This is why our company refuses to work with any vendor requiring a deposit. We need a contract to start, and photos and inspection to issue payment after completion. This has lead to a lot of projects being put on the back burner, but after a $30k loss that’s what we gotta do to protect ourselves from being scammed. 3 out of 5 companies I interview in my area, have more than one verified review about receiving money upfront and not showing back up. We have found a couple smaller crews who were willing to work but couldn’t afford the overhead. So we’ve been purchasing materials to take that cost away which saves us at least 20% in markups, and also throw in quicker easier jobs to help supplement the businesses income while working on the bigger projects. So far it’s been working out for both parties.
So would you recommend not paying people until after each step is finished (25+25+50% or something?) Would you do anything differently? It sounds like even a contract isn't enough to provide full protection.
So this is a tricky topic because if you tell the contractor that you want to pay for work after it's done they're not going to be too happy with that because they can wind up not getting paid. In a new business relationship I find that it is safest to find a contractor who is ok with that scenario because that gives control to you to make sure they follow the plan and execute the contract as agreed. I have heard of customers taking advantage of contractors this way though, so some contractors may be unwilling to do that. A compromise is you pay for materials and labor separately. That way they can't rip you off for the cost of materials AND labor, such as was in this case. Contracts are the worst case scenario backups and definitely a good thing, but shouldn't be relied upon.
Also, paying for your own materials normally saves you around 20% in markup costs. Those markups cover the contractors travel, insurance, and overhead related to gathering all materials, which in my opinion is a fair markup. But that loss in markup money also means the contractor makes even less in the end because overhead then comes out of the labor.
The dispute took just over 2 months (90 days was the max they told me) and the engineering firm would have just kept the money otherwise... I spent about 5 hours talking back and forth with them and my bank. I just couldn't believe that they didn't understand what had happened and wouldn't fix it themselves. As for the actual concrete scammer, court is in a couple of months. That should be interesting.
This is why our company refuses to work with any vendor requiring a deposit. We need a contract to start, and photos and inspection to issue payment after completion. This has lead to a lot of projects being put on the back burner, but after a $30k loss that’s what we gotta do to protect ourselves from being scammed. 3 out of 5 companies I interview in my area, have more than one verified review about receiving money upfront and not showing back up. We have found a couple smaller crews who were willing to work but couldn’t afford the overhead. So we’ve been purchasing materials to take that cost away which saves us at least 20% in markups, and also throw in quicker easier jobs to help supplement the businesses income while working on the bigger projects. So far it’s been working out for both parties.
Yeah, it is hard in a tight job market where workers and companies are short staffed, but you have to.
So would you recommend not paying people until after each step is finished (25+25+50% or something?) Would you do anything differently? It sounds like even a contract isn't enough to provide full protection.
So this is a tricky topic because if you tell the contractor that you want to pay for work after it's done they're not going to be too happy with that because they can wind up not getting paid. In a new business relationship I find that it is safest to find a contractor who is ok with that scenario because that gives control to you to make sure they follow the plan and execute the contract as agreed. I have heard of customers taking advantage of contractors this way though, so some contractors may be unwilling to do that. A compromise is you pay for materials and labor separately. That way they can't rip you off for the cost of materials AND labor, such as was in this case. Contracts are the worst case scenario backups and definitely a good thing, but shouldn't be relied upon.
@@MyFortressConstruction Thanks for sharing.
Also, paying for your own materials normally saves you around 20% in markup costs. Those markups cover the contractors travel, insurance, and overhead related to gathering all materials, which in my opinion is a fair markup. But that loss in markup money also means the contractor makes even less in the end because overhead then comes out of the labor.
That's terrible! How long did the dispute take?
The dispute took just over 2 months (90 days was the max they told me) and the engineering firm would have just kept the money otherwise... I spent about 5 hours talking back and forth with them and my bank. I just couldn't believe that they didn't understand what had happened and wouldn't fix it themselves. As for the actual concrete scammer, court is in a couple of months. That should be interesting.
@@MyFortressConstruction forealz