my friend bought from Lowes - they hardly had it off the truck as we watched the jambs spliting at the hinges.

I turn down every job that includes owner or contractor supplied cabinets from HD or Lowes. I can not mark them up enough to cover the PITA factor - I have yet to see a cabinet delivery arrive w/o damage. I buy alot of my products in WA and have them shipped up if I can not get them at my only supplier who is very good, but does not have everything.

My niche up here is getting things that are not available locally, no HO is going to go through the hassles I do and no one ever questions my mark up.

The best part about contractor supplied materials is that I put them all on a CC and pay it off every month - the airline miles have taken me all over the world.


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## Mike Finley (Apr 28, 2004)

Maj - you might not be able to mark up 50%, but I'll bet your customers would tolerate some sort of mark-up, even if it was only 15%. Most people understand the right for a man in business to make money - they just don't want you making all your money off of their one job!


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## Mike Finley (Apr 28, 2004)

dsnAK said:


> The best part about contractor supplied materials is that I put them all on a CC and pay it off every month - the airline miles have taken me all over the world.


:whistling Hush now, before everybody figures that one out! I'm getting a free big screen this year off of my CC miles, and am shooting for two free airline tickets to Europe for next year for our 10th wedding anniversary. :clap:


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## dgbldr (Apr 4, 2006)

No customer-supplied materials unless it's something extremely odd or peculiar, like installing an antique family heirloom of some sort. I would have to mark up their materials more than mine just for the pita factors described by others.

Occasionally I get requests from customers to supply their own materials. So I ask them what other businesses they deal with on that basis. Do you take your own steak to the restaurant and ask them to cook it for you? Do you bring parts to your car dealer and ask them to install them? Do you take flour to the bakery? Do you bring your own sutures to surgery?

Bottom line, when a customer thinks they can save money by cutting out my markup on materials (which they really don't anyway because they can't buy at my prices), I walk away regardless. That mentality is a telltale of other problems looming down the road. 

DG/Builder


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## lou_tamba (May 7, 2006)

If I have to tell my client to buy their own materials that would be unbeneficials for me.
I have to mark up my materials. Thats why i have specials account at my supplier. it's my profits.


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## Joasis (Mar 28, 2006)

Geez, there it is again. I am responding to this, then I think I will stay off of the forums, I am getting tired of being hammered for an OPINION!

Pirates was referring to our local rip off agents...not to people who mark up material, a legitimate practice. I mark up material if I buy it. I don't use customer supplied material, I order what I want from my supplier, and the customer pays for it.

I was not suggesting only "some" contractors get away with it. I can do it if I choose to, and like our opinions, I can have my own choice, right or wrong, to do what I wish to do, and I choose not to purchase materials.

And lastly, I am not sticking my nose in the air about anything. I really don't believe I am one of the primma donnas on this forum, I have yet to criticize any members, or chastize anyone's opinion. If you think I am preaching from the pulpit for some just noble cause of the downtrodden homeowners ripped off by the unscrupulous contractor, then I am heartliy sorry and apologize for zinging anyone's feelings....geez.


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## Kristina (Apr 21, 2006)

If you meant no offense, that's cool. I'm just telling you how it may have come across to other people. Just figured I would clarify.

I never said for one second what you should be doing, if it works for you, that's all that matters right? 

Again, it's different markets, that's all. 

I'm sure there is a formula to build the extraneous costs into our labor costs,but then people around here would scream about how hight the labor quotes were.  This way just works for us.


Mike, I agree with everything you said 100%!!



joasis said:


> Geez, there it is again. I am responding to this, then I think I will stay off of the forums, I am getting tired of being hammered for an OPINION!
> 
> Pirates was referring to our local rip off agents...not to people who mark up material, a legitimate practice. I mark up material if I buy it. I don't use customer supplied material, I order what I want from my supplier, and the customer pays for it.
> 
> ...


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## maj (Mar 13, 2006)

maj said:


> If I were to break the mold and charge what some of you do, and heaven forbid, add 50% markup on materials,......... I would be out of business immediately!!!!!!!! People around here are fully aware of what materials cost and absolutely would not go for a contractor adding anything for markup. They'll find someone else who will do just labor.
> 
> I am fully aware of how contracting is SUPPOSED to work, but it just doesn't fly around here!!!!:no:
> 
> OK, go ahead and beat the $hit outa me, I'm ready this time..:boxing:


I reread my post, this may be where the misunderstanding is. I, by no means, was implying what you guys do was pirating or ripping off the customer. I said I know how contracting is SUPPOSED to work because, I get all the magazines you guys do and read all the info on the net, etc. So I am fully aware of how to run a business!! Please don't go through how to markup & add profit, I KNOW ALL THAT ALREADY!!!. What I was saying is that the area I live in does not follow the standard operating procedure.... Lord, I wish I could mark up, even 20%, but the people around here are penny pinchers... The way it usually works by having their materials on hand, I adjust my labor rates for the pita factor...



> The answer is, yes I get a discount on tile because I purchase a lot of tile and am a steady and guaranteed customer to the tile manufacturer. However if you want me to pass the discount along to you, all you need to do is select your tiles as you normally would and instead of being done with the process, you will now need to
> 
> Place the order for the tile -making sure you are getting exactly what you need. Make sure you double check the sku numbers and verify the quantities.
> Pay for the tile
> ...


Mike, that's it exactly...... the people here are that way....They would rather get the best material discount and pay the contractor whatever it takes to make it work.... I could fill a page on the experiences I've had doing this


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## Mike Finley (Apr 28, 2004)

joasis said:


> Geez, there it is again. I am responding to this, then I think I will stay off of the forums, I am getting tired of being hammered for an OPINION!
> 
> Pirates was referring to our local rip off agents...not to people who mark up material, a legitimate practice. I mark up material if I buy it. I don't use customer supplied material, I order what I want from my supplier, and the customer pays for it.
> 
> ...


Sorry you take it personally. I would suggest you don't post either if you are going to be offended by anybody who has an experience that is different then your own. The forums are about information, there are always two or more sides to everything and if you feel you are being hammered or chastized everytime somebody says something that is contrary to yourself or in reallity is only using your post as a springboard to add to the discussion then you probably should avoid posting, it isn't worth the stress to yourself nor to others to have to continuolsly read post after post of somebody crying they are being abused.

I personally wish you would post only in agreement with everything being said here, because I feel chastized and hammered everytime you post something that is in disagreement with the herd and offers another opinion or viewpoint that might benefit myself or someone else. :w00t:

There is also an ignore list on your user CP. You can simply add my user name to it and you won't ever see another one of my posts. Cut and paste "Mike Finley". (Control -C, then press control-V)


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## Mike Finley (Apr 28, 2004)

maj said:


> Mike, that's it exactly...... the people here are that way....They would rather get the best material discount and pay the contractor whatever it takes to make it work.... I could fill a page on the experiences I've had doing this


Maj, I know what you are feeling, I've been there myself. I moved in 1994, I couldn't stand my services and skills being looked at like a commodity, - people looking at my services the same way they look at gasoline, nothing different between one gas stations gas or another so why not just buy at the cheapest place? The situation not only is tough on a business to operate profitably, but worse it destroyed my sense of self-worth and I kept seeing the "why bother" mentality keep creeping closer and closer into my work ethic.


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## A+Carpenter (Apr 19, 2005)

Kristina said:


> We live in an area with a bunch of overpaid pencil pushers who move out to the "country" to "get away from it all".
> 
> They wouldn't know the difference between a 2x4 and a 2x6 even if they were accountants. Seriously, a buncha stupid smart people out here.


:whistling :whistling :whistling :whistling :whistling Your post is rated number one in my day.


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## A+Carpenter (Apr 19, 2005)

maj said:


> I said I know how contracting is SUPPOSED to work because, I get all the magazines you guys do and read all the info on the net, etc. So I am fully aware of how to run a business!!


I never read no books. All my battle scars where earned with hammer in hand. 

:thumbsup: :thumbsup: :thumbsup: :thumbsup:


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## Kristina (Apr 21, 2006)

A+Carpenter said:


> :whistling :whistling :whistling :whistling :whistling Your post is rated number one in my day.


:thumbsup:


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## Bone Saw (Feb 13, 2006)

Mike Finley said:


> See dude - this is where you lose it...
> 
> 
> 
> ...


Word 4 word, totally agree, reading comprehension is a must to gain from and/or contribute anything in a forum.


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## Bone Saw (Feb 13, 2006)

nadonailer said:


> Materials
> Labor
> Overhead
> Profit
> ...


words right out of my mouth


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## Bone Saw (Feb 13, 2006)

maj said:


> Materials are delivered, I don't get them or pick them up.
> I don't select the materials
> I don't haul materials, if I do I'm getting paid damn good for it!!
> I absolutely don't store materials
> ...


word 4 word:thumbsup:


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## Mike Finley (Apr 28, 2004)

maj said:


> Yes, I UNDERSTAND all that Mike....
> 
> 
> 
> ...


I thank you for your details, and I will once again give the benefit of the doubt that you are just shedding light on your operation, because if you aren't and you are defending your business policies you don't have to. If it wasn't clear in anything I said, then I will state it clearly once again. 
This is the facts of the contracting world -_ (I know because I came down from the mountains with this stuff on some rock tablets I found up there.)_

#1 You can mark-up or not, that is your choice. 
#2 Mark up is not a rip-off to a customer. Mark-up is legitimate.

Now everybody here can give opinions on #1 and #2 but it won't change that #1 and #2 are written in stone and are facts. Somebody who doesn't want to mark up for whatever reasons they have - market won't support it, they don't agree with the policy, don't think they are able to justify it, is fine but they can't support their position by saying #2 is false.

Now just to start the ball rolling here is my position based upon the way I do business and the type of business I'm in which might differe from yours...




> Materials are delivered, I don't get them or pick them up.
> I don't select the materials
> I don't haul materials, if I do I'm getting paid damn good for it!!
> I absolutely don't store materials
> ...


We do do all of the above and while we don't warranty over a manufacturers warranty. If cicumstances arise that a manufacturers warranty is called into play, I can be pretty much 100% certain that I will be spending time with the customer in order for them to reach that conclusion. Customers rarely find something wrong with a product installed by a contractor and don't call the contractor first. Maybe others don't run into this but I certainly do and I want it that way. I never want to position my company as an installer. We offer a total solution from start to finish, and maybe that is part of the reason why it is so easy to charge way more than others do, including marking up materials?

Mark up good or bad? I don't really care either way, but I'm certainly not going to light $50,000 a year in pure profit (_and growing!), _hard cash on fire, no-way no-how. I like money too much, especially easy money.


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## DecksEtc (Oct 27, 2004)

Mike,

Your position is valid, especially for your market (that is what you know, after all). For myself, I don't have a specfic percentage of mark up calculated into my materials but I do take into account ALL of the work it takes to get that material to the site. For example, the majority of the time I have all my lumber delivered on site. I pick up everything else - screws, saddle brackets, joist hangers, nails, sonotubes, etc, etc. Now, like I said, I don't have a specific percentage that is added to all the materials but I do take into account the time it takes me to create my material list, order the lumber and pick up all the other supplies. For me, I factor all of this into my square footage/linear footage pricing. So far, it has worked for me.

Also, I'm glad to see that Mike got this thread more or less back on topic. Honestly, I never saw anything that said that anyone's method was "right or wrong" compared to someone else's - just a lot of constructive opinions about how people do things in "their own market".

I think the phrase "to each his/her own" is extremely relevant to this whole topic! Let's move on folks!


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## Nathan (Jul 21, 2003)

OK, this thread is closed.

Why don't we just stick to the topic... report bad posts... and/or Private Message people who you have a problem with.

Specific problems with specific people are usually handled best via PM.


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## Nathan (Jul 21, 2003)

Actually.. I take that back. I'm leaving this thread open but removing the bad posts.

I think everyone will understand why.

Thanks.


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## A+Carpenter (Apr 19, 2005)

Nathan said:


> Actually.. I take that back. I'm leaving this thread open but removing the bad posts.
> 
> I think everyone will understand why.
> 
> Thanks.


HOLY COWBOYS YOU HAVE A BUTTONfftopic:


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## A+Carpenter (Apr 19, 2005)

I was just gving Nathan a hard time,


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## Mike Finley (Apr 28, 2004)

Damn, this thread is open then it's closed, then open again... worse than a 18 year old CT.


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## Tscarborough (Feb 25, 2006)

While ignoring the bile, I have been thinking about what *I personally* would consider a fair advance on a custom home. Arranged through the bank, I would have no problem with a 30% deposit, nor would I have a problem paying the interest on that loan as funded by the bank. I would expect that 30% deposit to carry through to 30% completion before the next draw, though.


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## Kristina (Apr 21, 2006)

Tscarborough said:


> While ignoring the bile, I have been thinking about what *I personally* would consider a fair advance on a custom home. Arranged through the bank, I would have no problem with a 30% deposit, nor would I have a problem paying the interest on that loan as funded by the bank. I would expect that 30% deposit to carry through to 30% completion before the next draw, though.



Seems absolutely reasonable. Any builder who can't work within those parameters, might reconsider how they structure their payment schedule.

What is an "18 yr old CT" :help:


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## realpurty2 (Aug 18, 2005)

Kristina said:


> What is an "18 yr old CT" :help:


Shew, I thought I was the only one on here wondering the same thing. lol 

So wise ole men folk, enlighten us. What is an 18yr old CT?


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## Mike Finley (Apr 28, 2004)

realpurty2 said:


> Shew, I thought I was the only one on here wondering the same thing. lol
> 
> So wise ole men folk, enlighten us. What is an 18yr old CT?


I should have said this thread opens and closes more often than the *legs *of an 18 year old CT.

CT =







+ *TEASE*


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## realpurty2 (Aug 18, 2005)

lol, ok, that I understand. Here it's a PT not a CT. I behave now.. back to topic.


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## Kristina (Apr 21, 2006)

Yes, mentioning the legs might have helped.

I live in CT though, so I was trying to figure that one out. :whistling


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