Steve Payne
What are your thoughts on: “No good contractor needs more than 10 per cent to start a job”
Canadian Contractor FinancialsMike Holmes' has put another one of his memorable re-quotable quotes out to the public. This time that no one should pay more than a 10 per cent down payment on a renovation.
Last month, the general public got another reason to think of the word “contractor” with fear and loathing, when Adam Gardin of GarCon Building Group, Toronto, walked away on as many as 20 of his renovation customers. He had received cheques from some of them that ranged as high as $50,000. He left holes in the ground, water pouring into people’s untarped basements. And the media went after him.
Clearly referring to the Gardins of the world, without naming him, Mike Holmes came up with a memorable rule-of-thumb, in his column in the National Post last week, to avoid the Gardins of the world.
It’s Mike Holmes’ “Ten per cent downpayment solution.”
“No good contractor needs more than 10 per cent to start a job,” Holmes said. He then notes that the exception would be if dangerous material was discovered during demolition.
Let us know what you think about that kind of one-size-fits-all information being sold to the public.
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That’s all fine and dandy if you know the homeowner well, and you have no doubts about weather or not you’ll be getting paid.
But what about the the brand-new customer you’re about to build a $10,000 dollar deck for? Or about to install $6000 worth of windows for?
I really don’t like to feel like I’m gambling when I start a project for a new customer. And If I only received 10% up front, I’m going to be a bit worried.
Let’s not forget, that’s Mike Holmes opinion right now. If you asked him that same question X amount of years ago when he was getting started, he might have a different opinion.
I agree with what everyone is saying, about this 10% crap, what. If the materials are far exceeding the 75% of total job, and do job to not get paid, as a. Contractor you will have hardly a foot to stand on!!! Come on Mr H how does one go about that, give us all your info on mighty wise one, can ya sense my sarcasm here haha maybe collectively we as contractors should start a petition to get him off air and stop trashing the entire trade, sick and tired ot meeting with potential clients who look to Mr H as god and bow down to his every word. But then when you talk money they freak, every province has their different costs and issues involved. I have been watching the idiot box for years before I was even a teenager taking ineverything from new Yankee workshop!!!! It was knowledge and interesting, not trash talk and crap!! One of the best guys hands down I see on the tv is MR Brian baeumler. Who I feel is real, does not trash the trade in any way, does things to inform and educate the viewers and even shows his tid bits of mess ups and the reality of a job site! Just my two cents. But still feel a collectively getting MR H off the airways would be beneficial all around!!!!!
I think its easy for mike holmes to only ask for a small amount when he has a net worth of 25 mill . He can write it off , where the rest of us can only dream of having that much wealth. There is no money tree for us to go to, if the customer doesn’t pay. If they are honest they should have no problem paying for most of the material up front. I have always asked for 25% down, which usually covers materials.
I think 10% down is unrealistic. Too much risk being taken on by the contractor. Payment schedules need to reflect real costs. Obviously we don’t want to be constantly asking for another cheque, but every job is unique and so every payment schedule needs to be negotiated fairly with every client. This method will ensure each party is comfortable with the other. And if that comfort level isn’t there, the project shouldn’t proceed.
I don’t know where he is coming from. I would make an arrangement where the money is held by third party. Draws every two weeks for work in progress.
What that contractor did is finance current jobs with the deposits of future ones. He was bankrupt a long time ago.
Earth to Mike Homes….. Earth calling Mike Homes……
When materials are installed they become the property of the customer (whether they paid for them or not). The legal system will not allow a contractor to retrieve them if the customer does not pay. I feel that the customer should front the money for all material. The payment schedule for material should follow the job schedule. The customer is made aware of what the total project cost is, and they have to pay for it at some point. It is in their best interest to prepay for the purchase of material and save the contractor having to charge interest on the outstanding amount. The contractor should only risk his time. Contractors are not banks and the sooner they act accordingly the better off everyone will be.
Touchy subject I happen to be in the plumbing industry and my company offers renovations to our clients I find that a deposit is needed to build trust between us and the client regardless of whether or not I need the funds if people want things done they gotta pay to play certain exemptions would apply if it was a strong Referall from an existing client or a regular customer but no way would I start a job over $5000 with out a deposit of half, I usually ask them for the funds at the end of the first day on site and most don’t have an issue with that it shows that your there to work and get things going and the customer feels better about the whole situation.
Mike Holmes should come down to our level before he makes such statements like that ,would you give the car dealer the money before getting the keys I wouldn’t not everyone has the cash he has and I have been stiffed by clients as well as contractors in the past it hurts and you really don’t have any recourse we take all the risk and just hope everything works out so we can get a pay cheque at the end of the day
Hey Mike if your reading this come on bye sometime and do a show with our company I’ll show ya what people will put you through and the termoil we deal with all the time
Thanks
Matt Girard
M&j plumbing
Peterborough ,Ontario
How naive, 10% would probably not even cover the legal costs to recover your money if the customer defaulted. We insisted on 50% downpayment,
might as well be sitting at home as losing money.
This bit of advice that Mike Holmes is giving, coming from the man who has been known to demand a percentage of sales from suppliers when he was promoting their products by name on his show.
I believe MIKES OVERSIGHT may “BE” what about a special order ie: special custom design kitchen , or windows etc. our policy has always been special order material must be covered in the deposit, it’s worked for years and most customers don’t mind paying the company they have confidence in “A DEPOSIT”no matter the amount if everything is spelled out in the beginning.
Do you have the cost of the special order split out from the rest of the quote?
If its a new customer that I dont know I ask for 30% up front, and 80% of the project on last day of completion. Not because we need that much to get started , but for peace of mind . If they cant pay that much then , how can they pay for the rest of the project( I also feel its a red flag if they stammer around and seem unsure how to come up with the money).Also with the above scenario I draw up a contract stating the above 30/80 ratio. I have had positive results with this and I find it puts the home owner and me , the contractor at ease. Clarity and communication is huge !
Wow, you are getting your customers to give 110%!! They must be pro hockey players.
That was 30% up front and 80% of complete project on completion Leaving 20% to be paid in 30 days. 30%/50%/20%.
I rarely agree with Mr. Holmes, in fact normally I’m totally anal about expressing my disgust for this guy and how he portrays all of us “terrible” G.C.’s.
On this occasion though, I feel he hit the nail right on the head. Maybe it’s because I come from a more rural area, as I almost always wholeheartedly trust my clients. But I don’t understand this concept of getting paid for something before you have provided any service.
Our company has never once received a dime before commencing a project, regardless of it’s scope and size. We do small jobs(as small as repairing a door sash in a seniors complex) all the way up to larger projects for industrial/commercial purposes(worth 1.5 million).
It’s as simple as this. When you start a new project what immediate cost’s do you actually have? Wages, that’s it. Building material, subs….etc… etc… We as G.C’s don’t get billed for these things until a few weeks or a month down the road. So in reality the only cost you need to carry is your employees wages(until “PROGRESS PAYMENTS” are received). If you can’t handle that then I think Mike is right(can’t manage money, then you can’t handle my project).
Example 1: would you pay too have your car repaired before they started working on it?
Example 2: would you pay one of your subtrades before he/she set a foot on the site?
Example 3: why should the new client be paying for your previous jobs cost’s, because that must be the reasoning for this early payment.
Credit people! It’s about credit and professionalism, get your line of credit and other accounts in order, before you start operating a supposedly professional business.
For the ones who might question me and my thoughts, and then presume I’ve been in business for many, many years…..well fyi I’m 31 and have currently been in business for 3 1/2 and counting.
I want to apologize if I come across as ignorant, that is not my intent. It just bothers me when I see topics like this all over magazines and the web, but have never encountered it personally. Could be because of the rural area I come from(P.E.I).
cheers
Mitch, You said it right, pretty much word for work for what I was going to say. and I am from Ontario.
A lot of contractors theses days have way to much overhead in equipment and 50000$ trucks when a 20000$ truck does the exact same job. It takes one contractor to miss quote a job and lose some money and always be behind the eight ball, that’s when they start to use the new jobs deposits to pay previous jobs subs.
I would like to add that I agree with previous commenter “shell busey”. There is always unique situations which deserve specific detailed observations in the preliminary quotes and proposals.
With Contractors working on Projects of different size and scope of work it is not fair to apply a rule of 10% regardless what the Job is. If you have a 500k Project to sign a Contract 10% would be to much. On the other hand if a Contractor is ordering a Custom Kitchen which only fits the Customer Job he may need 50% to cover Material cost. Doing a little Credit Check on the Company you write the check to will save you potential problems if they are in financial trouble.
I agree a good established contractor does not, should not need more than 10 points down to secure a contract booking. However, we can not blanket that as standard for all contracts, each contract has different circumstances and different material vs labour expense ratios, and each client comes with different credit history with the contractor. Though ten points is a good minimum starting point.
If a client is brand new you may not want to risk a lower deposit, you may also want regular draws as work is delivered upon to keep account in check., which is Good on any contract. And a fair progress balance for client and contractor!
A repeat regular client with good history, you may not wish to offend client by asking for a deposit, if they have good credit history ?
Projects with large material orders and or custom orders; ie., windows, cabinets, special fixtures, etc, Items that cannot be cancelled or returned once order started, a much larger deposit definitely needed. Thus avoiding change of heart and contractor stuck with custom parts not returnable and or requiring large restocking charges! Order confirmations are also a good way to provide client confidence, with delivery instructions to client’s site, on larger deposits for custom orders.
Contract details should never be clouded by how financially successful or not either party is, but rather what is fair and a good business practice. Paper work is great to have it all in writing and good intent – and signed change orders, deposits also secure intent, and receipts and or order confirmations put purchasers at ease!
End of the contract day, it is a two way street, both client and contractor should be prepared to deliver on what they commit too, signed for and paid for, on both sides. Unfortunately all the paper work and deposits in the world cannot insure against wrong doings by unfair parties lacking good business morals!!!
In closing, the larger the project and commitment, the larger the deposit , but it should be performance based – so much down to order, so much upon delivery, so much upon Successful satisfactory installations! Then we are ALL happy if we ALL just play business nice!
Oh happy day!!!
10% deposit is unreasonable. We require a 10% signing deposit and usually another 20% at a reasonable and agreed upon milestone in the projects progress. We will also take another draw if the scope of work and cost of materials is large enough. Being a young company, we can’t afford to gamble and hope the client pays and pays on time.
Maybe that’s one of the reasons Mike Holmes went bankrupt as a contractor
I would agree with those who say that 10% to start a job is too low. I would suggest that 10% is OK to ‘book’ a job (assuming the job is more than a $10,00 deck, for example). After that, I believe it would be prudent have a ‘start fee’ equal to at least another 10% and thereafter a payment timetable based on milestones being reached. If you know the customer and trust him/her, this payment schedule keeps business and friendship separate. If you do not know the customer or have any financial concerns, it protects you. Either way, everyone knows the expectations. It worked for me on my project when I booked my major trades (ICF/Foundation/interior framing for example). I was happy to have as firm understanding, and the trades knew when they would be paid. If a customer baulks at this type of payment schedule, maybe you don’t want/need the heartache. And like other commentators here and on other subject comments….I don’t put much weight behind anything Mike Holmes has to say about very much at all.
There’s an old saying – A contract is a liability – until it is complete. For both parties. The reality is that whatever the two parties negotiate is what goes. If you are willing to negotiate your exposure and risk for someone else’s comfort that’s your prerogative. The vast majority of renovations are done to both parties satisfaction but it is the very few that go wrong that are used as examples to tell the other good contractors how they should conduct their business. Mike Holmes has made a carrier out of ‘feeding on the fear’ of homeowners. And to be fair he has also pointed out to many of them that they missed doing their due diligence in checking credentials, but that’s no reason to imply to the public that “No good contractor needs more than 10 per cent to start a job”. That is complete BS, especially from someone who went broke as a contractor and does unlicensed electrical work on his own jobs, just a bit of a double standard.
I usually don’t say too many things in respect to our industry but I feel that an individual like Mr Holmes should maybe listen to contractors that actually make a living in the renovation industry. He has made money but not from being a contractor.
As we all know good projects ,bad projects of any kind start with trust from both sides. After that is when it happens.
When solidifying a contract if you are running your company properly it means that both parties are held accountable with a binding agreement. This is where most contractors fail. The deposit means business and if additional deposits are required for purchase of specialty ordered products it should also be outlined in that section of your contract.
What Mr Holmes fails to recognize with comments like no more than 10 % deposit for contractors hurts the industry as far as the good contractors to perform what they are good at.
The contract is the starting point if any homeowner or contractor are legit and abide by the promises they made to get this far. All of the problems originate after the signing if they are not.
I have been a business owner in the renovation /construction industry for 25 years in Saskatoon and I think it is time for Mr Holmes to keep to himself and move on with his money he made because he is more damaging to a good contractor with his opinions when he has never been a contractor in the real world.
My company contracts are approx 8 pages long and outline everything as far as protection for homeowners as well as protection from homeowners. A good contractor will tailor his contracts as well as deposits as they see fit and have standards as to the amount of deposit required based on the size of the project. A 10 % deposit as he has outlined as a requirement we would use if the contract is over 350k
Time for Mr Holmes to leave.
Dave Anderchek
I can’t tell you how many times we have been asked by homeowners about products PROMOTED by Mr Holmes, how many times we are questioned about construction practices and told this is not how Holmes on Holmes says it should be done.
Agreed the show has some wonderful ideas, however we find ourselves time and time again trying to explain the costs they would incurr. It’s necesarry to point out that a majority of these jobs that he gets involved with are; 1) paid for by our Ontario Government. If you have the ability to pause the end of one of his shows it’s clearly stated. 2) other portions of the repair or Reno if I understand correctly are paid for by advertisers.
Let’s get back to reality, there are products that fit budgets, good quality workmanship coupled with good quality products that have existed for years, still function without breaking the homeowners budget. Like buying a tap. Yep you can buy a good quality tap for less than $100 and yes you can pay $ 1,000.00 for a gold one. But a canadian government approved tap is still a tap.
I am often surprised by comments made by Mike Holmes, but I am also surprised at the reactions among the construction community. Mike Holmes is not making his money representing our best interests, and as such, his comments are always made for the protection of the general public from unscrupulous contractors. It can be tough on honest, hard-working contractors to have suspicion cast on your character and intentions by generic comments made over mass media. Thankfully, staying in business demands we be stronger than that.
There are awful customers and awful contractors out there. Anyone who has been around this industry knows that. We negotiate those hazards every day as we try to run productive, profitable businesses. It has been my experience that you need to trust your instincts to run a successful business. Don’t let anyone else tell you who you have to deal with, what you are allowed to charge, or how you go about collecting. And stop expecting Mike Holmes to see things from our perspective. He is singing to a different crowd.
Marc Gaultier
Gaultier Enterprises Ltd.
Chilliwack, BC
Right you are.
Mike Holmes has made his money on trashing contractors and feeding his big ego. Good for him, not good for anyone else that is actually in the industry. Every contract and customer is different and there should not be statements made for someone who should know better that says otherwise. I am sick of him and his trashing of the industry and using fear mongering to get rich himself.
I wonder if he is related to Trump?
Mike Holmes is riding on his celebrity status, people would pay this guy just for one of his farts in a bottle. The average contractor can’t be gambling otherwise head to the casino, at least you wont blow out your back while the money is carefully removed from your wallet.