deposit on commercial jobs

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Mike Lang said:
He says I'm small time and the big contractors don't even ask for money
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Tell Him to get bids from the big time guys then. Sounds like typical GC BS where they expect you to finance the job for them and then they want to mark you up without putting up a penny out of pocket.

Giant red flag in my opinion, do you know this GC ? or is this first time working with him ?
 
mcclary's electrical said:
You're not off your rocker, but you need to get out of the habit of asking for down payments. It really scares peolple off. Rough it in, he gets a draw, he pays you rough in, and everything goes smoothly
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Really ? The only people it scares off are the ones that have no intention of paying you. I can see not asking for a down payment for a $2000 job. But asking for a deposit while you proceed to order $4000 worth of material for a $20,000 job is called good business sense


GC's mark your prices up, and that is ok, but the price of them marking you up should include them paying you whether the client pays them or not. That is the risk they are taking not you. If they don't want to assume that risk they have no business marking your prices up or as a matter of fact they have no business at all being involved in your price to customer. All they are entitled too is a finders fee.

See this is the problem, there are way too many "electrical contractors" that have no clue whatsoever and let these clowns pull this crap
 
Mike Lang said:
On residential jobs I normally dont have a problem, just when I work for scum bag builders. New residential construction I usually get 1/3 up front or within the first few days. Then another 1/3 at rough inspection and the final payment at the end. It's just these commercial jobs that are making me a little nervous. ALthough like I said most so far I've never had a problem, even though I'm still pretty new. It's just recently that I've worked for one that wont pay until the end and now just this week they said they want me to sign a lien release form. That sounds like they have bad intentions to me.

Thanks for your input guys. I knew I wasn't out of line for asking, and like some of you said I think it's necessary in this economy. I just found out today that a billion dollar home builder / developer in my state is going out of business.
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No problem, another classic line. Just tell them that you will bring the lien release form to the they're office and they can give you final check. Once you give them a release of lien, you have no legal recourse if they decide they don't feel like paying you
 
Amen!!!

Amen!!!

Rich R said:
GC's mark your prices up, and that is ok, but the price of them marking you up should include them paying you whether the client pays them or not. That is the risk they are taking not you. If they don't want to assume that risk they have no business marking your prices up or as a matter of fact they have no business at all being involved in your price to customer. All they are entitled too is a finders fee.
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AMEN!! I'm with you 100% Rich!
 
It must be a regional thing. If you required deposits on Commercial or Residential jobs around here you wouldn't be in business very long. Or atleast you wouldn't be working with any reputable GC.

The "standard" around here on commercial is to submit a bill on the 25th of every month and then you get paid 30 - 45 days after that. This continues throughout the duration. The retainage is 5% and you won't see that for 90 days after competion. On a $1M project that means you won't see your last 50K for 3 months.

The "standard" on residential is 60% after rough-in and 40% after trim is complete.

On a personal note - I would never under any circumstance pay someone up front to do work for me. I have built a few homes over the years for myself and every sub was hired with a handshake and not paid until thier work was completed in full. I would personally be offended if they asked for a deposit which would imply that they think I'm going to rip them off.

The line about "needing to pay my suppliers" doesn't fly either. If you buy materials the first of the month, you have until 30 days after the end of the month to pay your supplier. That's 60 days!

The best part about this system is that it weeds out the little "up and coming" electrical contractors. (No offense) They can't afford to go without their money that long.
 
shockin said:
On a personal note - I would never under any circumstance pay someone up front to do work for me. I have built a few homes over the years for myself and every sub was hired with a handshake and not paid until thier work was completed in full. I would personally be offended if they asked for a deposit which would imply that they think I'm going to rip them off.
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No contracts? Not a penny until trimmed out? I've met guys like you who are very strict about not having contracts and not leaving a paper trail of your financial obligations. The fact that you are "personally offended" when a sub wishes to conduct business in an honest and above board manner is quite revealing.

You are not a business man if your policy is not to put things in writing. You are something else.
 
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shockin said:
On a personal note - I would never under any circumstance pay someone up front to do work for me. I have built a few homes over the years for myself and every sub was hired with a handshake and not paid until thier work was completed in full. I would personally be offended if they asked for a deposit which would imply that they think I'm going to rip them off.
.
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I would calmly get in my truck and drive away. :roll:
 
N844AA said:
No contracts? Not a penny until trimmed out? I've met guys like you who are very strict about not having contracts and not leaving a paper trail of your financial obligations. The fact that you are "personally offended" when a sub wishes to conduct business in an honest and above board manner is quite revealing.

You are not a business man if your policy is not to put things in writing. You are something else.
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I think that you completly missed my point. That fact that for my personal intersts I don't use contracts is not an indication that I am a shady businessman. It indicates that the subs I choose to use are trustworthy. Most of them are hired T&M because of this fact. Keep in mind also that we are talking about a house. No sub is there longer then a week. If you can't wait a week to get your money, that's a problem.

Let me try to explain this another way. What if you walked into your perfered supply house tomorrow and they said that they are no longer a bank at that they are afraid you are going to rip them off so you are now on COD only.
 
shockin said:
And that wouldn't offend me in the least.

That being said, if I lived/worked in other parts of the country where people don't tend to be as honest I would be much more jaded. Lucky I don't.
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And just where are people so honest? What part of the country are you talking about?
 
N844AA - roflmao

How would you respond to this?

shockin said:
What if you walked into your perfered supply house tomorrow and they said that they are no longer a bank at that they are afraid you are going to rip them off so you are now on COD only.
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Belive it or not, there are actually good people in this world. Every year we do a number of million dollar plus design/build electrical projects. Imagaine how much trust these owners are putting in us that we won't be ripping them off as we are billing them T&M for a million dollars.
 
growler said:
And just where are people so honest? What part of the country are you talking about?
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Midwest - Sorry I can't be more specific, I do have valid reasons for trying to be discrete.

That being said, there are still plenty of scammers and dishonest contractors around here as well. But if you are hiring them for your own projects, you know which subs you can trust. You have been working beside them for years on different projects, and have developed a relationship. They attend the same church as you, your kids play on the same softball team ect.

Let me ask this question. If you are awarded million dollar project, does the general contractor give you 50% of the contract amount up front? I'm not trying to be funny, that is just vastly different from the AIA contract that I work with.
 
shockin said:
On a personal note - I would never under any circumstance pay someone up front to do work for me. I have built a few homes over the years for myself and every sub was hired with a handshake and not paid until thier work was completed in full. I would personally be offended if they asked for a deposit which would imply that they think I'm going to rip them off.

The line about "needing to pay my suppliers" doesn't fly either. If you buy materials the first of the month, you have until 30 days after the end of the month to pay your supplier. That's 60 days!

The best part about this system is that it weeds out the little "up and coming" electrical contractors. (No offense) They can't afford to go without their money that long.
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I would say the best part about this system is that everything is in your favor.

The subs carry all the risk.

Asking for a deposit implies that you're going to rip them off?

So if a sub asks for a deposit does that imply that the sub is going to rip you off?

Are you afraid that you'll pay the deposit and the sub won't do the work?

Why would you balk about paying a deposit unless you worried the sub is going to rip you off?

Sound to me like you wan't the subs to trust you but you don't wan't to trust the subs.

No deposit and no contract means you have the upper hand.
You have all the control over the money.
There's nothing written that says when and how much the sub will get paid.

If you trust your subs like you want them to trust you a down payment and written contract shouldn't be a problem.
 
shockin said:
Imagaine how much trust these owners are putting in us that we won't be ripping them off as we are billing them T&M for a million dollars.
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I love this world you live in, where the people who hold, retain and distribute money to those who have *already* done the work are somehow worried that *they* will be ripped off. This is clearly convoluted logic meant to confuse the dullards you are used to doing business with.

Earlier, in another stunningly illogical bit of reasoning you had the temerity to claim that when you refuse to use contracts, it is a glowing testimony to the honesty and trustworthiness of your subs. They do all the work, you hold all the money, and using the time honored tactic of misdirection, you claim that by having no contract, it is *you* who are trusting *them*. They are "trustworthy" as you put it.

You are deliberately reversing the actual roles of the participants and by using ridiculous emotionally charged words like "personally offended" and "trustworthy" you are hoping we did not see this transparent ruse of yours.

You might be a slick operator in your neck of the woods, but here in the big city, we've seen this before.
 
Thanks for your reply. I answered your questions in between them. I'm sure there is a better way to quote/answer each question, but I don't know how to do it.

* I would say the best part about this system is that everything is in your favor.

That might be overstating it a bit, but you are correct that it generally favors me more then the sub

* The subs carry all the risk.

Yes and no. What risk are we talking about. They can lien the propoerty and guarentee they will get paid so that eliminates to finacial risk. What other risks are there?

* Asking for a deposit implies that you're going to rip them off?

In my way of think - yes. Why else are you asking for the deposit. The replies I have been reading about this are stating that they are worried about the GC ripping them off.

* So if a sub asks for a deposit does that imply that the sub is going to rip you off?

Not at all. It may imply that he is COD with his supplier and can't afford to purchase the materials.

* Are you afraid that you'll pay the deposit and the sub won't do the work?

Yes - It happens all the time. Maybe I have been watching too much Holmes on Homes.

* Why would you balk about paying a deposit unless you worried the sub is going to rip you off?

I would be a little worried about it. I have seen it happen. NOt just on TV.

* Sound to me like you wan't the subs to trust you but you don't wan't to trust the subs.

I think I am showing the subs that I trust them by selecting them to do the work.

*No deposit and no contract means you have the upper hand.
*You have all the control over the money.
*There's nothing written that says when and how much the sub will get paid.

The reason I don't have contracts is realated to the fact of me not wanting to spend the money for my personal projects on an attourney to draft them. I have never had a sub ask me to sign a contract that they drafted either. So they must be fine with it as well. These aren't fly by night operations either.

*If you trust your subs like you want them to trust you a down payment and written contract shouldn't be a problem

Again - it is just not that common around here. The company I work for does a lot of volume every year. We don't genereate any contacts ourselves, and we sign contracts for GC on maybe half the projects. Never on residential. It just isn't common around here. Don't hate the player hate the game.
 
The subs providing work upfront without a deposit are providing you with a down payment.
The down payment is the materials they bought and installed.

When you are asking them to do this you are asking them to provide a down payment to you.
They should be offended that you don't trust them.
 
shockin said:
* The subs carry all the risk.

Yes and no. What risk are we talking about. They can lien the propoerty and guarentee they will get paid so that eliminates to finacial risk. What other risks are there?
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Nice try. Without a contract that lien isn't going to go very far. Please do not insult our intelligence.


shockin said:
Don't hate the player hate the game.
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We already know you're a "player", you did not need to drop this self serving phrase to communicate this fact to us.
 
N844AA said:
I love this world you live in, where the people who hold, retain and distribute money to those who have *already* done the work are somehow worried that *they* will be ripped off.
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I disaggree. If you have completed your work I will pay you promptly. I don't see the need to "pre-pay" for work.

Can you explain to me what the deposit covers exactly?

Have you ever signed an AIA contract?
 
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