Canadian Contractor

40/40/20 draw system for billing a basement reno customer?

What do you think about Rule of Thumb staged payments like this? We at Canadian Contractor don't like them.

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February 28, 2019 by canadiancontractor

It has been almost four years since contractor coach Mike Draper wrote a post to help contractors figure out a fair deposit for different types of renovation work. Here is a recent comment on a thread that is still going strong. (Editor’s note: We don’t think that Rule of Thumb staged payments like this are a good idea. Each renovation project is unique, each customer is unique, and trust factors can vary all over the map on┬áboth sides.)

A contractor may also ask for draws and not deposits. I feel that a draw of 40/40/20 shows commitment from both the customer and contractor. A lot of times the customer may not want to pay the full amount once the job is completed – even if the job was exceptional – meaning the contractor is out. Similarly, if the contractor starts but does not finish, the customer is out. A 40/40/20 systems works well with basement renovations in the sense that 40 per cent to start should give the contractor the funds to order all material and pay their labour up to the paint/finishing stage. Then the customer also will find out about the quality of the work completed before releasing the second 40 per cent. The final 20 per cent payment will be the contractor’s profit.




Canadian Contractor is the independent voice of residential renovators and home builders everywhere in Canada.
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