Contract Forms
Keep your contract forms simple because customers are hesitant to sign long and complex contract forms written in difficult to understand legalese. On the other hand, a contract should protect you in the event that a problem arises during the job.
Remember that a good contract is an agreement between two honest people who want to do some form of business. If one or the other intends to cheat on the arrangement, the contract will not prevent problems. It may protect you but it won't stop problems from arising if you do not perform as agreed or if there is a misunderstanding.
This means that even with a good contract, being right is not the important thing. The best thing is to complete every job with a happy and satisfied customer who will call you again and recommend you to his or her friends and family.
The Steps Of Contracting For Work
Contracting for work involves several steps. The first one is selling the customer on the idea that you are the best person to do the work. This requires finding out exactly what the customer wants. That can only be determined by listening to the customer and making certain you understand what he or she is explaining to you. Once the job is clear to you, it’s wise to prepare some simple drawings and specifications to make sure that you and the customer are on the same page regarding the work to be done. The next step is to calculate the cost of the job and give the customer an accurate and competitive quote.
After all this is complete, if the customer decides to give you the job, the contract form is prepared. The contract should define the job clearly and refer to any drawings or specifications prepared specifically for the job. All of the drawings and any additional specifications should be attached to the contract form. At this point you sign the contract and give it to the customer to sign. Each of you should keep a signed copy of the contract and all related documents.
The Deposit
The next step is one of the most important and often overlooked part of the contracting process. You should always require a fifty percent deposit payable upon execution of the contract, that is, when the contract is accepted and signed by the customer. This amount must be paid before the job starts.
Some will tell you that it is difficult if not impossible to get a fifty percent deposit from customers. That isn't true and you will get little resistance from customers who trust you enough to spend the money for the job. If you have developed a rapport with the customer he or she will not doubt your honesty. If your honesty is in question to any customer, you are better off without the job because such distrust will lead to difficulties almost immediately.
Even when you are first starting your business, it is no problem to get a deposit as long as you present yourself professionally, carefully explain the work, present clear and concise drawings and a fair contract form. When people realize you are serious and know what you are doing, they will not resist the deposit. Once you develop a reputation it will be even easier to get the deposits from your customers.
As previously mentioned, a contract with a customer is based on trust. If a customer is unwilling to sign a contract and give you a deposit, then trust doesn't exist. For whatever reason, the customer is concerned that you will not follow through and perform as you promised. If you relent and proceed without the deposit, you can’t be certain that you will get paid.
The fifty percent deposit is a compromise. The customer has a reasonable assurance that you will do your job to get the rest of the money. You have a reasonable assurance you will get paid because the owner has contracted with you and given you a good faith deposit that he or she will not want to lose. If even this limited amount of trust doesn’t exist, you should not be doing business with each other.
In all my years in the woodworking business what worked for me was to get a fifty percent deposit when the contract was executed (when the customer signed the contract agreeing to the work and the terms). The balance of the contract amount was then payable in full upon satisfactory completion of the work described in the contract. I recommend that you use this procedure to avoid losing money on jobs.
Chapter 10
Contracting Jobs
Forms You Can Use
To help you prepare the forms you need, there is a web site with a sample contract form and many other forms available at:
http://woodworkers-
You may use any of these forms and
change them with your company name and address. These are forms that worked for years
but there is no legal adequacy stated or implied. They are merely supplied to save
you time. You may consider getting an attorney to prepare a simple contract for
you but do not allow it to become a twenty page nightmare of legal jargon. This will
just make it much more difficult to sell your work.
In addition to the forms at the web site listed on the previous page, you can find reduced copies of those forms on pages 101, 102, and 103 and you can use those as a guide to prepare your own forms.
No matter the form of your contract or your reputation, you may rarely run into a potential customer who absolutely refuses to pay the fifty percent deposit. It is important to treat this deposit requirement as standard policy that you do not bypass for anyone. Potential customers who resist the deposit may sometimes come up with various alternatives including various lower percentages or depositing the money for the job in an escrow account.
Years ago I had one potential customer who refused to pay the deposit even though she had gotten my name from a neighbor who recommended me highly. Even though it was clear that she wanted me to do the work, she was adamant about not paying the deposit.
The woman continued to call me various times over a couple of months offering alternative proposals and trying to get me to relent on my policy. I finally had to tell her not to call me anymore. I strongly recommend that you set a policy regarding the fifty percent deposit and apply it to everyone. Unless you can afford to lose money on projects, it is the only sensible thing to do.
Dealing With General Contractors
Remember that this policy will eliminate almost all general contractors as customers. Contractors want to have the work done and then pay you after they get a draw from the bank financing the work. This can be a slippery slope that can cost you a lot of money.
I’ve known several woodworkers over the years who allowed themselves to be talked into doing complete kitchens in large subdivisions thinking they would make a lot of money. As it turned out, some contractors cut their prices after accepting their quotes initially. And, several contractors failed to pay at all. They were left with the option of filing liens on the property. They may get paid sooner or later and probably only a portion of what they are owed. Plus, they will have to pay the legal expenses of filing liens on the property.
Some contractors will try to cut your price after the fact because they realize that the home or building is costing more than they estimated. If you stick with your policy, only contractors who have the financial ability to pay the deposit up front will do business with you and your odds of collecting the balance when the job is done are greatly increased.
Sometimes You Don't Need A Contract And Deposit
There are some situations where a contract and deposit arrangement may not be possible or necessary. One of those involves doing work for government agencies. In those cases, it is unlikely that you will not get paid and it may not be possible for them to arrange a deposit or even sign a contract. In most cases governments work with a purchase order arrangement and you will have to accept that if you choose to do work for them.
Don't think that you will get paid promptly by government agencies. They will pay you but seldom promptly. Years ago I did a $2,800.00 job for the IRS. I felt since they always have such high expectations for people to pay on time or be charged penalties and interest, they might pay promptly. It didn't turn out that way. It took me more than ninety days after billing them to finally collect my money.
Another time where deposits could be a problem is with large corporations. They also work with purchase orders so you may have to pass on the deposit if you want their business. You should be very careful here because some corporations are badly managed and some of their employees simply don't care about their vendors and it may take a long time to finally collect.
The last area where a deposit could be overlooked is when doing work for someone regularly. For example, I had a customer who owned rental property on which I did woodworking related repairs for more than ten years. In his case I would just do the jobs and send him a bill and he would send me a check. It would have been too bothersome to do a contract for so many small jobs.
The important thing is to handle these situations carefully, always making certain that you collect for every job you do. If someone fails to pay you promptly, stop doing work for them until all their outstanding bills are paid up. This will, at least, limit your losses and ensure that your woodworking business will be a financial success.
Thanks for reading this chapter. I hope you found it informative. You can get my book Woodworking Business: Start Quickly And Operate Successfully now by clicking on the order now button below. Thank You.
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