This month I want to talk about a couple of essential remodeling functions. It never hurts to revisit basics, and there may be a new wrinkle or two you should know about.
Due Dates
Let's start with collecting money. Obviously it's vital to your company's existence. But you should also regard it as a useful check on quality and customer satisfaction. If customers aren't satisfied with the work to date, they'll usually hold up a payment. That's good, because it alerts you to a problem that needs to be addressed. Of course, you must get in touch with the customer immediately, preferably in person, to learn what the problem is and move to solve it.
Though in some states there is a limit placed on the initial deposit for a job, a payment schedule of 30% down, 30% after start of work, 30% at start of drywall, and 10% on completion is typical for a standard multi-trade project. On major projects, many contractors require that the initial payment at least cover the cost of special order materials, then they divide the payment schedule into $20,000 to $30,000 lumps with the final payment being no more than 10% of the entire job. It's important to make the final payment as small as possible to minimize your potential loss with a difficult-to-impossible customer who is reluctant to pay.
Collect in Person
It's absolutely critical that payments be collected in person. If you're using lead carpenters, they should leave the bill at the jobsite communication center on Wednesday and pick up the check on Friday. A second method is to have the project manager collect the payment. Some companies have the salesperson pick up the check from the client, but this may lead the customer to say, "The only time I see you is when you pick up a check!"
Change orders must be paid when written up and signed, or immediately on completion of the change, or at the very latest with the next progress payment. Never let change orders go until the end of the project. I regularly hear of contractors who lose thousands of dollars on change orders because they didn't collect on them promptly.
One more thing: Be sure the payment schedule says "due at start of drywall" or " start of painting." Never have a progress payment due upon completion of a segment. You don't want your payment held up by a broken window that has to be re-ordered or damaged drywall needing repair.
Show and Tell
The other item I'd like to touch on is product selection. Technology has made elaborate showrooms unnecessary for most contractors. A product selection area in a retailer's showroom can be sufficient for many.
Many of today's customers spend a lot of time -- on average, more than a year -- researching the project they're planning, especially kitchens, baths, and additions. They're reading magazines, visiting new home projects, going to home shows, checking out home center and lumberyard displays and kitchen and bath showrooms, and of course browsing the Internet.
Studies have shown that prospective real estate buyers who use the Internet are selecting their subdivision, neighborhood, and type of house before they even call an agent. Internet users look at seven houses before buying, and 80% of them are happy with their choice. Other buyers look at 15 houses, and only 62% are satisfied.
Technology helps to sell remodeling by demonstrating what the finished product will look like. A salesperson recently told me about a $350,000 project that required tearing out two existing rooms and rebuilding the kitchen. Using Chief Architect, he showed customers before and after views on his computer. That sold the job.
--Walt Stoeppelwerth is a publisher of management and estimating information for professional remodelers. (800) 638-8292; [email protected]; www.hometechonline.com.
