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Down Payments on Larger Installs

Discussion in 'Landscape Architecture and Design' started by JimLewis, Jul 5, 2006.

  1. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,839

    For larger residential install jobs (e.g. a $25,000 job including new lawn, irrigation, plants, water feature, mulch, etc.) what do you guys as for as a deposit?

    Usually, I get a 50% deposit at the signing of the contract for every job we do, with the balance due on completion of the work. But on these larger jobs I am sometimes tossed as to what to ask for down. The benefit to asking for 50% down is that you get a big chunk of money several weeks before you even need it. This helps a lot with cash flow, if you have a good sized business. But the disadvantage is that sometimes we get 1/2 way through a job and I've already spent more than what I got as a deposit.

    Alternatively, sometimes I'll take 1/3 down at signing of contract, 1/3 when the job is 50% completed and the remaining 1/3 due on completion. This works out well because you still get a good sized deposit, and half way through the job you will have received 66.6% of the money.

    Sometimes I just let the client chose. I give them both offers - either they can do the 1/2 down thing or the 1/3 down thing. I tell them either is okay with me - whichever they feel more comfortable with.

    But I was just curious how the rest of you guys handled deposits on larger jobs like this.
  2. GreenMonster

    GreenMonster LawnSite Silver Member
    from NH
    Posts: 2,702

    I'm kinda struggling with this right now too, Jim. I started out this year asking for 30% at signing, but booking stuff out 6-8 weeks, I don't like having that much up front. Then, I feel even more pressure when we keep missing start dates -- all because of the weather this year. Some people are a little leary of giving that much up front as well.

    I've done some stuff at 10% upon signing and most people are ok with that. What I've done most recently is ask for $250-$1000 at signing (non-refundable) so that we know these are solid jobs on the schedule, then 50% at start, 50% when done. Or if it's a longer job, a 25% half-way through, and the last 25% when done.

    Confused? Like I said, I'm struggling with it.
  3. Green-Pro

    Green-Pro LawnSite Bronze Member
    Posts: 1,420

    !/3 to book, 1/3 upon half completion, 1/3 upon final sign off. This has served us well.

    GM, I do know what you mean about missing starting dates, we have had a few of those as well. Getting caught up now and actually waiting on contractor to finish four season room on one project (glad its his feet to the fire instead of mine for a change) :)
  4. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,839

    Well, you need to get over that guilty feeling of having people's money up front. If you have employees, expenses, taxes, etc. then you eventually come to the realization that success or failure in this business isn't only dependent on making profit on each job you do, it's also about CASH FLOW. You need big deposits coming in like this on a regular basis to carry you through the ups and downs of running a business.

    Being a contractor is crazy. And the bigger your company gets the crazier it can become. I remember times in the past where I'd check my bank account on Monday at it would be at $35,000 then 3 or 4 days later I was down to under $1000. Payroll, major vehicle repairs, tax deposits, yearly insurance premiums, etc. Sometimes these things hit you all at once. It's the large deposits in the bank that make these temporary hits not hurt.

    You know how it is; some times you're just about to finish 2 or 3 big jobs and then you'll have $15,000 more. But that's a day or two away and today's payday and the health insurance bill is due today too. Well, it's those big deposits that help you stay afloat and make payroll and all the other stuff on time while you're still waiting for your jobs to finish.

    I used to feel guilty about taking big deposits and holding on to them for a few weeks. But not any more. First of all, I almost never get a customer who seems to mind. They all accept is as standard practice and gladly right the check. But second, I've just come to realize that these deposits really help with cash flow. As long as I got deposits coming in regularly, I NEVER get into a cash flow problem.

    So don't feel guilty for taking people's money ahead of time. It's hella difficult being a contractor and most contractors eventually fail. So I don't appologize for doing something that's going to help insure my success.
  5. AAELI

    AAELI LawnSite Senior Member
    Posts: 362

    Don't normally take deposits unless I am unsure of customer's ability to pay. I do offer cost of money discount for full payment up front, usually 2 - 3%. I have also offered 6 mo. to 1 year free mowing for full payment up front. Most customers opt for the free mowing. We do mow year round here, 52 weeks a year. I am talking of $15K - 20K installs in a 2K sqft - 4K sqft yard. Rock and flower gardens along with zoysia sod accompanied by hibiscus, bromeliads and palms. We end up with roughly 1500 - 2000 sqft of mowing.

    I would advocate healthy deposits for unfamiliar customers. I do like the idea of 1/3 down, 1/3 progress payment and 1/3 upon completion. I have also taken 90% payment with 10% retained until all work met with contract specs as agreed upon.. Customer feels in control for just 10%.

    Just my $2.00 worth.
  6. Pro-Scapes

    Pro-Scapes LawnSite Platinum Member
    Posts: 4,181

    Your a very sucessful business owner and it seems as tho you answered your own questions there. 1/3 1/3 1/3 is great or 50% up front. On landscape jobs we usually go with What I feel materials will cost up front. I got enough capital to cover labor and such but I like having the client committed. I usually leave padding when I give my start dates to compensate for unforseen delays then if we are ahead of schedual its great. Never been a problem so far.

    On lighting jobs we get 50 to 60% up front depending on the client and jobs but always a good chunk up front.
  7. hoskm01

    hoskm01 LawnSite Fanatic
    Posts: 5,690

    I'm liking the thirds with one at 50% completion. Always worked well thus far.
  8. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,839

    Yah, I kinda answered my own question, you're right. But I was more or less just curious to see what others did. Always looking for novel ideas, you know...
  9. JimLewis

    JimLewis LawnSite Fanatic
    Posts: 6,839

    Huh? You'll do a big install without any deposit? Wow. I've never heard of that. Do you do much install work? Because eventually you could get really burned doing business that way.
  10. AAELI

    AAELI LawnSite Senior Member
    Posts: 362

    You did notice the qualifier "customers ability to pay" ?

    The customers have come to my commercial outlet and asked for me. I have been fortunate to have had no problems with non-paying or late paying customers. I do pick and chose who I work for very carefully.

    I have been burned by LCO's who have given bad checks or failed to pay bills on repairs and even one who left Island to avoid paying bills. He took off to Florida owing $28K. Judgement by court had no effect. He disappeared into the Miami area.

    I do take care to limit my exposure on installs. Majority of plant/sod material is from my nursery. Rocks are free for the hauling. Labor is mine.

    These are only small house installs. I would go with the 1/3 down idea if the project were more substantial.

    Been in this business as an owner since 1982. Laborer since 9 yrs. old. Mom says I just like dirt! (Wife agrees)

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