Deposits on Commercial Jobs

[shockin]

I would add that you should ALWAYS take advantage of the cash discount that is offered by the wholesale house. Typically it is 2% if you pay by the 10th. Your bill will usually say 2%10th Net30.

Even if you have to "borrow" (line of credit) money to pay the wholesale house to get the 2% discount, you are still money ahead. It's not even close. Given todays profit margins, this may be the only profit you will make on the project.

As I have said before, I like the fact that GC take 60 days to pay and hold retainage out for months after completeion. It keeps my competion out of the market. Only well established well funded compaines can afford these terms.

I disagree that you can dictate terms to a GC. Not around here anyway. If you want the work, these are the terms.

 

[satcom]

I disagree that you can dictate terms to a GC. Not around here anyway. If you want the work, these are the terms.

The only time you can dictate terms to the GC, is when he has a poor credit record, you are not a bank, and no business, will extend credit to someone not worthy of it.

We have a decent credit line, and there is no way we about to risk that money on a project with a CG that does not have the ability to pay, or a poor record of paying.

 

[shockin]

The only time you can dictate terms to the GC, is when he has a poor credit record.

I will agree with you on this point. However if that were the case, we wouldn't have bid to that general in the first place. On bid day, we won't send bids to ever GC that is bidding. Only the ones we are willing to work with. So I guess you could say that if you bid to a GC you are argreeing to there terms?

 

[bradleyelectric]

I will agree with you on this point. However if that were the case, we wouldn't have bid to that general in the first place. On bid day, we won't send bids to ever GC that is bidding. Only the ones we are willing to work with. So I guess you could say that if you bid to a GC you are argreeing to there terms?

Note: Contingent on mutually agreeable terms and schedule. Then if they don't agree to your term you withdraw your proposal.

 

[jmellc]

1 of my supply houses has now agreed to a job account, so that would help some. I'm not likely to get any bank credit at this point.

Sometimes I think the Mafia must have set up the procedures and hoops one has to go through to bid a job. I do better work than many contractors and stand behind it better. I don't find ways to stiff customers for extra $ because the sun didn't shine bright enough that day, etc. But, because I'm a little guy without a bankroll, I can barely get my foot in the door.

If I can't get any payments up front and have to wait 30-60 days or more on every billing, I can't do the job. Anyone working for me wants to get paid, inspections will freeze me out if I get behind on paying them, no one gives me free fuel or helps my family eat while I wait on someone to pay me. Most any job I've ever had someone do for me, I either paid deposits up front and/or paid in full when complete. I guess it's whoever has the biggest stick that wins the game.

 

[hardworkingstiff]

About 13 years ago I came across a guy that had been in business for 30 years. I asked him what advice he would give to someone younger in the business. His answer was:

"Never take a job that you can't afford to not be paid for".

I'm not saying I agree with him, it's just worth thinking about. I think his point is it's easy to get in over your head.

 

[jmellc]

Yes, that's a good point. But most any work is scarce here at the moment. I have had some good jobs, but a lot have been bottom of the barrel junk that barely had any profit.

 

[gadfly56]

It depends. Our usual terms are 25% down NET 30 if you pass a credit check. Most of our work is directly to the end user and we're pretty firm with those terms. Circumstances may alter that. The customer that gives us $500,000 a year in business doesn't have to pony up the 25%. We may very politely request something up front for high ticket items, like a fire pump and controller. GC's are usually polite enough not to laugh in our faces, but sometimes you get lucky. I always say, "You don't ask, you don't get."

We have a bid out to a tenant for >$100,000 in sprinkler work. Their D&B came back saying they were good for $750. In that case we got the building owner, for whom we are also doing work, to guarantee payment. Otherwise we would have had to turn down the job. You can't afford that kind of high-risk exposure in this business climate.

 

[macmikeman]

By far and beyond, the majority of mechanics liens in the county where I live for the past 30+ years have been for commercial jobs. Some of the cases I read about in the business papers are astounding as far as how much is owed to subcontractors when the general contractor ditches town with all the money. I am talking about millions sometimes. Get deposit money from the contractor. Sweep as much as you can out of the project as early as you can, and shepherd it well yourself during the execution of your work.

 

[macmikeman]

....................... Double post removed by macauthor...

 

[satcom]

By far and beyond, the majority of mechanics liens in the county where I live for the past 30+ years have been for commercial jobs. Some of the cases I read about in the business papers are astounding as far as how much is owed to subcontractors when the general contractor ditches town with all the money. I am talking about millions sometimes. Get deposit money from the contractor. Sweep as much as you can out of the project as early as you can, and shepherd it well yourself during the execution of your work.

We had a big hit here in New Jersey when a few of the larger construction firms went belly up, they depended on the little fish to keep them afloat, by slow pay methods and trying to convince the subs that that is the way business is done if they want work, a method that worked for them during the go go years, but when reality hit and these small subs realized, they were going to loose everything, they were in shock, for years the big guys played with the small subs, and the subs went along with them, thinking it was the only way to get a good amount of work, not who was going to bay, and if they had the ability to pay, I sure hope the industry learned, that in some cases deposits and bank backed agreements, are necessary to secure a contract.

 

[wireguy8169]

Kinda just repeating what everyone else said, but I would evaluate how much this job would help your company...if this is a job that will net you more work in the near future. Not sure what the time line is but in any economy a large commercial job that will last for say 6-9 months you can find that the customer will run out of money can't pay the GC and then well you know how it flows. If this job is not going to do anything but give you work you may want to re-evaluate. Another option is if allowed only buy the materials going to be used during any given billing cycle. Again not sure how big the job or time line but if your doing say 5 floors and the first and second floor are going to be x amount of time say a month then only buy those materials. Unless your saving a large amount with a bulk purchase which I am sure is not the case, that may be the way to go.

Good luck