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has anyone else had this happen, how did you deal with it?

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Topic by DC3 posted 05-17-2012 05:07 PM 5137 views 1 time favorited 12 replies Add to Favorites Watch
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DC3

6 posts in 2682 days

05-17-2012 05:07 PM

Hi guys, this is my first post here and I’ve got a question for the pros out there.

I’ve been remodeling as a side job for a couple years and I decided to go full time about six months ago. I done three full kitchens and a bathroom since then.

I build and install the cabinets and vanities myself and sub out the counter tops, electrical and plumbing. I have a pretty good cabinet program so when I do the estimate I pretty much know exactly what I’ll need for the job almost down to the screw and the rest of the work is done by well known first class people who do their jobs very well.

My problem has come up on my last two jobs and now on third. When the customer and I have agreed on a price and materials deposit, the customer wants to come with me and pay for the cabinet materials personally instead of cutting me a check.

One problem, l get my plywood from the BORG but I get my hardwood from a commercial supplier(which happens to be right down the street from BORG). The hardwood supplier doesn’t like to take payments from folk who don’t have an account. I have an account, my customer doesn’t. Since I’m there with my customer they’ll do it, but its a hassel to have to go through and I can tell the supplier finds it annoying to.

Second problem, I usually tack a little extra onto the deposit as operating money, but once the materials are purchased I have to ask for the rest of the deposit, I always hear,’you’ve got the materials, why do you need more money now?’ I ALWAYS cover this while we are negotiating the job but it ALWAYS comes up later.

I’ve never done any kind of markup on materials so the price at checkout is usually within twenty buck or so of what I’ve told the customer it will be, and I’ve never had a customer who was not totally satisfied with the work I’ve done for them. It seems like they are questioning my integrity or something, but since I my work through word of mouth, why would they come to me if that was an issue?

I was wondering if anyone else has experienced this, if you found it to be a problem, and how you handled it. I like to think of myself as an easy going guy but do I need to standing my ground a little firmer about this?



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BootsTripp

10 posts in 2693 days

05-18-2012 10:57 PM

I assume you and your customers agree on a price and execute a contract prior to starting the work. Within this contract, you should include a payment schedule which is nothing more than a simple list of the progress payments, when they are due, and how they are payable.

You should also put a clause in the contract that states the customer is to pay you directly.

I also assume that you’ve been awarded this work in a competitive market. Therefore, if you were the successful bidder that the customer chose, he/she has no right (ethically speaking) to start nickel and diming you or start trying to piece apart how you came to your contract price (like by tagging along to the lumber yard with you). With that said, within your contract, you should state that your price is a “lump sum price”. This means that however good or bad the job ends up for you at the end of the day, the price is the price and neither you or the customer have a right to renegotiate the price (unless other provisions are stated in the contract to do so… ie if there is a bonus clause for finishing the job early, or a penalty clause for finishing late, etc.)
Even if you didn’t have competition, you should still probably base your price as a “lump sum” job to avoid the situation it sounds like you’re in.
Sorry I’m getting so long winded, I think the simple answer is to spend some time on creating a standard contract that you’ll use with all your customers. There are probably a lot of resources online for sample contracts, and you can tweak them as needed. Just make sure the contract you work with prevents customers from doing these things you don’t want them doing.

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DC3

6 posts in 2682 days

05-19-2012 05:28 AM

I guess I made a mistake by letting the first one do it. He was an old Korean War vet and I let him talk me into going to HD so he could get the veteran’s discount they have. Since he lives on a fixed income, I figured what the heck, it saved him a couple hundred dollars and I kind of felt sorry for him being in the circumstances that he was in.

Since I get most of my work word of mouth the last two customers have been friends of his. Though neither one of them where veterans, so it struck me as odd that they wanted to do this.

I always bid my cabinet jobs whether the customer is seeking other bids or not, and I don’t go up on a price. The way I see it, I have plenty of time to decide how much to charge BEFORE they say yes.

I hadn’t thought of putting the direct payment clause into the contract, I’ll do that.

I do need to polish my contract up I guess. I live in a small town and the only cabinet shop in town just closed its doors. That could be a good or bad sign, I haven’t really decided yet. It’s too soon to tell. Next closest cabinet shop is twenty miles away.

Thanks for the reply, I was starting to wonder.

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BillyJ

253 posts in 3685 days

05-22-2012 02:52 AM

DC3 – your situation sounds very much like mine. I assume you’re a one-man operation getting work word-of-mouth. Unfortunately, I’ve read some bad press online regarding contractors. One of the most damning talked about the mark-ups contractors have on purchased goods. It went on to suggest that the customer purchase the goods (because we, the contractor, get deals and pocket the “huge” savings). Even if I do get a deal, I hardly count a couple of dollars as a huge savings. And no, I don’t charge the customer for picking up the materials.

I agree with Boots regarding a tight contract language. However, and correct me if I’m wrong, you probably don’t have the customer sign a contract. I too believe in integrity, and I believe a person’s word is his word. However, I’m slowly learning my lessons in this business, too.

Boots is dead-on with his words of advise. My lesson learned on my last job is very simple, and perhaps I missed it in Contracting 101: always have your customer sign a very, tight, contract. No matter what, even if my next job is for a relative – they’ll need to sign a contract. A contract is your (and your customer’s) guarantee that you’ll be paid for your work and labor, with little hassle. And when all is said and done, you deserve being paid for your work without having to justify everything.

One suggestion. If you are not already subscribing to JLC (Journal of Light Construction), you should. They often run articles about the side of contracting most of us probably don’t think much about. However, when everything is said and done, we need money to pay our bills, too.

Good luck.

-- No matter how many times I measure, I always forget the dimensions before I cut.

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DC3

6 posts in 2682 days

05-23-2012 12:05 AM

I am a one man operation. Ever now and then I’ll get a helper for a day or two but for the most part its just me.
I build and install custom kitchen and bathroom cabinets. I also do the floors backsplashes and painting. I’ve done some built-in stuff but its mostly the stuff in the kitchen the pays the bills.

I had never heard of that publication but I’ll look into it after I get through with this reply.

I have in the past worked on a handshake. Lately I’ve been using a simple contract that came as part of my cabinet program, but its quickly starting to look like its not nearly tight enough.

Don’t get me started on those ‘investigative’ reporters. They’ll have five minutes with one honest guy and then the whole rest of an hour of crooked fly by nights in whatever industry they’re ‘investigating.’ You’ll never see a program about everyone who bends over in all kinds of directions trying to make an honest dollar.(end of rant.)

I don’t mark up materials at all, never have. If I get to the checkout and my estimate was over by say fifty dollars, then that fifty dollars comes off the back end of what the customer pays. I do charge for going to get materials, I have to, the nearest borg store is forty miles away and Lowes is fifty. Typically I’ll charge the drive time (2 hrs) in order to cover gas, but not in store time since I may look at something I’m interested in while I’m in there. All my cabinet materials are delivered by my hardwood supplier.

Except for the cabinets which I price by the foot, the rest of the job is billed as time and materials. What is the best way to handle that in a contract? I’m sure as I keep going, I’ll be able to eyeball it better as to how long a job will take but for now this is what works for me.

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BootsTripp

10 posts in 2693 days

05-23-2012 02:02 PM

If you do your jobs T&M get used to this close oversight that you’re experiencing from your customers. They have every right to require backup to justify the costs they are being charged. As far as tagging along to the lumber yard, yeah, that’s still a bit ridiculous and no matter what the contract format is I’m sure you can put a stop to that.
As far as structuring a contract to fit your T&M work, you would use a “cost-plus-fee” type contract. It’s very important to keep every penny of backup to substantiate your costs. Also, clearly define the overhead costs that will be billed (ie tool costs, mileage, insurance, etc.). I would also make sure you have tight progress payment requirements listed so that you don’t let your customer get too far behind payments vs completed work.
Be careful if you spend a great deal of time working on cabinets in your shop outside of the customers home, I would be afraid that at the end of the project the customer will start challenging you on whether it actually took you X amount of hours to build his cabinets in your shop.
Google something like “sample cost plus contract” and you should probably find some examples that you can use as a start.
It sounds like you have a really good reputation and line of communication with your customers. That’s probably most important. Just keep communicating so there are no surprises and so your customers feel involved.
Maybe once you get a few more jobs under your belt you’ll find out that you know how much the job is going to cost you and you’d rather move towards a lump sum contract so that you don’t have to do so much cost tracking and watching the clock throughout the entire job.
For the veteran discount, maybe you can talk with your lumber yards/suppliers and find out how they can give the veteran discount to you when you have such customers. That way you can also advertise that you are able to honor the discounts they have coming.
Keep us posted, and good luck!
ps Sorry if I come off as a paranoid jerk who doesn’t trust anyone. I’m not like that at all. I’m just trying to emphasize that there are a lot of simple yet important details to work out ahead of time so you can avoid arguments or surprises. Just simple ways to cover yourself and keep lawyers out of your business.

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DC3

6 posts in 2682 days

05-23-2012 03:17 PM

I saw real early that having to justify my shop time on the cabs I build would be problematic. Whenever I take a cab job on I’ll price the cabs by the linear foot. However long it takes to get the cabs built, that’s the set amount, I don’t get more if it takes longer, I also don’t go down if I’m done early. That gives me the incentive to get the cabs done instead of riding a clock. I give the customer a target date for the cab completion and I generally don’t start work on thier house until the cabs are done. This also gives time for any ordered materials(flooring, counter tops etc.) to come in.

The T&M comes in once the work starts at the customer’s home. I keep a clipboard on the console of my truck with a time sheet that has their name in the header, dates are filled out along with start and stop times through the duration of the job. Since I charge drive time one way for travel to the job in the morning, I also write down the time I start my truck and the time I arrive at the job for each day. For cost tracking I also keep a big envelope with the customer’s name on it under the time sheet with receipts and a ledger page of what’s been paid for and what hasn’t. I make it clear that at any time they can ask to see the time sheets and receipts and I’ll go get them out of the truck. I also keep outstanding receipts separated from ones that the customer has paid for.

My first customer asked to see the paperwork about a week and a half into his job, and after going over it with him that one time, it hasn’t come up since, but I keep doing it just in case. It also makes my bookkeeping easier.

I guess I’ll have to add a copy of the contract to that clipboard.

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BillyJ

253 posts in 3685 days

05-24-2012 03:39 AM

I agree with your linear foot pricing on cabinets. I can also empathize with the customer – they want to get the best for the least amount of money spent. However, more often then not, the two never share the same sentence. As times get tougher, people are going to look for ways to squeeze out every penny they can.

If you want to ditch the clipboard and go modern, there are many free work clock programs that you can get for your smartphone. I use My Work Clock by Spelements. You can start, stop, lunch break (or pick up materials), run multiple jobs, run reports, etc. Easy to use and allows you to print out on Excel.

Finally, when you and your customer sit down to layout the project, do you show them MSRP? Most of my clients go shopping first (or look online), for the best prices. Depending on how much they want to control the cost, I’ll often let them purchase everything (as long as I know they are purchasing exactly what was settled on). Then it becomes my responsibility to make sure my time is really compensated well. Then there are others who don’t have the time to shop, or the truck & trailer to haul the materials.

As in all other profession, if the client has the knowledge and time, they will probably do it themselves. Since most lack at least one (most of the time both) of those two requirements – they hire us. As a professional, your time is compensated by a rate you can live with (and they can afford). Striking that balance is probably the most difficult part in remodeling / construction.

-- No matter how many times I measure, I always forget the dimensions before I cut.

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DC3

6 posts in 2682 days

05-25-2012 02:09 PM

The cab program I use breaks down the kitchen into price per cabinet that includes labor, also gives a total price for the kitchen broken down into labor and materials. It give a square footage for plywood, board feet for hardwood, hinges and drawer slides. The labor will be different depending on the style of door and drawer fronts. I’ll also have a 3D image and 2D elevations of what their job will look like. When they sign off, I leave the images with them along with a copy of the proposal. I typically let the home owner purchase their own door hardware.if they want to buy tile for the backsplash or paint that’s fine.
My biggest hang up is when they want accompany me to purchase the material for the cabinets and then haggle over the remainder of the deposit. Everything else seems to be working.
I think I see where my problem lies. I need a contract that spells it out in no uncertain terms who and when to pay what.
Oh, and I’ve had the laptop, and the iPad, and I just find it easier to use a pen and paper during the week and feed all the numbers into the computer on Saturday morning. My clip board will never get attacked by a virus or just decide to loose my info on a whim. I also don’t have to recharge it, and it easier to read in direct sunlight. It’s just my preference, technology doesn’t always make our lives easier. I do use the iPad and phone to show pics of my projects, both WIP and completed. I also have handy little materials calculaters on my phone. So I’m not completely in the dark ages.
Like I said, I’ve been doing this full time for about six months full time and I’m still trying to figure some things out. It seems like to start a business now days you’ve got to have seven masters degrees and fifteen to twenty years experience.

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Grandpa

139 posts in 3037 days

05-26-2012 03:07 AM

I live in Oklahoma and if there is a charge at a lumberyard and the material is used in my house the lumberyard can attach a “mechanics lean” against my house. I personally know of people that have given the contractor the money he asked for believing he was paying the bill at the lumberyard. Then one day he stopped copming to the job and when they checked on the bill it was still umpaid too. So he had left the state and they were left with the bill to be paid. Could this be happening to you?? I actually had the lumberyard call me once telling me my contractor had left the state and my bill hadn’t been paid. This really ticked me at first because the contractor was a personal friend of mine and I knew he had gone to North Carolina to visit his mother and I knew when he was coming back. Later when I got over my mad, I figured out the man at the lumberyard didn’t know my friend as well as I did (even though he had been in the contracting business for about 10 years at the time). I knew when my friend was coming back and I paid him and he paid the bill. I am just wondering if this is happening to you also. I live in a town of 24,000 people and most people know you. Maybe your contract should tell them this amt of $$ if you supply the materials and some way you need to tell them it will be more if they want to supply materials because you can get them cheaper. I know contractors buy materials from the lumberyard cheaper than I can get them. Just wondering.

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DC3

6 posts in 2682 days

05-26-2012 04:16 PM

No! I don’t leave my customers hanging in the wind with unpaid bills, but thanks for asking.

I’ve only been doing this full time for six months but even I know that the surest way to avoid getting over extended is to NOT USE CREDIT! I don’t even look at those folks who try to push a credit card on ya at the door.
the beat way to run a successful business is to keep balanced books, not running in the red.

The materials I use are paid for IN FULL, BEFORE I use them. I don’t use credit to fund my business and I don’t finance my customers remodels by issuing credit. And the surest way to make sure that I don’t have to worry about being paid is not to do work for customers I can tell can’t afford it.

Grandpa, I’m sorry you had that happen to you but I live in a lot smaller town than you do, I don’t advertise to get my work, and I know for a fact if I left ONE job in that situation, it would be my last.

I’m thinking this is more along the lines of folks trying to conserve as much money as possible and me not explaining clearly enough about the deposit.

Sorry to go off on the last reply, but being asked if I’m running off with a customers money just doesn’t sit well.

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Grandpa

139 posts in 3037 days

05-30-2012 02:13 AM

I am sorry you thought I was implying you don’t pay your bills. I am telling you that I have known of people that came out on the short end of the deal and it is double bad. I am asking are they afraid of that happening because they don’t know you well enough. I was not saying you don’t take care of business. This kind of thing can happen in a town of any size though. I would hope that their friends were good enough to recmmend you would know you take care of business. I am like you….I am just fishing for a reason this is happening. My contractor took care of his business too. I know of others that were not so fortunate.

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starjackioaz

4 posts in 29 days

09-10-2019 09:28 AM

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