Thursday, May 6, 2010

Keep A Close Eye On Your Bottom Line By Carefully Monitoring The Details

If you’re a contractor who isn’t making a profit - the job isn’t going to go well because you’ll feel resentful – even though it’s with yourself – about not making enough money once again.

1.  Know exactly how much you need to earn personally so you can plug you into your business-spending plan.  In other words, a personal spending plan must be created and then you move on to creating a business-spending plan with your salary figured in.

2.  Debug every job in the set up phase by making all decisions up front, right down to the final color and type of knobs.  Get your products in order and on-site, if possible, before you begin the job.  Prepare a complete materials list and line up all sub-contractors and make sure all work orders and bids are final with the exception of change orders.

3.  Have a preconstruction conference with your client.  Go over all the procedures and schedules as well as supply lists and find out if the supplier is delivering materials and if not who is?  This saves time and $$.

4.  Make sure you discuss exactly how change orders are going to be handled.  It’s easier to know this up front rather than at the time of a change.  Change orders must be written, signed (by both parties) and collected before they are started, as soon as they are completed or in the next progress payment but knowing this before the job begins will save hassles.  It’s easy to forget or wait until the end of a job but this can create a major nightmare for both parties.  It can also create a feeling of being ripped off if you don’t discuss this with the client clearly and directly.

5.  Make sure the payment schedule reads “at start of” rather than “on completion of” a project phase.  This way it’s clear, however, if there’s a broken window get in writing that will be fixed before the end of the project phase in question.  Find out at the beginning of the project who will be collecting the money and when.  If a phase is complete and payment is due - PAY YOUR CONTRACTOR!!  Neither party should allow monies to be held up for any reason if phases are completed in a timely fashion and the payment is scheduled in the contract.

6.  The final payment due should be between  $1,000 - $2,500 and must be paid upon completion of the remodel including touch-ups or punch list items.  Prepare and sign a pre-completion list when the job is 98% complete.  Contractors should be very clear about this initially and homeowners must abide by this on their end.  If any item on the punch list is not complete hold back 200% of its cost, but the client must pay the final payment balance minus this percentage until it’s complete unless you make other arrangements.  Allowing a hold of up to $15,000 because the knobs aren’t on the kitchen cabinets is not acceptable.

7.  Neither party should let down their guard from beginning to end.  Remember this is a 50/50 relationship and can be a dream if you simply communicate and stay focused on the purpose - which is a completed, quality project.

The goal is a win/win situation – the contractor gets all monies due (including change orders) and referrals and the homeowner gets the project and experience they paid for.

Reva Kussmaul
CEO – Eye For Detail Inc.

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