As a contractor new to working for time and materials I’ve got a question. When I first talked to this client I agreed to giving him my discount on the first round of big ticket materials. Am having second thoughts about continuing this. Seems like I ought to have a little cushion to help pay for my license, bond , insurance, etc. Any thoughts from all of you?
Discussion Forum
Discussion Forum
Up Next
Video Shorts
Featured Story
Fine Homebuilding's editorial director has some fun news to share.
Featured Video
How to Install Exterior Window TrimHighlights
"I have learned so much thanks to the searchable articles on the FHB website. I can confidently say that I expect to be a life-long subscriber." - M.K.
Replies
This is a capitalist society. Bone them hard, fast and frequently.
The $$ t cover your bond, insurance, etc., shouldn't be coming from "not passing along your material discount"- it should be factored into your hourly labor rate.
It sounds like you're working along the same lines a lot of guys do- "I want to make $20/hour, so I'll charge my labor out at $20/hour". That line of thinking will have you working at Home Depot in no time. Your labor rate should cover your actual labor cost, your taxes, insurance, vehicle costs, and all of the othe costs of "being in business. You then add for materials, and should also be charging at least 10% on top of all of that for "profit".
Whether you pass the discount along to the customer or not doesn't really matter, as long as you're charging enough for your labor to cover your overhead, and charging for profit on the whole job.
Bob
For this client and this project, I think you are morally obligated to pass on the discounts. Next time, keep yer yap shut.
"When asked if you can do something, tell'em "Why certainly I can", then get busy and find a way to do it." T. Roosevelt
If you're having second thoughts to honoring your committment then the client has every right to have second thoughts about paying you.
Make sure you charge enough to cover your overhead regardless of any materials. Then you only have to worry about keeping busy rather than keeping your volume up.
Jon Blakemore
RappahannockINC.com Fredericksburg, VA
All my work is now time and materials and on the bill there is an overhead portion for all the time (it varies with the subs involved). I give coppies of all invoices and sub bills they are being charged for. I get paid well enough to remain honest and not cut corners. I don't see why anyone on a time and materials job should need to pad anything, that is the reason for both sides to agree to a project as being billed time and materials. Not a place to be testing trust, word does travel for the good and the bad.
What happens of you drop something and break it or scratch something, materials wise. This is construction, and dings happen, no matter how careful you are. Either you ding it, or the customer dings it, or a sub dings it, or the dog walking through the room to go outside knocks something off the tabel with his tale and dings it or something else. Who buys the new material? Customer? You? The 3rd party damage inflictor?
Marking up materials helps ease the pain on these things that do happen. If it hasn't happend to you yet, it will. And if you have to pay for it, it could easily wipe out the profit for a whole job.
I was putting in a small octogon window for a neighbor. Charging him my usual rate, but being very fair in his favor with the hours. I felt a little bad not giving my neighbor a discount. But then, I dropped my hammer off the ladder, and it busted his plastic window well cover. I told him I would replace it. It cost me about $45 (plus time to go to the store and back, and removal and replacement) which was wasn't much, but the whole job was worth only $275 (he already had the window.)
I didn't feel bad about charging anyone full price after that. I figure that I'm a professional, and will give professional service, which includes paying for my own mishaps, and fixing them without a grumble. But I can't afford to do it by giving discounts, and if people want cheaper service, it certainly is out there.
Anytime I have given a discount, is has cme back to haunt me.
I do think you should honor your agreement with this contract, and chalk it up to tuition. But next time someone asks if you can give them a discount on materials, just say, "Why?"
If Home Depot sends you a 10% off coupon, are you going to share that too?
Pete Duffy, Handyman
as an observer there are a couple things I ee in a thread like this.kind of contracts. what I learned was that on one end you have fixed price contracts where the majority of the risk is on the contractor. On the other end is cost plus where the majority of the risk is on the customer. T&M IMO falls much closer to cost than fixed.the other thing is how folks do their "accounting" how you recover your overhead.while I haven't read the book there is a system I belief is called Proof, which was described before, where overhead etc is covered by labor, materials are charged at cost (going by memory)The range of contract types you want to do can be effected by how you do your overhead recovery, but the biggest thing is making sure you and your customer understand in detail how things are being charged.Physcologically I believe a customer feels like they are getting screwed if they see themselves as paying 1.5 to 2 times the cost of materials. in a fixed price effort they don't see this normally, so they won't have that feeling.somrthing a customer doesn't necessiraly understand in cost efforts is being charged to pick up materials.
bobl Volo, non valeo
Baloney detecter
Eat it this time. On the plus side you'll retain integrity, and that'll get you good promo. After that, do what feels right (this didn't, that's why you asked. But the for the occasional little old widow it'll make you feel good)
Around here most contractors mark up 15% on materials. I have an arrangement with the local yard whereby my copies of invoices are given back to them, once billed out, and then they discount me 10%. I bill out at the rate the invoices show, and keep a running tab for myself of the discount. The Lumberyard benefits, 'cause I buy all my tools from them on this tab, and the occasional stuff for home.
Sure, I don't get the 15% others do - and I don't have to declare that as income - and my customers can check every item if they so wish. I'm spared the embarrassment of having to justify any underpayment if I forget something first time round..."look, here's a bill I forgot"
All the best...
To those who know - this may be obvious. To those who don't - I hope I've helped.
Edited 11/29/2005 10:09 am by piko
Piko,I assume you don't tell the customers that the real invoices are a different amount?To me, this looks like a terrible way to run a business. You're essentially overcharging the customer. While the customer may feel reluctant to pay a 10% markup how do you think they would react if they knew you were keeping two sets of books?"Sure, I don't get the 15% others do - and I don't have to declare that as income"So to top it off, the government is also getting the short end of the stick?
Jon Blakemore RappahannockINC.com Fredericksburg, VA
Jon,
On your website the fourth picture in the Porches and Decks comes up as a tiny thumbnail photo.
'Nemo me impune lacesset'No one will provoke me with impunity
piko... you know that more than one person knows about your little arrangement..
the people in the lumberyard know, and it is always just a matter of time until word gets out..
so , you walk into the sales desk.. and everyone you see knows that you cheat..
what you are describing is called taking the short term gain.. in the long term it never works..
i reap dividends every day for honest dealings i made 30 years ago... and my lumberyard.. my employees.. my subs.. and my customers know they can count on me to be honest..
you'd be amazed the dividends that pays in the long term gain column
why don't you rethink how you want to go thru life ?Mike Smith Rhode Island : Design / Build / Repair / Restore
"Sure, I don't get the 15% others do - and I don't have to declare that as income "Right, because it is not income. It is a reduction in expenses.And that reduction in expense better show up in your net profit.It does not matter if you increase the income side or decrease the expense side of the ledger. Then results is the same.
Two sets of books.
Bad, bad, bad.
I wish you had not revealed that side of your business.
Maybe you should go to work for Enron or WorldCom.
"When asked if you can do something, tell'em "Why certainly I can", then get busy and find a way to do it." T. Roosevelt
Well, gentlemen, thankyou for sharing. Once in a while there's a post that comes up that everyone seems to dump on...I've done it myself, and now I'm the recipient.
A suggestion has been made to me about 'skimming' - an idea which honestly never crossed my mind until now. But which 2nd thoughts cause me to query anyone markiing up materials without admitting so as also skimming. Perhaps that's considered "normal business practise", and is acceptable? I do pay the full posted price for the materials, down to the penny. And any accumulated credit is used to buy tools and materials from the same store...I'm not walking around with cash in hand. The loyalty discount my yard offers me is no worse than the free trips that bigger Co's offer their customers, nor I doubt if l any of you will give back your Airmiles cards because you couldn't live with yourselves 'buying' those golf clubs or taking a 'free' hotel weekend from all the purchases you racked on your credit cards buying materials for your customers...(phew, what a sentence).
It's all rather academic, as I will be moving to another town where none of this will apply.
So, mark me down as naive rather than dishonest...
Boy, this crow tastes bad....
All the best...
To those who know - this may be obvious. To those who don't - I hope I've helped.
Edited 11/30/2005 10:31 am by piko
Thee's nothing wrong with marking up the cost of materials. What you said was, you paid the lumber yard less than the amount shown on the invoice, and you showed the invoice amoun to the customer. That's shady. Your contract should spell out that you bill materials at cost + 10%, and then everything is above board.
"When asked if you can do something, tell'em "Why certainly I can", then get busy and find a way to do it." T. Roosevelt
Great posts. As a HO lurker I couldn't help but read the entire thread.I just finished setting up a loan with a broker that lied about her compensation. I got a good rate, her service was good, the closing was easy. It just sticks in my craw that she didn't tell me, after being asked directly, if she was getting cash outside of closing (which she was). She's entitled to make a living, just not lie about it.I don't mind the $ as much as the lie. I'd much rather (and do) pay more for a job well done and integrity than look for the lowest bid. Do not sacrifice your reputation as an honest businessman/woman for a mark up. Moondancer has it right. You can imagine the recommendation I'll give.Ted
Ah, what I first wrote was ambivalent(edited to read 'ambiguous). So, to make the correction - I pay the full cost of mat'l's, as my customers would. The only difference is that occasionally the lumberyard allows me a credit, based upon my payments. This is the equivalent of using credit cards that give airmiles, or a %age going towards the purchase of a car or airline tickets. If you consider this as promo, then GM, Airmiles, Alaska Airlines, et al, are shady too.
All the best...
To those who know - this may be obvious. To those who don't - I hope I've helped.
Edited 12/1/2005 9:31 am by piko
Piko,I was doing some reading at JLC and I thought of a few points that reminded me of this thread. My intent was to come here and posts those thoughts to hopefully inspire some discussion.Now I see that you beat me to it. Nevertheless...Here is an ethical question for anyone interested.If you have a time and materials job and you have a credit account with ABC lumber and you buy 10 studs from them, the invoice will be $26.90. On their invoices they have the terms 2/10, Net 30. You, being the conscientuous businessperson that you are, always pay early to take advantage of this discount.Do you charge your customers 98% or 100%?What if the customers pay your invoice after you have already paid the material invoice and the discount period is past? I realize this may (and probably should) be a moot point because how you charge should be clear and up front, if it is then you are in the clear whether you give material to them at cost or with a 100% markup. But the question still intrigues me. The same questions could be brought forth regarding cc cashback or air miles.If anyone has had actual experience with this issue I'm especially interested.
Jon Blakemore RappahannockINC.com Fredericksburg, VA
on T&M, we charge as invoiced.. discounts are earned by us, not the customer..
we have also had customers set up special arrangements where they would pay for certain materials by their credit card , so they could get their air miles..
the ethical part comes in the terms of the contract.. where it is spelled out..
if there is an intention to deceive , then there is an intention to be unethical..
we mark up ALL materials, subs, and services related to the job... we show all invoiced amounts, and we will show the original invoices if they request..
i would still rather work Fixed Price , but T&M is a neccesssary part of the business..
one thing to keep in mind is the standard markup allowed on insurance work is 15 & 10.... and that includes markup for paper clips
so.. if you want to use a straight PROOF system,like Gerrald.. fine.. but, if you want your labor rate to stay out of the stratosphere, you can markup everything else and lower your labor rate..
it all comes out of the same source.. the customer is compensating us for our service.. it should not be a question of ethics...
i no longer do business with one of my favorite painters .... among other things , he admitted to me that he pads his hours to keep his rate low ( $25 / hour ).. what he is really saying , is that he doesn't have the nerve to charge what he thinks the job is worth .. or what he thinks his company is worth..
that is the biggest hurdle for most.. once you find out how much you have to charge to stay in business, you have to develop the confidence to actually do it..
Mike Smith Rhode Island : Design / Build / Repair / Restore
once you find out how much you have to charge to stay in business, you have to develop the confidence to actually do it..
This is my biggest struggle. My problem is when I complete the estimate with the labor rates I have calculated, I start to think it's too high, and I'm going to lose the job.
Then, I start to think, "Is the demo really going to take 4 days, or can I cut that back to 3."
Most jobs I'll submit the estimate the way I originally calculate it, but if it's a job I really want/need I end up short changing myself. Towards the end of the project I start thinking, "If I don't finish this today, or tomorrow I'm not making any money."
Which is, of course, the last thought you want to creep into your mind.
Stacy's mom has got it going on.
dustin.. that's EXACTLY what i'm talking about.. and it's just the way i used to bid..
figure it out ... then start cutting it.. and of course.. the original amount was really not enough either.. so when i cut it, i was into negative numbers
let's face it... as builders , we're optimists.. we have a CAN-DO attitude.. but if you keep records , you will find that the jobs always expand to fill the allotted time.. and easily go over..
you have to bid like a pessimist.. what ever can go wrong.. not as if everything was going to fall in place..
remember, Risk = Reward....
what we are risking is our income.. there are only 3 possible outcomes on a bid job.... you make money, you lose money, or you break even.. two of those are good reasons not to take the jobMike Smith Rhode Island : Design / Build / Repair / Restore
Mike & dustin, I totally see your point. I did/do the same thing for years, but if you have a good reputation and work in a good area, people will pay. Don't shortchange yourself, you probably have more skills than you're giving yourself credit for. Most people I work for hire based on reputation, not solely price. If people really press me, I always say my price is the same on the bid regardless, unless you add something, but on T&M it is what it is and you pay me what it is. It sometimes makes for some uncomfortable discussions at first, but usually at the end the customers see & realize how much work was involved, and they'll tell their friends the same when they hire someone (hopefully you). Generally your first calculation is the best one, trust your knowledge. If it's a bigger job, I always review it again the next day with a different frame of mind before I submit the bid. An oldtimer I once worked with told me, the only thing worse than a tough day of work is one that you don't get paid for.
Upping the ante a bit, eh. Thanks for asking this, as there's a point here that I have taken as granted - if one is the project manager/const supervisor/GC/maestro that adds 15% to the sub's prices...would that be considered wrong, or be dissimilar to the attitude people (mistakenly) thought I was taking, ie paying less than receiving??All the best...
To those who know - this may be obvious. To those who don't - I hope I've helped.
Erik
Give the guy the discount but next time pay yourself. If you don't make enough to stay in business a year from now you aren't helping anyone. Most homeowners are apprehendsive about finding a new contractor. If you are good and they trust you they will call again. If you didn't charge enough the 1st time they have to go out into the market and find some one new. Most guys in the trade are working on their assumption that they can get health insurance were their wife works and they save for their retirement on the wife's 401K. If you want to be serious about this business you must charge enough to support your family and save for retirement. You have to get paid as much as the guy who works in an office and the company provides the benefits. I charge more per hour than most anyone else in our town of 10,000 because we are a single income family. I mark materials up 10% and tell customers that up front if they ask. Most jobs are done with an estimate or a bid. As long as I am close on the estimate, or under, my markup is of no concern. If they want to buy the materials themselves, that's fine. On $2,000 worth of materials that's $200. My kid can eat that up at the dentist in a 1/2 hour. I have several long term customers who do it that way and I just charge the materials to their account and give them the tickets. The taste of a job gone sour can linger for years. The many compliments I get don't seem to stick in my mind. If you have to take it in the shorts to make a customer happy, it's better than that sour taste in your mouth. Be honest with people, give them a fair estimate and stay close to it.
My lumberyards give me discount but it varies from product to product. I have an over the counter price (1- 2x4) or I give them a list and ask them to give me a price on the whole project and the price per 2x4 is usually lower. I have no idea what the homeowner pays when he walks in. I live in farm country and many farmers have accounts at the local lumberyard, but most homeowners do not. I charge for my time spent buying materials. I know what I need, where it is stored and which ones to reject. If I sent the customer to buy stuff it would take twice as long and I would have to make a return trip. Most people know that.
My main point is be honest with people and charge enough to stay in business
Good post cargin, you make some good points & I agree
"Do you charge your customers 98% or 100%?"
Have to come in again, Jon...
If retailers didn't ask for more than they paid there wouldn't be any. Ditto wholesalers. SO - nor would there be us buying their goods.
But I see your point.All the best...
To those who know - this may be obvious. To those who don't - I hope I've helped.
read thread again. I already mentioned this
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
I got into this thread a little late, but it's very interesting and I'd like to explain my situation. We moved to Norway this past summer and I am working as a 1 man operation remodeling, trim, sheds, etc. You know the deal. I looked into starting my own company, but the way it works here, you need to pay estimated taxes in advance. As an independant company, you also need to pay your own gap insurance (in Norway everyone is fully insured for healthcare, but if you own your own business, you receive the absolute minimun {60%} benefits) for healthcare and comp. I hope that made some sense. Anyway, large expenditures up front. I hooked into a group called the Nordmøre Landbrukstjenester yeah yeah I know that operates as a sort of umbrella employer. I am employed by them, however, I sell and obtain my own jobs through word of mouth. They can also recommend me to their clients. I am free to set my own labor rate and the customer pays for all materials. I can be, if discussed in advance, reimbursed for all mileage, not just that obtained by driving for incidentals. NLT does all my bookeeping and billing. They collect from the customer, but I am paid the 20th of every month. I can set my own rate depending on the job/customer. This allows me to account for tool wear and tear and pass that on where necessary. My generator fuel is also paid for by the customer. I do most jobs at about $24/hour (varies with exchange rate, of course). In addition, NLT puts 10% of my gross into a vacation fund, so it works out to like $26.40/hr. It's a pretty good system, I think. I know a guy who charges about $40/hr to cover all his business costs and keeps about what I do. My customers get a deal, because NLT marks me up a lot less, I believe 10%, and I deliver quality work. Thought you might like to know.
That is an intresting concept for individuals, one that I have though would be good around here.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
I charge my customers an hourly rate, and I let them pay for the materials. What does it cost me if I use my contractor's discount to get them a better price? My hourly rate is high enough that I don't have to try to make a few extra bucks on the materials.
I assume the comment about boning them fast and frequently was a joke, but this adversarial relationship between contractors and customers isn't good for either of us. My policy is complete honsety with my customers. If I see a place they can get materials cheaper, of course I'll tell them about it. Even if it means using my discount.
I don't care what they spend on materials. I get paid by the hour. I'm happy with my rate, and I like the fact that I can lay all the facts out on the table without worrying about how they will look. I've worked for people who were constantly trying to hide this and that from the client, and I can't stand it.
What is wrong with saying, "I'll let you pay for the materials, and if I can help you get them cheaper, I will. I'll even go to the lumberyard and pick them up for you. But my hourly rate goes on, regardless of whether I'm driving nails or shopping for materials.
I know this doesn't work when you have employees, but the one-man show is in a unique position. You have only yourself to sell. You can do things however you want. For me, it is so easy to just let them buy the materials, and I work for my hourly rate. I let people know right up front what my hourly rate is, and that's all thay'll pay me. My hours at my hourly rate.
To me, that seems so much more honest than giving them a price that is less than you want, and trying to make some more along the way. I like knowing that my customer knows what's going on, and sees me as a partner in getting their project accomplished, not an adversary.
Sometimes, on small jobs, I'll go pick the materials up and pay for them myself, and let the owner reimburse me when I get paid. I'll show them the actual receipt, and add that cost to my labor total. They write me a check for the entire amount, and we're both happy. They don't wonder what the materials really costs, and wonder if they got hosed.
I like partnering up with a home-owner to get their project done, working with them openly and honestly, and getting paid well for it. I don't hold back anything, because I have nothing to hide. I don't try to drag my hours out, either. I get in and get the job done, and people are more than happy to pay well for a contractor that they know they can trust, and who will be honest with them at every step of the way.
Allen in Boulder Creek
" What does it cost me if I use my contractor's discount to get them a better price?"May you always be blessed with customers as honest as yourself.Here is a sample of what it can cost you...When the purchase has gone through your books, you are then the seller. As such, you are liable for customer satisfaction on any warrantee that should come up, whether appliances ( biggest headache I've had for followups) or paint, or bad adhesive, or windows and doors (second biggest followup headache). If you have not budgetted for dealing with those followup calls, you work for fre, and there are some customers who can hang you in court for not taking care of their warrantees, whether express, imploied, or limited.Here is another way it can cost you -
I get my discount based on timely payment. If I pay a day late, I lose my discount for that month. Say half the money is from one job and half from another. If one customer doesn't apy, and if i don't have the cash on hand to deal with the lumber bill, I lose the discount on the total. I have to use my nmoney but I passed on the discount that covers that cost, so I lose money? I don't think so.Or say you bill the customer based on the discount and they pay you a month later after you already lost the discount. You lose the money. The purpose of the discount is to encourage timely payment of yard bills. I manage money properly, so I make money on the risk taken. You are taking a risk and making no money on itThat is only wise as long as you count it as a marketing strategy and reconcile the cost of it that way, because it does cost you money.Think about it from anopther POV here to take this a step further...joe blow goes into the yard and orders custom windows. He has to put down a deposit, anywhere from 15% to 60% before they will process the order. I can make that same order with no deposit bcause of lonmg standing credit and payment history. But you can bet the customer is depositing me, because if they change their mionds, I'm stuck with the special order and having to pay for it. i'm not going top give them the same deal i get on time of payment like that because it is based on my name and integrity, which has value. I don't give value away, except maybe here at BT
;)
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
I don't give anything away, either, and it doesn't cost me anything to pass along my contractor's discount at the lumber yard. I don't finance projects, so no one pays me 30 days after I'm done. And I don't charge materials to a charge account. So if I go purchase materials for a job, and get them a little cheaper because I'm a licensed contractor, I don't "give away" anything. I don't use it as a marketing strategy. Why would I? "Hire me because I get a contractor's discount?" It doesn't cost me anything, in spite of all the hypotheticals you listed. That's just silly.
Allen in Boulder Creek
Piffin has good points. It would be wise to carefully reconsider with an open mind.
Do you warranty your work, and the materials? If so, how are any necessary labor and material expenses covered?
We provide allowances for HO selection items. The client can select, purchase and deliver according to the allowance.
Alternatively, they can provide us a list with selections, we purchase on our accounts, pay the bill, are responsible for delivery and cover the item with our warranty. The upcharge for this service is 15%.
For example, a plumbing faucet is $80.00. Our handling of the faucet, purhase, delivery and warranty is $12.00. If it goes bad we replace it at no charge.
If the client wants to roll the dice and be responsible for the faucet, he purchases and delivers. If it goes bad, our warranty covers the plumbing up to, but not including the faucet. He must pay a plumber (or do it himself) to remove and replace the faucet, and he probably will need to carry it back to the place of purchase for replacement.
This works, and has worked for many years. Clients understand upcharges when they are explained. Some do choose to roll the dice.
Offering your discount must be a marketing tool, as it undoubtedly helps sell the project.
No, I don't warranty my work. I do excellent, professional quality work that I expect to last for a very long time. Do you provide a warranty if you come out and replace some rotten soffit and fascia? A warranty is a selling point, just like some are saying the discount should be.What is wrong with selling my work based on the fact that I'm an excellent carpenter, I'm honest and reliable, and I'm pleasant to be around? That's what people used to do. Now we have all kinds of marketing strategies to get a client to choose us instead of someone else. I've mentioned before that the work I'm supposed to get is going to come to me, regardless of who else wants the work and what they do to get it. I don't "sell" anything. The deal you describe with the faucet is just how I would do business. I would tell them that they can pick out the faucet they want and pay for it, and I'll install it. If it turns out to be defective, I'll install it again, and they can pay me again. If I installed it improperly, I will rush right back out and fix it. Lots of customers like having more control over their projects. I've heard lots of stories about contractors who basically come in and do exactly what they want to to, regardless of what the customer wants, knowing they don't have enough knowledge to know if what they are doing is right or wrong. They'll say things like, "You can't do it like that, you have to do it like this."I built a deck a few years ago, exactly the way the woman wanted it. Another contractor had told her you couldn't do it like that. I told her, "Maybe he can't, but I can." He just didn't have the skills nor knowledge, and I think that kind of thing happens a lot. Contractors act like this is all rocket science, and the customer doesn't need to know many things about it. The way I do business is a lot easier, less headache, and worlk out well for both parties involved. For those who think I'm leaving myself liable for something, all I can say is I don't let fear of possible outcomes run my life. I like having control of the outcome, and that begins by only doing work that you like doing, and working for people you trust and like doing business with, not taking anything that comes along that you happen to be the low bidder on.Again, if you've only been in the trades for 10 or 20 years, and if you don't have a wide range of skills, the way I do business wouldn't work. I'm putting myself out there as being possibly the most knowledgeable person my clients will run across. That's what they are looking for. An expert who will solve their problems and make a positive experience out of what could be a bad experience.I only adverize in one place, and here's the ad I use:Extraordinary carpenter seeks small projects...Housewright with 30+ years experience in all phases of residential construction seeking small projects. Light remodeling, framing, cabinet installation, door replacement and repair, pocket door installation, rotten wood repair, crown molding, baseboard, wainscoting, chair rail, fences, decks, pole barns, (insert your project here.)I especially enjoy working on old houses, and welcome the opportunity to see yours. I recognize the special needs these wonderful old structures have, and give them the respect and TLC they deserve. I do high-quality work, I'm reliable and honest, and my rates are fair. I live in Boulder Creek, and work throughout the South Bay area. If you have an old house that requires attention, or if you have an unusual situation and you're not sure what to do about it, give me a call and let me come take a look. I can furnish local references. Please contact me by email first, so I'll have a record of your "call," and I'll get back to you promptly. Thanks!California Contractors License #861390.
Allen in Boulder Creek
I like a lot of the way you do business and it is similar to the waay I started mine.but you should be aware of something about warrantees and the legalities surrounding them. They are intended in the modern form to protect the warrantor - yourself- as much as the recipient of your services.i.e. - you can stipulate the limits of the warrantee period. Without this, a judge can decide that it is to be waranteed for whatever term seems reasonable to him after hearing arguments. Yyou can limit the warrantee to the original owner also. otherwise the house can end up in the hands of an owner who is not as nicve as the clients you choose and have raport with. The new owner can hold you responsible for...unless you limit those options.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
When I had a deck building company, I had a really nice warranty for five years on all my work. No one ever called me back for warranty work. Now I'm doing small projects that I can do by myself. Last week I spent 10 hours at a house removing a door, and framing up the opening. Across the room, I opened up a wall and installed a pocket door. I hung the drywall on both walls. The owners are going to tape and mud the drywall, do the painting, etc. He even did some electrical work that we found in the wall I opened, while I worked on other stuff. I charge $65 an hour, so I made $650 for one days work. The customer was happy to have someone do part of the job, and let them finish. I told them if they have any problems with anything, let me know. So far, no call. Should I have offered them a 5 year warranty on the wall I framed up, or the pocket door I hung, or what? If they sell their house, do you think the new owner will call me about the work I did?I've been in these trades for many years, and I think I've seen it all. If I was going to build a new house for someone, of course I would do things differently than I do these small jobs. But I like to make a good wage without a lot of hassles, in my old age, and this way works for me. If I see some potential problems with a job, I won't take it. Here's another example. A woman emailed me that she had some stairs she wanted reduced in size. I went out and looked at it the day before Thanksgiving. I told her I thought I could do it in a day's time, but since it involved removing and reinstalling a bunch of hardwood floor, which might be glued down, and not knowing what was underneath, etc. I told her my rate, and that I would get it done as quickly as I could. If it took less than a day, I would get paid for 8 hours. If it took more, my rate would apply. They were in a hurry, so I did the job on Friday and Saturday after Thanksgiving. The hardwood was glued down, and the job wound up taking me 14 hours, which is what I got paid for. I did not offer them a warranty. I did the job right, and any problems that may occur won't be my fault. There aren't many contractors who can do that kind of thing on short notice. It took a lot of skill to do what I did. I don't know of many other people who could do it, and there isn't a construction company in town who could send a guy out to do the work I did, that could do it as well for that price. I guess what we're talking about here is an implied warranty vs. a written warranty. I always tell my customers that if you have any problem with this at all, call me, and I'll take care of it. I have had very few people call me back for anything over the years, and it was usually something very small that could be taken care of in no time. So I do warranty my work, it's just a verbal warranty. Fortunately for us, if you build a deck right, it will still be standing there in 20 years. I warranteed all mine for 5 years, knowing that there was nothing going to go wrong in 5 years, unless a big splinter developed somewhere they want removed. So I stand behind my work 100%. I just don't put it in writing. One day I might decide to sit down here at the computer, and come up with something written that I can give to clients. But probably not. Allen in Boulder Creek
Edited 11/30/2005 10:55 am by moondancer
allen... i do not offer a written warranty....
in the mid-'70's, Congress passed a law called the Moss-Magnuson .. about warranties.. we were selling solar equipment wholesale & retail at the time, so we had to research it
if i recall, it was so onerous.. and required so much weasel words to CYA thta i didn't think we could write one that would stand up in court..
so we chose NOT to offer any written warranty.. i do the same in my contracting work.. we do not offer a written warranty.. the implied warranty is going to be interperted by the courts anyways
what we do have is an Arbitration Clause.. so if we cannot satisfy a customer, they can take us to arbitration.. and vice -versa..
that clause, and our reputation has served us well for the past 30 years
on the outside chance that there is always a better way to do something.. i'd be curious to read Piffen's Warranty clause on a typical jobMike Smith Rhode Island : Design / Build / Repair / Restore
When I write a contract...I include..."All work performed by NHS Corp. will be performed to the highest standards possible and is gauranteed to perform as intended for the original home owner(s) only. This warrantee is limited to the period of time specified for the particular materials, appliances, or fixtures by the respective manufacturers involved, up to a limit of five years, and is limited to two years for other items not individually warranteed. This is intended to cover the labour and miscelaneous cost for repairing or replacing the original failed item, but not the cost of the item itself, which shall be bourne by the manufacturer thereof. This gaurantee shall be considered to be voided when we are not contacted to make intitial repairs or when others have tampered in any way with work performed by NHS Corp."I explain to all my customers that my general over-riding principle is that if I did it, and it fails, I will make sure it gets fixed. This has always worked for me, and I have never had to spend more thana half day on any one call-back. It has always been a marketing opportunity for more work, instilling customer loyalty, and educating the customer further how to...Usually, it is something like a loose screw in the lockset, or adjusting a slider or cleaning something out. Several times, light fixtures have had hundered watt bulbs in them, right next to the stick-on notice that says, "This fixture is designed for a MAXIMUM 60 watt bulb" Once the problem is fixed and the consumer education done, they always have something else that is a paying job to be done either while I'm there or to be sceduled later. warrantee followup, even when it is something that is not my fault like that has always been a profit making opportunity for me, whether it is a writtten warrantee or not.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Sounds like we have the same policy, but without the paper.
Allen in Boulder Creek
Yah, I was never trying to argue with you on this, only making sure what some of the devices and limitations were. Sounds like you've been to the mountain already though.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
I didn't think you were arguing, Piffin. I really do appreciate hearing other points of view. I've learned a lot at this site, and wish we'd had one when I was starting out.
Allen in Boulder Creek
I don't know if I explained that very well. Let's try again...You cannot legally claim to not warrantee your work. a perinciple of the law at work here is that there is a universally recognized "implied warrantee"in the absence of a written warrantee, it is implied and expected that a coffee maker will make coffee. if it does not, the buyer can expect his money back. A warrantee written can stipulate that the buy must first give the manufacturer a stated amt of time to replace or repair the unit and can limnit how long the coffee maker can be expected to make coffee.There are similar thing going on with say, a fence.
The client might want the fence to keep dogs out - or in. A limited warrantee can stipulate exclusions for yuou. Afterall, you cannot control the dogs after you leave. There are some dogs that can defeat ANY fence in the world. OTOH, the client can expect you to reasonably design the fence to be more than simply decorative if they communicate to you that the reason they are contracting this fence is for animal control.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
As Piffin stated, I too like the way you understand, present and do business. I am 51 and have been through the same business procedures when I was more hands on. that is what helped me build a good reputation that continues today.
I started as a framer in 1972. Now, I am a custom builder with projects that are $500,00.00 plus and there is too much to do without subs. I need to make percentage overhead and profit on as much as possible. Justification comes from a similar approach to your small project attitude and quality effort. I get down and dirty with subs and do not on more that I can personally supervise.
I would not close on new home without a stated warranty. We are obligated to the standard as required by law (stated or unstated), and have two upgrade warranty programs that can cover a 10 year period.
Check us out at: http://www.brotherscustomworks.com.
I started out as a framer in 1973, but took a somewhat different path than you did, tx. I framed with an excellent slave-driver for 3 years, then joined the union for 6 years, and then took off traveling around the country working construction. I've thought at times that if I'd stayed put and did the things the conventional way, I'd be in the position you are in, building large homes. But I took the path I did. I've never owned my own house. I've never worked for anyone for longer than 3 years. I haven't lived in the same house for more than 3 years since I moved out of my folks house. Just pondering on how people's lives take such different paths.Someone made a good point about having the courage to charge what you're worth. I went throught that, too, believe me. I can remeber giving a woman a price, and her saying, "Oh, I thought it would be a lot more than that." Well, it should have been, but I let many factors make me think that was all my work was worth. Reading here has helped me realize the value of what I do. I think it was JR who tells the story of the carpet cleaner who worked for who said, "Don't be afraid of the money." That story still pops into my head, the part where he looks them straight in the eye and gives them his price, without flinching. That's easy to do if your price is for pauper's wages. It is a little harder when you know your price is a little higher than the going rate in the area.The same guy I framed up the door and put in the pocket door for was told on the phone before I ever looked at the job what my hourly rate was. I told him, and he said that was a little higher than other guys are asking. I told him, "Sure it is. I do better work than those other guys do." I got the job. Then later he mentioned that of about 5 or 6 of "my competitors" he had left messages for, I was the only one to respond. (Makes me wonder how he knows what other guys get, or is that just his standard line?) I said, "Well, now you can see why I don't consider any of those guys my competitors."
Allen in Boulder Creek
Seems we were born less than 60 days apart.
Building large homes has it's own set of problems and blessings.
We used to build with in-house crews, approaching projects in much the same way you do. I had 20 employees. Now, using subs for so much can be like running a daycare center with the kids wanting to get wild and irresponsible.
The projects can be 8-10 months and some of our fancier homes can be strung out for 12-18 months. Bank draw are every thirty days and can be delayed. Subs or suppliers tell you Tuesday but do not show until Thursday, and YOU have to call and find this out. I could go on.
Count your blessings, small well controlled projects where you are the one responsible for the getting the work done is a real blessing. Your in, do the job, get paid and are gone. If you live in California you probably need every bit of $65.00 an hour, but in Texas a carpenter earning $65.00 an hour could own 20 acres and a nice home.
Your sig says Boulder Creek, and I am thinking Colorado, but your profile says Santa Cruz, CA?
I live in Boulder Creek, CA, which is in Santa Cruz County. I seem to move back and forth between the two towns. They are only maybe 15 miles apart, but one is a beach town, the other is in the mountains and the redwoods. I'll change my profile. I've worked on, and ran, lots of big projects, so I know where you're coming from. For about 20 years I spent as much time working as a millwright on industrial projects as I did on residential. I've worked alone, and on jobs with 4,000 men. I like it this way. Working subs drove me nuts. Where are you in Texas? I lived in Austin for 3 years back in the early 80's. Great town.OK, I checked your profile and I see where you are. I think it's always cool to meet someone born very close to the time I was. I believe we live many, many lives on earth, and to me, it's like we jomped out of the plane together, but you landed a few seconds before I did.It's raining, and apparently in in a pensive mood. How do feel about turning 50 last year? I think it is pretty awesome, being on the planet for 50 years. I tell people the first 50 is done, and now I'm starting on the second fifty. But I've been surprised by the people who act like I should be depressed because I'm 50. Allen in Boulder Creek
Edited 12/1/2005 2:26 pm by moondancer
one is a beach town, the other is in the mountains and the redwoods
Must be real nice.
Hungerford is about an hour and a half from Austin, and 35 minutes form Houston. You are right, Austin is a nice town, with lots good music. The abundance of music and remains of a hippie culture remind me of my home town...... Memphis, TN.
Considering our lives and all that has happened since 1954, maybe it was a SPACE SHIP we jumped out of together. It is cool to meet someone born at the same time. I also think it is the bomb to meet and talk to you and others all over the nation in forums like these.
I have no problems with turning 50. I was 51 on October 18. I am wiser, richer and do not take myself so seriously (a big help). Life is good.
txlandlord comes from the 11 rental properties I own and a 100 acre development I am trying to start. Do not be impressed, it is former cow pasture, and my next big purchase is a dozer so I can do lots of the clearing and road prep myself. Development poorboy style, but it keeps me from big debt and expenses, and it is fun to get away from the office and spend time on my tractor, skid loader or the new dozer.
Where did Moondancer come from?
Sounds great to have a project like that to work with. I like that area of Texas. To give you an idea what Santa Cruz is like, here's a saying you'll hear:"The rest of the country thinks California is weird.California thinks Berkeley is weird.Berkeley thinks Santa Cruz is weird."Definitely an interesting place to live. My company is Moondance Construction Company, and I was signed up at one time as moondance. Then I couldn't log on with that name, so I changed it a little. I like the age I'm at, too. I proved myself a long time ago, and it's nice to not feel like I still have to do that. I'm still a hard worker, but I've mellowed considerably. Much slower to anger, easier to see the other person's point of view. I'm looking forward to the next 50. ;)
Allen in Boulder Creek
Giving materials away for free? What other business anywhere would supply a product at cost as a normal way of doing things?
Time and time again clients would ask a former employeer about material costs and the following was a firm, but decent way of explaining it: "We are in business to make a profit and of course all materials are marked up. The percentage of markup is not something we disclose to clients or other people outside our company."
I see that you're a licensed contractor in California.
Also you say that you warantee your work for 5 years, but nothing in writing (did I get this right?)
I believe that California contracting law requires for any work done by a licensed contractor, a two year warrantee on patent (obvious) defects and ten years on latent (hidden) defects. I also understand that the consumer cannot sign away these rights in any contract.
I'm familiar with these requirements because I ws a condo boardmember, and we went after the builder for faulty roof contruction, 9 1/2 years after the units were built, and he fixed the problem (which was an obvious contruction defect, as determined by an expert).
I'm also familiar with these warrantee issues because I'm a California licensed C-10 (electrical) contractor. Ten years is a long time, and that liability is one reason why I set my prices sufficiently high so that I'm working for more than wages.
Cliff
Is that an implied warranty, CAP, or does it have to be written?
Allen in Boulder Creek
Let me reinforce what some of the other HO's have said.As an HO all I really care about is value for money (total cost). I don't really care how you arrive at the total cost - but if you are going to tell be - but honest. If it's a Time & materials job - just tell me what I'm being charged for materials (invoice, discount, marked up, etc) and stick to it once you've got the job. If as an HO I don't like it, I'll tell you, and we can either negotiate, or I'll find someone else, but I want to know before you start work not after.As for discounts, the only time I see it that it should be sharded with the customer, is on Time & Materials jobs. On T&M jobs, the risk is being shared between the customer and the contrator & therefore both cost increases & deacreases should be shared as well. On fixed price jobs, the contractor takes all of the price risk & therefore should take all of the discounts that come along.I'll end up much happier in the end on a job that has some bumps, but the contractor was honest, than with a sooth job that I find out the contract was dishonest with me.
My philosophy on work is to keep it business. My rates are the same, unless the volume is slow and really need to bring work in. Overhead & profit is factored into my hourly rate and I bid on most of my work as I can. Customers like the sense of security from a fixed price bid, and I make my money by busting my butt to get work completed and if the jobs are going good, I throw any employees a bone, which keeps them motivated. Anything on a larger project that is unclear I use specific language in the bid that due to the nature of the work involved certain aspects may need to be done on a time and materials basis upon inspection & approval by the owner, which will be billed as an extra cost. That way the owner is involved, & can plan accordingly. Discounts are for family & friends only. Generally, if all the owners are looking for is the cheapest price, it's not the job I want, as those are usually the ones that drive you crazy anyway, and you wind up making nothing. If they ask me to do something for free, I usually respond by jokingly asking them if in return if they could just go pick up something for me, etc. and they usually get the hint. Once you start doing free work for someone other than family, you won't be in business for long. And keep everything in writing, people tend to forget how much they're spending when it's verbal, and then you wind up waiting to get paid. It sounds formal, but people respect you more when it's all over
Edited 12/2/2005 12:03 pm ET by VT.lab
Could you use some paragraphs, or divisons in your statements. I would like to read your comments but it looks like work when it is all together.
Of course, I am 51 and the old eyesight is not as good.
sounds like it IS written - by the state.
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
It does not have to be written. In that sense, I guess it's implied, but I'm no lawyer.
Cliff
This is just how I work. Am considering adding 15% to materials basically to cover any material type call-backs. I stand behind my work but if the product goes south I think there should be some cushion to cover that. Especially if the customer chose the product and I did not. I tend to buy the products requested with my recommendations thrown in and add it to the bill at cost. I get a 2% prompt pay disc at one supplier and do not pass that on.
Current job I had a 10% Lowes coupon and passsed that on to help a customer that is more of a friend/family from our church. I have trouble charging what it is really worth. I think about the $ value of the tools that I take to a jobsite and suddenly it is not as much of a problem. If you bring a handsaw and hammer to the job it is one thing but when you haul 2k worth of stuff to do the job (small one, 6k or so) professionally you should command more.
hey, allen... what happened to the santa cruz tag line ?Mike Smith Rhode Island : Design / Build / Repair / Restore
Hey Mike,I've moved about 10 miles up the San Lorenzo River to Bulder Creek. I'm still in Santa Cruz County, just up in the mountains now. BTW, I originally signed up at this site under my name "allen." Then I found out I wasn't the only one. So I changed my name to "moondance," which is the name of my company. Then they made some more changes, and I coudn't sign in as moondance anymore, so now I've changed it again.
Allen in Boulder Creek
Just pass it on. As a HO i'd tell all my friends what a guy you were and if everything finished out like we agreed i'd probably send a few extra $$ your way at the end for being such a good person. That stuff goes along way in a HO eyes.
I never understood markup on materials stuff. I would think all your running around, deliveries, more running around etc would be wrapped up into the labor bid. To a HO that just seems a cheezy way to make a buck.
Not insinuating ANYONE is a cheese-ball on here, just offering options from a HO's perspective
-----------------------------------------------------------------------------
WWPD
Much of this is discussions about hourly work.
Can I bill you hourly for:
Time I spend time at home/office on my phone, figuring and ordering material
If go pick-up the materials in my truck
If it is delivered and one of the boards is warped, taking it back for exchange
Time I spend at home/office checking the lumber compaines bill, making out the check, creation of a project file and other paperwork
Unpacking and setting up a new tool (on site) I needed for your project.
Hourly work is a strange animal, and seems not only to be to be a conflict of interest, but can be a source of client / contractor problems. We never do it, except related to work we do with our tractor and skid loader.
Marathon Construction: We work by the hour.
We give you a guaranteed bid, with stated specifications and responsibilities. Although it is not obvious in our bid, if materials on our job cost $1,000.00 you will be paying $1,250.00 - $1,5000.00. This provides planniing, logistics, protection of onsite material, warranty, bookkeeping, General Liability insurance, Builder's Risk insurance, Workman's Comp insurance, communication expenses, travel expenses, etc. all related to our seeming $1,000.00 lumber cost. I know Workman's Comp and other insurance can be related to labor only, but if we did not buy the $1,000.00 wortt of lumber, we would not need the labor to build with it. All things considered this lumber does cost a contractor more than $1,000.00.
It is like a store owner friend of mine. He says it cost him $0.17 to provide a fountain coke that he sells for $0.89. If he did not get $0.89 there would be no store.
Edited 12/1/2005 10:11 am ET by txlandlord
There is another angle to this. I get a 10% discount because I have a long relationship with a lumberyard and I do more volume than the average HO. I tell the HO I will give him my 10%.
After the job is over, the HO does some DIY work. Goes to the lumberyard and wants 10% off his small order. If the yard guy gives it to me why not the HO?
Suddenly I am not popular at the lumberyard.
Retail price for material is retail price.
I would never tell a client I get a special discount, but if you started that way, then I think you should finish that job the same way.
U can get stuck working t/m they do not have to pay unless u give them a max the job will cost.That complets a contract thats way we are called contractors!
with that said u are obligated to continue as started.