Price increases??

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justin

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I am a new EC and I am learning the hard way sometimes about how to deal with builders. Due to the cost of copper going up so much I am forced to ask for an increase in my contract price for the home models I am forecasted to do. Based on the amount of the increase in the cost of copper I have requested an increase in future jobs of 17% of the sale price for each model. We are anticipating completing between 350-500 homes for this certain builder in the next 12 months and have completed approx. 50 for them allready. I am coming to realize it's def. all business with these guys and there is always some strategy behind most eveything, not just being straight forward and honest about doing the work. If they were to refuse my request there would really be no point in carrying on with them because I would barely break even, but in turn the money in my receivables would be in there control and based on what I have seen in the past, if you leave a builder, whatever money they owed you was forgotten about or tied up for sooooo long it might as well have disappeared, any info would be great about dealing with these big builders or a different way to sale the increase???
 
I think a lot depends on what your contract says and how much you have signed away already. If you've already signed for 500 houses and didn't include a clause about price fluctuations, you may be SOL. They, of course, would know this and would insist that you honor your end of the deal, even if it means you lose money on each house. Builders are businessmen above all else, and their bottom line is their #1 priority. Unless there is a shortage of ECs in your area, they really don't have to treat you very well, since they can always find someone else.

Perhaps put a very short time limit on your bid price and buy the materials immediately after the papers are signed. Or only bid a few houses at a time and keep an eye on wire prices so you can adjust your bids when prices change. I suspect the builders aren't going to accept any language that says you reserve the right to raise your bid price in case material prices go up. They would probably think that you'd use that clause to rip them off.

This is probably why I don't work for builders.
 
Marry the guy's daughter. Its the only way out. He won't have the heart to see his little baby suffer in poverty, and therefore will give you a break. Kidding... I hope you did not sign contracts for the entire 500 shebang allready. Is the site temp power included in your bid? If not, then divert some loss over to that by charging a lot more for providing it. If he balks, then shut down what temp power you provided so far. Remember its temporary power. You have the permit on it, its yours to turn off. Good luck, I hope you find a way out of this.
 
I'm with 77 and Mac on this one. If you don't have much work on your own and you're working for a builder it's "keep busy" work at best. But, as the saying goes, "you have to pay for your education". Take things slowly and try not to get burnt. If you find that you're not making enough money with this contractor get out as soon as you can and find other work. GC's are the only ones allowed to make any money ( in their own minds, that is).

Copper prices are very volatile these days. Prices have more than doubled since January. If you can't get more money for the increase in wire costs and you truly believe that you can't absord the increase, walk away from the job and let him sue you. It will cost him more to do that than it would to pay you the extra $$. Besides which, he'll probably get an extra from the homeowner anyway (although you'll never find that out).
 
77401 said:
Trust your instincts... You'll get burned by the builders one way sooner or later. USually when they owe you the most. There is a reason why builders always go with new EC's
Cut your losses now.
Click to expand...

I cannot count the number of times I have hear the ol' "I fired my last EC" line only to find out you have to hunt them down for your money, if you get it at all.
 
As a new EC to the field let me give you a word of advice I learned the hard way. Never ever ever ever ever start a job unless you have filed a Notice to Owner. That way if the builder "plays" with your money you can lein the property and have the homeowner pressure the builder for payment as well. I would suggest checking with an attorney (you should have one if your an EC as well as an accountant) in your area for the proper way to do this. Also as stated elswhere on this thread do not sign long term agreements unless you have a price increase clause in your contract. Remember get it in writing or it means nothing. Good Luck in your business future.
 
Turns out I was able to get the increase. I negotiated doing some "pro bono" work on an amenities bldg for the builder, I was smart enough at the last minute to double the price on the amenities center and then offer to do the job for free to get the increase for the long run, I can do the tiny little job myself but they were under the impression they were getting over on me for about 7K. I was prepared to walk if necessary, and there were no "contracts" just purchase orders that serve as contracts and once I pull the permits I own the job basically, adn I also PO every job through my supplier so that if they hold any money on completed work, my Suppliers (nationwide supplier)lawyers can help me with the liens.
 
Job accounts from your supplier are a good idea but if you do not file a notice to owner within a certain amount of time after job starts you give up your rights to lein a job. Please be carefull. Also if a contractor does not wish to supply me with a Notice of Commencement I do not work for him.
 
Definitely all good ideas. Lien laws here, and probably elsewhere are so difficult to understand that it can be difficult. They do send me a NOC on every job as well, I am still learning A LOT! I try to ask other contractors in the area but I honestly do not really like the way most of them handle their business and customers. The housing market is insane here in south Florida and there are so many "contractors" trying to take advantage of the everything that they quickly become overwhelmed and quality and customer service are long forgotten, AND their businesses are not run efficiently in any way so it is very difficult to follow any type of "leader" in the industry. For example, corrections on inspections may take 2 weeks where as we focus on 24 hr turn around, also failing inspections 1 time as opposed to 3 or 4 times in a row, and on and on. We are able to easily keep customers but I feel like I am possibly missing something, like someone is seeing how we do things and is thinking to themselves " I remember when we used to care about all that stuff and go out of our way, but that isn't how it works in the real world."
 
Justin,

I'm glad you were able to get your increase. I know one contractor here who was under contract for 16 condo's. That's not a lot, but the developer is holding him to the contract he signed about a year ago, and the romex price is killing him. He did not have a clause to account for increased material cost.

My only question is why would you base your increase on a percentage of his sales price? I'd present him the increase based on my additional costs. Unless it was just a way to package it to him to make the sale.

John
 
Quote: "but that isn't how it works in the real world."


The way it works in the real world is, EC's that are in it for the long term, and are making money, have signed contracts, not peropsals, or work orders, they have an attorney close the deal with the GC, they do not sign or agree to anything without his approval, they hedge rising copper prices, by buying copper futures, to offset the possible increases in the market, and above all they run their operations like a business, if a GC will not accept your terms, he also, may not intend to make payments, the long haul EC's will check the GC's credit, and background, before signing any contract.

The unreal world, EC's is desprate for work, and accepts any work at any price, agrees to any terms the GC offers, and usually ends up working for less then wages, and would make more money delivering pizza.

Sorry, but when i started out, i learned it the hard way, and i don't want to see some new guy, get beat.
 
work half as much and go fishing while making just as much money

work half as much and go fishing while making just as much money

I?ve learned that it takes contractors 3 jobs to burn you. It?s because they are not running there shops like a business and then they start to look around and poach the subs money about when the boat payment comes due, or insurance or taxes or child support or restitution for the last job. I will not work for Bubba Construction LLC. It is not worth it. Once you start talking Notice to Owners, Liens, and payments by owners instead of the people that contracted you to do the work, maybe you should just not do the work and go fishing. Everyone wants a bargain, I for one don?t want to be the WALMART of Electrical Contractors. I?ve found that as I raised my rates there was an increase in the quality of my customer base. The more I charged the faster the payment was made. I would show up in a nice clean truck, on time, looking, and sounding competent. I would give my honest opinion on what the work would take, how much I thought it would be and what it would look like after I was done. I no longer run into contractors that will do me a favor and let me wire their houses for $1/sq foot, I no longer run into flying joints in attics or under houses, I don?t leave cables in panels without cable connectors or open spaces in panel covers because the panels I work in are in good shape when I get there and when I leave.
A contractor who conned me out of $700 worth of work told me if you buy water melons at $1 each and sell them for .99 each, you wont make up the loss by buying a bigger truck and making it up on volume.
 
I made the increase based on an increase to "my" sale price. At first they wanted me to list my total cost of labor and mateial now and then list each seperatley with the increase. I saw absolutely no need for them to know exactly how my jobs are priced and what my mark up may be so I just calcualted an increase to the total price of each individual model. That way my mark up which of course is a % of cost also went up as a whole on every job leaving more left over at the end of the job than before the incerase in copper. I am still attempting to determine what exactly I want from this business. I do KNOW that I DO NOT want to be self employed, I want to be a business owner that is able to walk away from his business while it still continues to produce efficiently wether I am there or not based on the systems I have established wthin the company. I am also a beleiver that if a business is not growing it is dying, and I am also attempting to create an established business to sale or carry on a legacy for future generations. Awesome feedback from everyone, I need MOre!!
 
Justin wher in south Florida are you at? I am in Port St. Lucie area. If I can be of any help with questions or anything please feel free to contact me at bill@jensenelectricinc.com. I know what it is like to get started in this business.
Also I have learned in the South Florida residential market that the piece workers and immigrants are taking over. That is why I got out and am doing 100% commercial work.
 
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