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Old 05-09-2013, 04:17 PM
Element Property Mgmt's Avatar
Element Property Mgmt Element Property Mgmt is offline
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Location: Oconomowoc, WI
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Please tell me what you think of my large contract policies.

I recently had a customer that was interested in having quite a bit of work done on his property and after price was gone over and agreed upon i was explaining to him my contract policies for his type of work.
for any jobs over $1000 or that will take longer than 1 day i require a contractors agreement to be signed. in this agreement i have certain stipulations, one being all material costs be paid for up front by the customer along with a 1/3 down payment for labor/operating costs.
immediately after i told him about the 1/3 down he actually got very angry with me stating how he owns multiple properties all over and never has to do 1/3 down with his carpenters, and that he would NOT be doing business with me if i require a down payment...
I could have said MANY things back to him like how i am not a carpenter i am a landscaper, but i stayed professional and tried to explain to him verbally why i do this and that it is actually fairly standard whether its called labor/operating expenses or it is just included in any down payment without being labeled 'labor'.
the conversation ended there but i decided to try to send and email and here is what it read
Quote:
I am sending you this message to help clarify my business policies for you and help you understand them.
Element Property Management is a small company and we are trying to stay that way until it it absolutely necessary to expand, we also try to go the extra mile by being honest with our customers about all expenses on our bids.
We require 1/3 down payment for labor because included in that number are our onsite operating costs that are very difficult to calculate precisely and include in our estimates like fuel costs and employee compensation. Like i said at this point in time we are small, i pay anyone working for me at the end of the work day and i pay them in cash, This is what the 1/3 is for. I would not have a good group of happy hardworking employees if i had them wait up to 14 days from job completion to receive their compensation. A down payment on labor costs is exactly what any of my competitor companies are doing when they require %50 down on a contract but they do not tell you it is going to labor, in fact most do not tell you what it is going into at all. I apologize for upsetting you with my business policies being this way, it is not some form of scam, it is actually a more honest business practice.

If you decide to change your mind on the subject i would love to hear back from you.
am i reaching here or out of line at all? i have had many customers happily do business with me this way with no issue, to me working without a down payment is unheard of.
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Old 05-09-2013, 04:48 PM
Mark Oomkes Mark Oomkes is online now
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Couple things, I have no problem asking for 1/3 up front for materials. I think it's reasonable. Carpenters must just not be smart enough to demand it, but I think they might work off a draw as well.

Personally, I wouldn't tell him you pay cash at the end of each day. But I wouldn't pay cash at the end of the day, either. This makes it sound like you aren't running a legit operation. Maybe you are, maybe you aren't. But, that isn't his problem.

I've been doing this for awhile as well, depending on the size of the job and if I know the customer or not. I just explain it's for materials.

Then again, a few years back, I did a huge job with tons of material and labor without any deposits, but I knew they were good for it. Cash flow was a little better back then too.
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Old 05-09-2013, 04:55 PM
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tonygreek tonygreek is online now
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Quote:
Originally Posted by Element Property Mgmt View Post
immediately after i told him about the 1/3 down he actually got very angry with me stating how he owns multiple properties all over and never has to do 1/3 down with his carpenters, and that he would NOT be doing business with me if i require a down payment...
I would be inclined to think he's FOS on that one. I don't know anyone who does project work that doesn't require a deposit, especially carpenters. I think you may be dodging a potential payment collection bullet on this one.

Quote:
i pay anyone working for me at the end of the work day and i pay them in cash, This is what the 1/3 is for.
On this one, this isn't the clients problem, nor would I ever mention that's how you handle paying your guys. I agree with Mark in that it makes me wonder about your operation or, more importantly, the quality of people you have working on my house.
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Old 05-09-2013, 05:04 PM
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LandFakers LandFakers is offline
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Anything over a 1 thousand dollar job is half down for me. You dont know who and who isnt scum in this world and im trying to save my own butt. People dont understand this but I only tell them that its for materials. Im not trying to be dishonest with people, but people freak out once you start pre-paying for labor is it begins to sound like a scheme. You certainly arent out of line with your requests
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Old 05-09-2013, 05:18 PM
Mark Oomkes Mark Oomkes is online now
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Quote:
I don't know anyone who does project work that doesn't require a deposit, especially carpenters.
Guess I don't axe enough carpenters aboot their payment policy.
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Old 05-09-2013, 05:25 PM
Will P.C. Will P.C. is offline
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No problems getting a some sort of payment up front. I would scratch that whole 'letter' you quoted. It is like a giant justification for getting costs upfront which is not needed.

1. Dont tell your prospects you pay cash after each day.

2. Dont refer to your competitors at all

3. Don't use the words scam and go out of the way calling yourself honest.
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Old 05-09-2013, 05:36 PM
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Woody82986 Woody82986 is offline
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Quote:
Originally Posted by Will P.C. View Post
No problems getting a some sort of payment up front. I would scratch that whole 'letter' you quoted. It is like a giant justification for getting costs upfront which is not needed.

1. Dont tell your prospects you pay cash after each day.

2. Dont refer to your competitors at all

3. Don't use the words scam and go out of the way calling yourself honest.
Agreed. If your policy is to collect a % up front for materials or operating costs then that's your policy and he can take it or leave it. You have that policy in place for a reason, so that's how you feel comfortable doing business. You don't really owe it to anyone to start delving into why your policy is this or that. Collecting a % up front isn't out of the norm. Especially on a larger project with materials involved. My policy is to collect a percentage to defray materials costs and honestly just serves just as much as a good faith cost as it is a materials cost. If a client has a hard time pulling money out of their pocket to get the ball rolling with materials, then I find it suspect that they will pony up when everything is complete. So I see some fault on both ends here.
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Old 05-09-2013, 07:39 PM
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Element Property Mgmt Element Property Mgmt is offline
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Location: Oconomowoc, WI
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the reason i pay cash is because i only hire one of my friends to help out when it's necessary otherwise i just work alone. i do not have enough business to do this full time so i am only part time right now, and obviously by paying cash and running solo i dodge all sorts of bullets i'm not quite ready for; having people file w2's, unemployment, workmans comp, insurance... etc i'm sure you all know this. i do have insurance, an llc, and ein etc so i am legit, i pay taxes unfortunately haha.
i do not regret not getting the job, the guy was telling me that my labor rate (which is right about in the middle of the road for my area) was "too rich for him" even though his house was worth at least 4 million, and he claims to own a few hundred rental properties, alot of little hints he might have just dodged final payment.
i think the biggest thing i have learned is how i tell a customer that after materials are paid for an additional 1/3 of the remaining total is required.
i will never again say "and 1/3 of the labor cost as a down payment" instead i will say "and an additional 1/3 of the remaining total to cover operating expenses"
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Old 05-09-2013, 07:57 PM
Tim4 Tim4 is offline
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Really quite simple. "I'm sorry sir, those are my company policies. Please let me know if you decide to hire me. Have a nice day."
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  #10  
Old 05-09-2013, 10:24 PM
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snomaha snomaha is offline
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If you were professional you would not be paying cash - not covering basic business expenses like work comp, unemployment and w2's is what's wrong with this industry.
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