# money up front



## A-Bulb (Jan 27, 2008)

Is it unprofessional to ask a builder or customer for say 10% of contract price to help cover material cost? I havent done this But would really like to :smile:. What do U think?


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## mpvoss (Nov 29, 2005)

I always ask for 30 percent upfront. I have had to many people back out after I get the materials ordered. This way it commits both the ho and you to the project.

Marlin


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## ultimatetouch (May 27, 2006)

I usually get 20-30% up front, this is pretty normal most places. Some states regulate how much you could take as a downpayment. THe more money you get the less chance you have of getting screwed by a crazy customer. Which they dont come up often but you want to be in the drivers seat when they do. Always get money up front or you have a good chance of someone taking you for a push over. No offense but thats stupid not to get at least enough to pay off all your materials and then a little labor. The downpayment should also depend on your material costs. If it was going to cost me 50% for materials then I would at least be asking for that.


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## tnt specialty (Apr 19, 2007)

I have to admit, I was surprised at the apparent popularilty of the practice.

In 25 yrs. I've NEVER asked for a dime up front.......If I thought someone wasn't going to pay me, why in the world would I want to enter into such a stressfull situation? Not to mention the fact that, by the mere act of asking for money up front reflects financial incompetence, as well as mistrust....two very undesireable situations that I'd rather avoid, thank you very much!


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## MattCoops (Apr 7, 2006)

We take a third up front, unless cost of materials is more, in which case we take that.


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## BuiltByMAC (Mar 11, 2006)

A-Bulb said:


> Is it unprofessional to ask a builder or customer for say 10% of contract price to help cover material cost?


 If you give them a contract that has a payment plan spelled out, including an earnest money or deposit payment, that's completely professional. It's only unprofessional if done in an underhanded way...or if you take the deposit and run. 



tnt specialty said:


> Not to mention the fact that, by the mere act of asking for money up front reflects financial incompetence, as well as mistrust....


Actually, it's asking for fair trade. Hopefully, your reputation precedes you so the HO will have no problem making a deposit to be put on your schedule. The upfront cash commits them to the project. If your method has worked for you for 25 years, by all means continue what you're doing. Obviously, you've figured out how to survive without getting a payment up front. But I don't agree that asking for a down payment reflects financial incompetence, nor mistrust.

I trust all my HO's, I still make them sign a contract though. I am financially competent, I still make them invest in and commit to the project. I'm not a bank, I don't lend money.

Mac


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## ChrWright (Jul 17, 2007)

tnt specialty said:


> ...by the mere act of asking for money up front reflects financial incompetence, as well as mistrust....two very undesireable situations that I'd rather avoid, thank you very much!


 Are you kidding me? That's complete and total BS when said as an absolute for every project regardless of size and cost.


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## orson (Nov 23, 2007)

tnt specialty said:


> I have to admit, I was surprised at the apparent popularilty of the practice.
> 
> In 25 yrs. I've NEVER asked for a dime up front.......If I thought someone wasn't going to pay me, why in the world would I want to enter into such a stressfull situation? Not to mention the fact that, by the mere act of asking for money up front reflects financial incompetence, as well as mistrust....two very undesireable situations that I'd rather avoid, thank you very much!


Its not my job to finance the project for my customer. I don't charge my customer debt service costs so I expect the money for materials basicaly at the time I order them. In the long run this saves the customers money as I can take advantage up price leveraging by having cash in hand to pay for the supplies. In summation, I don't think there is anything whatsoever wrong with covering my own ass so I don't get hung out to dry with a materials bill I can't pay because I got no deposit. What you call mistrust I call prudence.

www.rubycon.us
Ruby Construction LLC 
Lancaster Kitchen Remodeling
Lancaster Bathroom Remodeling


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## tnt specialty (Apr 19, 2007)

This subject typically get's alot of people fired-up and defensive!

Likewise, I would never pay anyone "up front"....
They're paid promptly the applicable method once the service is rendered.

It's JMHO, but it's these type of practices that simply add to the general public's view of the degradation/character image of the typical contractor.

There ya go....chew on that awhile.......blast away!!!!!!


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## ChrWright (Jul 17, 2007)

It's a waste of time to rehash an old argument. Anyone new to this should read the following:

http://www.contractortalk.com/showthread.php?t=24427


SSDD


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## Double-A (Jul 3, 2006)

When you buy tickets to a concert, you pay before hand. When you fly on an airline, you pay before hand. When you go to a museum, amusement park, order a hamburger at a fast food restaurant, purchase a newspaper, you pay before hand. 

Why is it OK for these people to charge you something before delivering goods and services and not a contractor?


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## kevjob (Aug 14, 2006)

we get all materials at time of signing so we can order everything before projects starts. usually we start 3-4 months later.


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## john elliott (Oct 23, 2005)

tnt specialty said:


> This subject typically get's alot of people fired-up and defensive!
> 
> Likewise, I would never pay anyone "up front"....
> They're paid promptly the applicable method once the service is rendered.
> ...



That's sound like trolling to me

John


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## Standstrong (Apr 18, 2006)

10% of proposal due at time of contract signing.
This 10% is non refundable, and secures next spot in schedule.
If they back out then, you are all over the place trying to move up the next job, so the 10% compensates the time it takes to maneuver it all around.

50% of remaining monies upon start date with a drop of materials, and I usually pull my trailer to the jobsite. 
I do not pay for materials and it is on credit with my vendors.

The final payment is the remaining 50% of the contract price. If they are any discrepancies of payment then the vendors and myself would lien the property for the remaining money owed for materials, and contract price.

I have never had to utilize the lien. But probably should have once. 
A friend of mine has a lien he fills out every time he starts a job and fills out the lien waiver and hands it to the customer when they pay. 

I typically don't ask for any money if the job is under 2000 dollars, but I almost always work from referrals with small jobs.


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## tnt specialty (Apr 19, 2007)

Double-A;

Your talk'n apples n' oranges.....

I suppose it has to do with commoditiy type items vs. more skillful sensititve items/services; Also the provider's integrity/confidence.

One doesn't typically pay in advance for say, a haircut, dinner at a fine restaurant, when you go to the dentist, or say, for family portraits.

JHMO......again

If one feels they need money up front, then so be it......The more of our competitors that do..... just makes the sell easier for us!.....Just sharing my thoughts.....as you all do........


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## Double-A (Jul 3, 2006)

My point was there are plenty of things in this life that you must pay for before you receive them.

That being the case, it seems less reasonable that paying for something before services are rendered is a warning sign, a sign of financial decrepitude, insolvency or would degrade anyones perception of a legitimate business conducting itself in this manner than you are making it out to be.

If you don't do it, more power to you. However, I'm not in the business of conducting business for free. I do not build on spec. 

Many of us are involved in multi-thousand dollar jobs. Sometimes several at once. There is no way we can tie up assets for the duration of a job by waiting until completion for payment. It's just plain silly. 

Feigning noble indignation at this practice is insulting on many levels, not the least of which is practical experience. Those of us that practice this technique are no less legitimate or trustworthy than those of us that do not. I resent the implication.

If that was not what you intended, I apologize.


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## ChrWright (Jul 17, 2007)

Give me a break, Tom...You're just trying to get a rise with your holier-than-thou, "integrity/confidence/professional" crap.

Your personal preferrence is your personal preferrence. That's fine. But don't say it's your "Humble Opinion" when you insult the rest of us with snide comments like that and expect a free pass. 

We get the point. Your USP is that you don't take deposits.  

You sound a lot like the guy who'll tell you "Why, we don't really need a contract do we? No money up front. I'm an honest guy, straight forward. My word is my bond. I know how to take care of people..." yadda, yadda, yadda.

Here's a tip kids--run, don't walk, when you here that kinda talk. 

Anyone that has to go out of their way to tell you how professional, ethical, etc. etc they are.....

"Me thinks thou doth protest too much..."


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## tnt specialty (Apr 19, 2007)

Sorry also for the missunderstandings........

I thought the issue was "up front" money....Money prior to delivering anything. 

Of course we require monthly progress payments, as most contractors do.

I just feel taking money "up front" is a bit tacky.......and the fact that not asking for "up front" money, might add to their credibility.

I know as a GC, over the years, on rare ocaisions, I've had to deal with a sub that is more concerned/obsessed with collecting their money than they are in providing a quality service. It's downright discusting; The relationship typically comes to a screeching halt.


How's that?


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## Double-A (Jul 3, 2006)

If you have a contract, verbal or otherwise, that means you've invested time and effort in that job. Accepting 10% before the job starts isn't 'money prior to delivering anything'. 

You're already invested, why shouldn't your client be?


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## mahlere (Aug 6, 2006)

this is why you take a deposit...to avoid these situations


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## ChrWright (Jul 17, 2007)

rjordan392 said:


> I do not have a trade;


 
I find it a bit pressumptuous then for you to say whether or not someone "deserves" a markup, when by your own admission you haven't run a successful business.

The very word "deserve" has no place in this discussion in the first place, and demonstrates a lack of business accumen. The contractor-client relationship, as with any business relationship, is about an exchange of value. You don't see that value, because you've never had to be the one responsible for ordering those materials for a project--ordering the RIGHT stuff, ordering the right quantities, managing lead times, getting it to the jobsite, securing it from theft & damage, replacing it if it is, chasing down reps when there are problems, etc etc etc.

It's no wonder so many contractor businesses fail with attitudes like this floating around. Your most important job in the service of your clients is TO STAY IN BUSINESS. Fail, and you fail your clients: past, present and future.

I find all of this "elite", "upper echelon", "we who are above you all do it this way" BS absolutely hilarious. We get it, you see yourselves as superior to the rest of us because you don't take money up front. Bully for you. You can position and sell yourself however you want.

But frankly, your attempt to demonize the practice as dishonest and abusive to the customer comes off a little insecure. We're talking mountains and mole hills here. If the choice is between you and I, and the major issue between us is the deposit--you can have the job. (And only a contractor who's been in business a few years, and taken a few licks, will appreciate what I'm really saying there.)


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## rjordan392 (Feb 9, 2005)

Call me when you are hungry.


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## ChrWright (Jul 17, 2007)

_"I'll do the very best I can, the very best I know how, and I mean to keep doing so till the end. If the end brings me out all right, what is said against me won't amount to anything. If the end brings me out wrong, ten angels swearing I was right would make no difference."_

*A. Lincoln*


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## Mike Finley (Apr 28, 2004)

rjordan392 said:


> Call me when you are hungry.


Can you remind us again why you are allowed to be here on a contractors only forum?

I apologize in advance if I missed something, but I got the impression looking at your older posts that you aren't a contractor, and your responses to this thread seem to verify that.


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## rjordan392 (Feb 9, 2005)

I am entitled to be on this forum because I was a former businessman. As for the statement of me lacking business acumen, has nothing to do with business failure. Its all about supply and demand for services. Large business's will lay off workers if that does not stay healthy. Smaller business's like mine usually go under.


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## Tiger (Nov 21, 2007)

To the OP I'm as flexible as I can afford to be with clients. In general if it's under a day of work I wait until completion for payment. If it's over a day I have an advance and final. Sometimes the client will pay for the whole contract in advance if it's a 2 or 3 day job. If it's an addition I have an advance, rough and final. If it's commercial it's usually net 30 days. I once had a client sign a contract and never called to start the job. In effect, without the advance we didn't have a contract. The advance seals the deal. If someone objected to an advance, feeling that they hadn't received any value yet I'd offer to wait for that payment until I delivered materials, or after the first day of installing. Of course for my own protection any missed or refused payment stops the project or any future work with that client.

Dave


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## tnt specialty (Apr 19, 2007)

rjordan392 makes a valid point; If one is demanding money "up front" for materials, then yes, one wouldn't expect a "mark-up", as the contractor has no carrying expenses.

BTW; Been in biz 25 years this May; The only time i ever asked and received money up front was when I had the homeowner pay for materials upon delivery, due to the fact I was just starting out and had no operating capital to speak of. After the first couple of jobs, I was able to stand on my own two feet; Didn't need to go there anymore. I was forever grateful to the understanding of those first few customers.

I am quite surprised at the apparent popularity of requiring deposits.


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## john elliott (Oct 23, 2005)

tnt specialty said:


> I am quite surprised at the apparent popularity of requiring deposits.



Do the explanations people have provided mean nothing to you? Perhaps that is why you are surprised, because you are just unable to accept their explanations. Why do you think that is?

John


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## Brock (Dec 16, 2007)

To the OP. We always take 50% down (no exceptions=our policy) and at least two more progression payments with bal. due the same day as completion.

*WARNING;*

I will warn you that since you are getting all your profit up front and then some, be very careful spending on vacations, trucks, trailors etc, without being absolutely sure you know how much your costs will be before you blow any of that money. It's easy if you only have one job going, but at times you might sign 4 jobs in a week and receive 50 or 60 thousand in those down payments and you think you will be ok paying cash for that new dually since its only 40k. Then 6 weeks later here comes the lumberyards bill for another 40k and it's too late to realize you underbid all 4 jobs and don't have the money to finish any of them.


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## Mike Finley (Apr 28, 2004)

tnt specialty said:


> rjordan392 makes a valid point; If one is demanding money "up front" for materials, then yes, one wouldn't expect a "mark-up", as the contractor has no carrying expenses.


Where is it written that a mark up is connected to carrying expenses?


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## ultimatetouch (May 27, 2006)

TNT,

PEOPLE GET PAID TO FINANCE PROJECTS. Ther called bankers, mortgage lenders, etc. ITs unprofessional to not take money up front.


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## rjordan392 (Feb 9, 2005)

Better yet! Where is it written; its ok to markup on the customers own money. You want a markup, then be a stocking distributor of the materials you supply. In most cases, someone else is already the stocking distributor which leaves you with a delivery charge to the customer which should be acceptable to him.


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## Brock (Dec 16, 2007)

ultimatetouch said:


> TNT,
> 
> PEOPLE GET PAID TO FINANCE PROJECTS. Ther called bankers, mortgage lenders, etc. ITs unprofessional to not take money up front.


Would any of you people like to have Home Depot or Lowes install a brand new kitchen for you?

If so, you will give them 100% upfront. Call them and check if you don't believe me. I have installed for both. Oh, and by the way, millions (YES I SAID MILLIONS) of people are more than happy to pay it all up front and do.


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## ChrWright (Jul 17, 2007)

rjordan392 said:


> I am entitled to be on this forum because I was a former businessman.


With all due respect, this is "Contractor Talk", not "Former Businessman Talk"...


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## Mike Finley (Apr 28, 2004)

rjordan392 said:


> Better yet! Where is it written; its ok to markup on the customers own money. You want a markup, then be a stocking distributor of the materials you supply. In most cases, someone else is already the stocking distributor which leaves you with a delivery charge to the customer which should be acceptable to him.


That is called a spread or a profit.

*Wholesale / Retail*

Customers make retail purchases from us, we make wholesale purchases from our suppliers.

We buy it at wholesale prices and sell it to our customers at retail prices. 

Where anybody comes up with this "stocking distributer" jive, I have no idea.

I can stock it myself, I can have my distributer stock it and I'll pick it up and hold it for 10 days or maybe just 10 minutes, or maybe even order it direct from a distributer and have it shipped directly to my customer, but no matter how it's done, the customer will pay retail and I will pay wholesale and the difference is the spread or a profit.

Believe me, more power to anybody that wants to wholesale materials to customers, go for it and enjoy. Why you would I have no idea, but if it helps you sleep at night to give up tens of thousands of dollars in profit each year, more power to you.


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## rjordan392 (Feb 9, 2005)

The spread or profit on sales, in my opinion should be reserved for business's that rely on sales only for their income and those contractors that stock the materials. That's called a vested interest. In a recent post, I gave a situation whereas the owner of a hvac company told me that his technicians could not find anything wrong and that the compressor was working as it should. I did not complain about the compressor. I told him that the commands I imputed on the thermostat were somehow being misinterpreted by the furnace controls and the compressor is only responding to whartever signal it receives. That was my guess. Afterwhich the owner said he could not do anymore for me. He never bothered to go over the installation procedures to double check everything. I had to go over the installation manual myself to look for clues and found it. Then I contacted the main headquarters to get the email and phone number of the district manager of my area for "Bryant" products. I told him that the dealer was not cooperating to meet my satisfaction and I needed him to come to my house with a technician. After explaining the problem, the district manager said he was almost certain what was wrong. When they both came, did a bit of testing and then the manager said, a thermal expanasion valve should have been installed which was the clue that I found also. Now here is a contractor who boasts 35 years in business that screwed up and caused me grief for two years and I paid a markup on his materials on a $4500.00 job. What a crock. 
So from now on, any contractors I hire get a delivery fee, cost's and labor and nothing more. Fortunatly for me, that I can do most of the repairs around the house.
I know my rant is not going to change anybodys way of doing business and I am not going to change mine.


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## The Stairguy (Feb 10, 2008)

Hello my name is ROLe, The Stairguy. I have to tell you, before I even touch a project I get half down immediately. I make a very explicit contract, telling the customer what I'm going to do for them and what I want in return. The reason is, life goes on and so do your bills. By the time I get my project out to the home they will owe me more than I owe them. Remember, you have to pay material expenses, pay labor, insurance, what ever. You are not the bank of ABC Company, you are a small contractor and you should be paid for your labor and your materials up front so you can live, make your payments and honor your commitments to other people. When you deliver your project you should get another portion of the amount owed and when you're done, if you've done a good job, you should get paid the rest. You must be a person of principle, do not back down from your demands. When it comes to a fair contract, stand by your resolve. In business the only thing you have is your integrity. If it is questioned, it's time to move on and find another customer. I have been in business, successfully, for over 25 years and when a customer tries to re-negotiate my contract, I don't budge. If they want what I have to offer they will comply with my demands and if they won't, again I say, it's time to find another customer. The reason I say this is, when it comes time for the final payment will customer that tried to mess around with your contract and try to renegotiate and new deal at the end? A deal that may not be in your favor. I never trust my customer past my contract because people are going to be people and if they feel any kind of weakness in you, you will have problems. I trust my contract as you should trust your contract. This may sound harsh, but business is business and love is bullsh*t. What I mean by that is you have to keep any emotion out of your business. Once you let it in and you become friendly with your customer, versus just keeping the relationship professional, I guarantee you the customer will eat better and you will eat less. ROLe, The Stairguy. www thestairguy com


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## ChrWright (Jul 17, 2007)

rjordan392 said:


> ...So from now on, any contractors I hire get a delivery fee, cost's and labor and nothing more. Fortunatly for me, that I can do most of the repairs around the house.
> I know my rant is not going to change anybodys way of doing business and I am not going to change mine.


You're not going to change yours? You've already admitted you're not a contractor. :blink: 

You're speaking from one bad experience--as a consumer. You sound like the man-hating, jilted lover; who judges the entirety of mankind based on one bad experience. 

Consumer advocacy: yes. 

Professional business advice: no. :no:

Admitedly, your post demostrates a not uncommon attitude: Everyone, and I mean EVERYONE, can relate at least one horror story about a contractor--either from first hand knowledge or a story passed to them by someone close. Unfortunately, there's a reason for the somewhat checkered reputation our industry has among homeowners. The few bad apples put us all in a bad light and make the task of earning our clients' trust all the more difficult. 

I'm all for consumer advocacy and educating the public on protecting themselves from unscrupulous contractors. But the distinction: taking a deposit = evil contractor, is inaccurate as an absolute. 

Should you give front money to someone who is a complete unknown--without checking references and reputation, years in business, etc etc etc--No. 

But there are many of us who are not unknowns--who have spent long years and numerous projects establishing a reputation of good service to our clients. Understand, you've seen us react so strongly to this argument because our reputations are our life blood. To pressume that we are abusing our clients by taking deposits is a slap in the face and an affront to everything we have worked so hard to establish.


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## Mike Finley (Apr 28, 2004)

rjordan392 said:


> The spread or profit on sales, in my opinion should be reserved for business's that rely on sales only for their income and those contractors that stock the materials. That's called a vested interest. In a recent post, I gave a situation whereas the owner of a hvac company told me that his technicians could not find anything wrong and that the compressor was working as it should. I did not complain about the compressor. I told him that the commands I imputed on the thermostat were somehow being misinterpreted by the furnace controls and the compressor is only responding to whartever signal it receives. That was my guess. Afterwhich the owner said he could not do anymore for me. He never bothered to go over the installation procedures to double check everything. I had to go over the installation manual myself to look for clues and found it. Then I contacted the main headquarters to get the email and phone number of the district manager of my area for "Bryant" products. I told him that the dealer was not cooperating to meet my satisfaction and I needed him to come to my house with a technician. After explaining the problem, the district manager said he was almost certain what was wrong. When they both came, did a bit of testing and then the manager said, a thermal expanasion valve should have been installed which was the clue that I found also. Now here is a contractor who boasts 35 years in business that screwed up and caused me grief for two years and I paid a markup on his materials on a $4500.00 job. What a crock.
> So from now on, any contractors I hire get a delivery fee, cost's and labor and nothing more. Fortunatly for me, that I can do most of the repairs around the house.
> I know my rant is not going to change anybodys way of doing business and I am not going to change mine.


I get approached by customers like yourself from time to time, they all have the same sickness the "step over dollar bills to pick up pennies" disease ... I'm a member of direct buy... I'm a member of a buying group... I have a $3000 credit at Home Depot... if you give me a material list I can buy all the materials... what's the mark up... how much money can I save by buying this or that myself?

About 20% of them are converted to customers, if they are receptive to a conversation that explains the short sightedness of their short-term *percieved* "savings" plan. I'm not going to go into the details of that conversation, real contractors, running real business know every word of it already and know how customers like that are shooting themselves in the foot in the long run.

rjordan392;375019 - the fact that you hired a sh**ty contractor has nothing to do with his mark up methods, the brand of tools he used, the color of his skin or the make of his truck. You hired a sh**ty contractor plain and simple.

What you are talking about as far as mark ups and such really boils down to is basically buying on a price or buying on value.


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## tnt specialty (Apr 19, 2007)

Brock; Home Depot and Lowes? Now there's some credible outfits!
The typical people we deal with with never dream of having either one of those shysters do any work for them!

I wouldn't even mess with those types.....Therein is another aspect; We're not "salemen", we're contractors. Just about all of our work is referral. I suppose that could be contruse as a form of marketing alos.....But that's what it is......primarilly due to Colorado's lack of contractor licensing, we must exist amongst a sea of either dip-sh!!ts or cagy/unscrupulous types....

We're just in different world, so-to-speak. To each his own.....


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## ChrWright (Jul 17, 2007)

tnt specialty said:


> ...Any-old nucklehead can simnply bid high...and to dupe a customer into paying more for something via a silver-tongue isn't exactly an admirable skill to some. Of course alot will dissagree on this forum...To most,, I believe, the "sale" is everything.


More baiting...  Keep on shooting from the hip...they say even a broken clock is right twice a day. Maybe eventually you'll come up with something that makes sense.


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## Tiger (Nov 21, 2007)

Nothing happens without sales.

Dave


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## GSE (Aug 24, 2007)

tnt specialty said:


> john elliott; You've touched on one of the key factors of a successfull contractor.......Delivering a quality product at a competitive price....Isn't that what it's all about to the consumer?
> 
> All the belly-aching about competitors that "bid too cheap"......I would agree if they're unethical or cheating, that's wrong...However, if they're just plain old better, (proficient at what they do)....., well then....., that's the way it goes....
> 
> Any-old nucklehead can simnply bid high...and to dupe a customer into paying more for something via a silver-tongue isn't exactly an admirable skill to some. Of course alot will dissagree on this forum...To most,, I believe, the "sale" is everything.


Yup your right, last week we were at home replacing flood lamps, when a strange truck with a funny looking crane pulled up, next door, seems the neighbor was having his roofing replaced, we watched as the workers went up on the crane boom and remover the old roof in minutes, and were installing the new roofing in just a few hours, when they came took a break we were talking to them, they said since they bought yhr machine they are doing more jobs in less time, there by getting more jobs, and making more money on every job


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## skyhook (Mar 17, 2007)

GSE said:


> we watched as the workers went up on the crane boom and remover the old roof in minutes, and were installing the new roofing in just a few hours,


 Obviously without a permit or sheathing inspection. Happens all the time, usually on weekends.

Even good clients don't pay in a bad economy, excuses are like Adam Henrys....... 
time to adjust the business techniques, it's going to be a sink or swim enviorment. :boat:


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## tnt specialty (Apr 19, 2007)

Chrwright....It's amazingly easy to flush em' out....... LOL


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## O.C.Inc. (Jan 21, 2008)

I did not read every post in this thread... but in California I am forced to use a "Home Improvement Contract" Which MUST include many things such as the phrase "down payment or deposit may not exceed 10% or $1000, whichever is less" --or something to that effect. Also a payment schedule must be included. I usually structure payment schedule to fit nicely with construction schedule. Client has 3 days to pay or we have the option to walk. There is a $750 mobilization fee if we walk and come back. Cali says I can't get paid in advance for work not yet done....but it cannot tell me how much the different phases cost.....

Patrick


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## tnt specialty (Apr 19, 2007)

O.C...as it should be........


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## skyhook (Mar 17, 2007)

O.C.Inc. said:


> I did not read every post in this thread... but in California I am forced to use a "Home Improvement Contract" Which MUST include many things such as the phrase "down payment or deposit may not exceed 10% or $1000, whichever is less" --or something to that effect. Also a payment schedule must be included. I usually structure payment schedule to fit nicely with construction schedule. Client has 3 days to pay or we have the option to walk. There is a $750 mobilization fee if we walk and come back. Cali says I can't get paid in advance for work not yet done....but it cannot tell me how much the different phases cost.....
> 
> Patrick


10% down, 3 day right to cancel. After that a GC has to schedule and commit to the entire project, start to finish, and that will require some serious dough. 

There are only 2 types of Contractors, those who have been stung, and those who will get stung.


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## Susan Betz (Feb 21, 2007)

skyhook said:


> 10% down, 3 day right to cancel. After that a GC has to schedule and commit to the entire project, start to finish, and that will require some serious dough.
> 
> There are only 2 types of Contractors, those who have been stung, and those who will get stung.


Are you able to put monies in escrow? That seems to me to solve a lot of problems, for both parties.


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## EZ Mode (Jan 10, 2008)

I'm pretty small. I have had to ask for 70% down payment on a $6000 job just to cover materials; hanging my ass on the line like that for someone not to pay would have thrown me under. I can imagine the bigger you get, the more money you can put on the line!


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## Tscarborough (Feb 25, 2006)

Your margin is too low, as a rule, if the materials are 70% of the contracted price. However, since your risk is decreased by getting that much up front, your margin SHOULD be lower.


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## Marcus W (Feb 19, 2008)

*money upfront*



Double-A said:


> Well, banking laws and regulations for starters.
> 
> You shouldn't consider entering into such a thing as a loan to your client. Leave that to the real professionals, you know, the ones that ate each other up until there are few local banks left anymore. The ones that brought you such brilliance as fees for fees, and services without real service. The ones that keep trying to get you to do business online, so they won't have to actually see your smiling face in their place of business. You remember those guys.
> 
> ...


 Well put DoubleA


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## Marcus W (Feb 19, 2008)

*Take into account*



tnt specialty said:


> Interesting.....
> 
> I haven't heard any consumer advocate that thinks it's okay for a consumer to give money up-front to a contractor......in fact, it's a MAJOR red flag if the contracor asks for an advance payment/deposit, whatever they wnat to call it.
> 
> ...


 My fellow contractors take into account that we are all from different parts of the country so we cannot generalize or frown upon other contractors procedures or practices.The great part about these forums are that we can get a wide range of opinions and ideas from one another it's called networking and it's priceless. tnt makes out pretty well in his neck of the woods ,as far as not taking deposits but in my neck of the woods I wouldn't be able to make it 2+ years ,it's just not our practices and procedures in northern New Jersey and Quite frankly it wouldn't work. for example if there was a ho who didn't want to give a deposit they might go through a few contractors. So as you can see we experience a little more risk . Also remember to that we all differ in the type of jobs we do.For example if I do custom kitchens you best believe I need a deposit but If I do 2 jobs a month for $2000 a piece maybe some might feel it's not that serious so allot of times I think guys are comparing apples to oranges. And as far as do your job and they'll pay you. I've never filed one, hope I never will , should have once it's called a mechanics lien. It was a small amount left on the contract so I chocked it up to inexperience . The deposit isn't about being money hungry, It's about protection . Guys Protect yourself and bid what your worth!!!!!!! Great site :thumbup:


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## tnt specialty (Apr 19, 2007)

Good one Marcus...
I understand the different business climates.....Don't think I'd be a contractor in the east!
I also find it interesting that one may find it easier to overlook a deposit for small jobs...I find it quite the opposite....it's the small, under $ 10,000 jobs that typically get neglected for us. I would be more inclined to require a deposit for the small jobs, than the regular/higher priced projects......Interesting, this site.


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## ChrWright (Jul 17, 2007)

Come on guys...this horse is dead... Let him RIP.


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## GSE (Aug 24, 2007)

O.C.Inc. said:


> I did not read every post in this thread... but in California I am forced to use a "Home Improvement Contract" Which MUST include many things such as the phrase "down payment or deposit may not exceed 10% or $1000, whichever is less" --or something to that effect. Also a payment schedule must be included. I usually structure payment schedule to fit nicely with construction schedule. Client has 3 days to pay or we have the option to walk. There is a $750 mobilization fee if we walk and come back. Cali says I can't get paid in advance for work not yet done....but it cannot tell me how much the different phases cost.....
> 
> Patrick


I was installing some equipment for a company that has shops in Cal, and I asked him how it worked out with only being able to charge 10% or the 1000, and he laughed and said you would have to be crazy to take on jobs with out payment, what his company does if sell the customers the material up front at nice markups, then they arrange an installation day, and ask for the 10% or 1000 on that part.

Lets say your selling fencing, you sell the customer the fence design, and they pay for that upfront, then you schedule an installation which will fall under the 10% or 1000 rule, this is why the contractors with show rooms have the advantage, they sell the products or devices out of the show room and installation is another part of the business, so they make money on the sales, and make on the installation.

The fear of the Box stores pricing have kept many contractors from selling anything, until they descover what others have, that the big box stores are in fact selling above retail in most cases, they broke in the business, by softening a few of the leader prices and heavey ad's in those areas, there are many small companies making record earnings every year going head to head with the box stores, and now eith them entering the installation end, it will be easier for the small guys with store fronts, to gain their share of the profitable markets.


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## tnt specialty (Apr 19, 2007)

:laughing::laughing::laughing::laughing::laughing::laughing::laughing::no:


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## gdc (Feb 17, 2008)

here here exactly. after all we contractors are independently wealthy dont u know. i have always found getting payments when do a little harder. but i do get them. a lot of clients are using investments and equity and might have to transfer funds.


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## gdc (Feb 17, 2008)

i wont blast anyone. first 25 yrs as a carpenter and 15 small biz owner. my clients pay for my time, my expertise and knowledge ( spelling aside ). a small deposit to hold a start date is as i believe acceptable . i get a percentage when i start but also show up with material or have it delivered on that start day. im a reliable and honest person let alone contractor and should not be bunched up with the losers who steal bottom line


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## gdc (Feb 17, 2008)

Look every company requires a deposit. why should you be on the hook for material and possibly labor. All i hear is how the home owner got taken advantage of by some contractor. but you never hear of the contractor who got taken by the homeowner or worse the general contractor if your working as the sub


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## newenergy (Mar 5, 2008)

I'm a Solar Installer in California. In this business the price of materials is about 5 times as expensive as the labor and it pretty much all has to be bought before any work begins. If I have to float the material cost for my next job it will be over $50k. What if I have 3 or 4 jobs going and am still waiting to get paid for a few jobs?

How can I comply with California law and have this kind of money sitting out on my credit? (I don't have that kind of cash)

If I get a resellers license can I treat the sale of the material and the installation contract separately and then collect for material up front?

I think in this industry pretty much everyone just violates the contractor law, but I'd prefer not to.

To the people in the thread who do not collect up front - do you think you wouldn't want to collect for materials up front in a case like this? 

p.s. Hi. Looks like an interesting forum.

(edit: Ok, well, tbh, it's not that drastic. My distributor will take a down payment and the rest in 20 days or something, but I won't get as good a price and if things do fall through or it just takes a while for me to get my money I could end up in trouble.)


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## skyhook (Mar 17, 2007)

gdc said:


> Look every company requires a deposit. why should you be on the hook for material and possibly labor. All i hear is how the home owner got taken advantage of by some contractor. but you never hear of the contractor who got taken by the homeowner or worse the general contractor if your working as the sub


*Or the GC who got taken by the sub. :sad:*


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## ihms683 (Feb 20, 2008)

I had a good custermer die in the middle of job.. and it took 3years for me to get my money .. I don nut have 14500,00 set aroud to be a.bank,,, I get half down all the time .I am not my customers bank


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## Double-A (Jul 3, 2006)

newenergy said:


> How can I comply with California law and have this kind of money sitting out on my credit? (I don't have that kind of cash)
> 
> If I get a resellers license can I treat the sale of the material and the installation contract separately and then collect for material up front?
> 
> ...


First of all, welcome to the forums.

Second, I think its time you sat down with your lawyer and your CPA and discuss this matter openly with them. California has some wicked consumer protection laws that I personally would not want to get on the wrong side of.

I'm sure there are some Californicators here that can offer some advice on how they handle this, but, for the final word, please get some legal advice from a licensed attorney. You're going to possibly need to update your contracts anyway, so, he's going to earn his fee one way or the other.


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## tnt specialty (Apr 19, 2007)

Some people/cultures/gov'ts., what-have-you, expect a business to finance it's own operations.....We do; Always have. If we don't have the capital...We have to borrow it....If you can get a customer to "front" you the $ at no cost, that's great, I suppose....


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## john elliott (Oct 23, 2005)

tnt specialty said:


> Some people/cultures/gov'ts., what-have-you, expect a business to finance it's own operations.....We do; Always have. If we don't have the capital...We have to borrow it....If you can get a customer to "front" you the $ at no cost, that's great, I suppose....



I see you are still unconvinced. I think the basic mistake you are making is to assume that everybody's customers will always pay exactly what they owe at the time required. That simply isn't the case. It might be for you, but that makes you the exception, not the rule.

What about ihms683's experience? Customer dying? That (or anything like it) obviously hasn't happened to you or you would be on the majority side of this issue with the rest of us.

John


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## Susan Betz (Feb 21, 2007)

newenergy said:


> If I get a resellers license can I treat the sale of the material and the installation contract separately and then collect for material up front?


This makes a lot of sense. In FL, everybody gets a sales tax ID, even if you don't use it. Then if you do T&M you have to charge the customer sales tax and pay the state.


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## ultimatetouch (May 27, 2006)

I am working on a renovation now. THe customer wanted reclaimed floors. The architect talked to a friend of mine who new a guy in wisconsin that gets reclaimed pine floors.

THe bill for the floors is 10,000 for material. He wanted 1/2 to get the order going. The other 1/2 before he puts it on the truck for delivery. I told the guy I dont usually give money up front. Since my friend has used this guy before, he knows where the guy lives although its four hours away. The point is the guy mills wood that is special, when he delivers hes done. Why wouldnt he want his money.

I wish I could start getting 50% down 50% before we start.


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## tnt specialty (Apr 19, 2007)

John; I suppose, as someone pointed our previously; One could compare it to McDonalds vs. a fine resturaunt.....One, it's customary to pay up front...The other, no one would ever dream of asking/paying payment up front......No offense, that's just the way we and all of our clients for the past 25+ years, in three different states, have done business. It's a good feeling, I might add......


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## john elliott (Oct 23, 2005)

tnt specialty said:


> John; I suppose, as someone pointed our previously; One could compare it to McDonalds vs. a fine resturaunt.....One, it's customary to pay up front...The other, no one would ever dream of asking/paying payment up front......No offense, that's just the way we and all of our clients for the past 25+ years, in three different states, have done business. It's a good feeling, I might add......


You could compare it to McDonalds vs a fine restaurant, but if you did, you would be wrong. 

No offense

John


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