Are we (residential cabinet makers) just too far down the food chain? It seems like we are in a free-for-all business. Everyone just does what they please, contractors, designers, homeowners, other subs, and it adversely affects our outcome and profit. I cannot predict the behavior of others. Customers hold up things by indecision, contractors are disorganized, subs put plumbing and electrical in the wrong places, on and on. I admire the architect, he is right in front of the project and gets his money while there is plenty.
(Business and Management Forum)
From contributor L:
Yes, that sounds about right, unfortunately. We try to go direct to the home owner as much as possible. The home owner will pay sooner than the contractor who may be having difficulty with another trade whose invoice was submitted to the owner along with yours. By going direct we tend to financially separate ourselves from all the others and their problems. We tell the contractor to tell us how much mark-up he would put on the cabinets and tell him to bill us when it's done. Most contractors who you have a long standing relationship with will allow this.
More than I can say for the designer who literally mocked me at one of the meetings. Still if it wasnít for costs and time constraints I donít think they would have hired me. I had a low bid and could fit the job into my schedule. There are of course two sides to every story and more to it than I can write here. At least everything worked out in the end.
I have several contractors who throw work my way, but their clients have expensive tastes without the money to go along with it so work can at times be scarce. The residential side hasnít been so great lately either, lots of tire kicking and price quotes but not enough steady work except for small stuff thatís not really a full time venture.
Then we added a company profit. Up until that point, we thought that's what we were paid out of, and why we always took a beating in the wallet. I look back now on how much money we left on the table and all the stress that went along with it, which is why I am always encouraging people to charge more, because their pricing is more ad-hoc than anything else. On your next ten bids charge 5-10% more - you'll be surprised at how much you still close. Then take that money and put it into a separate account and build a reserve fund.
Change orders - if it happens before a project begins, 50% down, 50% on completion, whether the whole project is done or not, as it is considered a separate transaction. If the project is already underway, 100% is required. Contractors buying cabinetry for homeowner - 50% down/ 50% on delivery. If we install, it is a separate agreement, and the install portion of the project does not begin until cabinets are paid for.
For homeowners who are buying cabinets only - 75% down/ 25% on delivery. If you ordered cabinets from a Big Box company, you pay 100% upfront for stock/semi-custom. We do this because we don't want to get involved in mechanics liens, collections, courts, etc. For residential, if the job is complete, there should be no reason as to why you get paid, and the final payment should be no more than 5-10% of the total. That's what works for us.