deposit amount?

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journeyman0217

Senior Member
Location
philadelphia,pa
hey all,
i recently bid my first commercial job and won the bid. the job total is approx. $26,000. the owner is asking how i want to be paid and if i would require a deposit. being a small company and this being my first big paying job, what would be a typical percentage to ask for as a deposit. i was thinking i wanted to have 3 payments. one deposit, than payment after rough completion, and then payment after final inspection. thoughts??
 

kwired

Electron manager
Location
NE Nebraska
Things to consider, what are your costs, how long will you have to sit on them if it is a longer term project and you don't ask for some of those funds up front?

Do you have credit with suppliers or will you need to pay for materials as you pick them up? Even if you have credit with supplier the net is usually due in 30 days or so most cases.

If it is a short term job like just a few days, maybe you take payment for entire job when complete - assuming you trust they will pay you fairly promptly.

I often on larger projects that will take longer time to complete want to ask for at least 70% or so of materials cost permit costs, etc. almost immediately to help cover those costs, and maybe progress invoice labor charges as the project goes on as well as factor in some more materials cost at certain times depending on the needs of the particular project.
 

GoldDigger

Moderator
Staff member
Location
Placerville, CA, USA
Occupation
Retired PV System Designer
In California state law governs allowed payment schedules for all contractors, including electrical.
I believe this may only affect customer payments, not general to sub payments.
 

kwired

Electron manager
Location
NE Nebraska
In California state law governs allowed payment schedules for all contractors, including electrical.
I believe this may only affect customer payments, not general to sub payments.
Because contractors are scammers I guess? If dealing with reasonable people that do trust one another what is wrong with wanting funds to cover expenses up front, especially on a project that will cover some time from start to finish. Also isn't that part of the purpose of contract documents? You can spell out what payments are due and when in the contract, presumably both parties agree to what is in that contract and both sign it. If they both don't agree you negotiate a new contract that both will agree to. Happens all the time in other types of business, but contractors can't be trusted I guess so they can't collect any advance payment, meanwhile it is ok for the owner to stiff a contractor on payment though:(
 
the owner is asking how i want to be paid and if i would require a deposit.

How do I want to be paid? 100% up front is what I want :D. The reality? Get at least enough up front to cover materials, anything you'd have to rent (ditcher? manlift?) and your time to set things up before the job starts. As for the rest- how much work is involved? From rough to final might only be 10% of the work, might be 30%. The 40/30/30 might be reasonable, but 50/40/10 might be, too.

Oh, and if you have some time, poke around this forum for other bits about contracting, like material and site security, acceptance criteria, mechanic's liens, and that sort of stuff.
 

Sierrasparky

Senior Member
Location
USA
Occupation
Electrician ,contractor
In California state law governs allowed payment schedules for all contractors, including electrical.
I believe this may only affect customer payments, not general to sub payments.
Commercial contracts do not fall under the same rules as Home improvement.
 
I used to be more lax about getting money up front, but am getting better at it. Now I often ask for 50% to start. That is roughly what materials will be. I am not a bank or cash flow service. Why not just ask for 50%? If they have a problem with those terms, drop it down a bit - maybe thirds.
 

JFletcher

Senior Member
Location
Williamsburg, VA
imo, it depends on the labor to materials ratio, how many phases/stages there are in the job, and overall project time. It also makes a difference on your confidence in getting paid in full upon completion, and for change orders.

Typically, on the commercial projects we did, they'd be broken down into 3-5 stages: rough-in one (box and conduit work), rough-in two (cable pulling), trim/ termination (sometimes two stages), final. Deposits ranged 25-40%; less if more stages, more toward 40% on the 3 stage jobs.
 

Fulthrotl

~Autocorrect is My Worst Enema.~
wow great advice guys. Thanks a lot this will def get me in the right direction!

it really comes down to what your gut feeling is, tempered with your exposure.
two commercial jobs:

one hanging lights in a parking garage, for $8k including the lights.
that one, after dealing with the middle manager poophead who was my contact, was
100% by cashiers check, in my hand before i scheduled the work. it was for the city
of san diego.

a city government, cash up front? yep.

the second one, from an out of country multinational firm, for a six month, $500k
job, nothing written down, on a handshake. no money down. bill as we go.

ordering switchgear on a handshake with an offshore buisness? yep.

it all depends on whose hand you are shaking.
 

Fulthrotl

~Autocorrect is My Worst Enema.~
That sounds like pure lunacy. :)

why, yes it does.... thanks for noticing... :)

depends on whose hand you are shaking.

i've had one person stiff me in the last 10 years, for $1,500.
it was a $40 million or so a year general contractor, and i had a purchase
order. happened about six weeks ago.

the guys i did the larger handshake deals with, are in mining and
aggregates, and it's a different world, and one that largely
disappeared 60 years ago. muddy shoes, and absolutely
straight up ethics. those guys largely were responsible for
renewing my faith in people in general.

it is a privilege to know them, and work for them.

that handshake? they had a lot more to risk than i did.
a $20 million project that would largely crater if i screwed up.
would you trust $20 million to a one man band on a handshake?

they did. they trusted me. how the hell could i not trust them?
 

rippledipple

Member
Location
New Jersey
Occupation
Electrical contractor
deposit

deposit

imo, it depends on the labor to materials ratio, how many phases/stages there are in the job, and overall project time. It also makes a difference on your confidence in getting paid in full upon completion, and for change orders.

Typically, on the commercial projects we did, they'd be broken down into 3-5 stages: rough-in one (box and conduit work), rough-in two (cable pulling), trim/ termination (sometimes two stages), final. Deposits ranged 25-40%; less if more stages, more toward 40% on the 3 stage jobs.
30/30/30 is fine,you are right
 

rippledipple

Member
Location
New Jersey
Occupation
Electrical contractor
deposit

deposit

imo, it depends on the labor to materials ratio, how many phases/stages there are in the job, and overall project time. It also makes a difference on your confidence in getting paid in full upon completion, and for change orders.

Typically, on the commercial projects we did, they'd be broken down into 3-5 stages: rough-in one (box and conduit work), rough-in two (cable pulling), trim/ termination (sometimes two stages), final. Deposits ranged 25-40%; less if more stages, more toward 40% on the 3 stage jobs.
1/3-1/3-1/3 is fine
 

goldstar

Senior Member
Location
New Jersey
Occupation
Electrical Contractor
There are several legal parts to a contract. Two of the basic ones are proposal/acceptance and consideration. When you get your proposal signed and accepted that becomes your binding contract. If you get a partial payment upon the signing of that contract that becomes the start of your consideration. Without those in writing you can still have an implied contract (via a handshake) but if the other party defaults you'll have to drag them into court and you'll have a long process ahead of you and a tough time getting paid. If you have written proof in the form of a contract you'll be way ahead. IMHO, set up a payment schedule as others have suggested.
 
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