Please tell me what you think of my large contract policies.

Discussion in 'Business Operations' started by Element Property Mgmt, May 9, 2013.

  1. Element Property Mgmt

    Element Property Mgmt LawnSite Member
    Messages: 80

    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
    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.
  2. Mark Oomkes

    Mark Oomkes LawnSite Fanatic
    Messages: 15,290

    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.
  3. tonygreek

    tonygreek LawnSite Gold Member
    Messages: 3,915

    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.

    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.
  4. LandFakers

    LandFakers LawnSite Fanatic
    from CT
    Messages: 6,309

    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
  5. Mark Oomkes

    Mark Oomkes LawnSite Fanatic
    Messages: 15,290

    Guess I don't axe enough carpenters aboot their payment policy.
  6. Will P.C.

    Will P.C. LawnSite Senior Member
    Messages: 966

    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.
  7. Woody82986

    Woody82986 LawnSite Silver Member
    from DFW, TX
    Messages: 2,128

    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.
  8. Element Property Mgmt

    Element Property Mgmt LawnSite Member
    Messages: 80

    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"
  9. Tim4

    Tim4 LawnSite Member
    Messages: 3

    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."
  10. snomaha

    snomaha LawnSite Bronze Member
    from midwest
    Messages: 1,269

    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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