Steve Payne
A good deposit policy has allowed us to only get stung three times in 38 years
Marketing & SalesYvette Aube's chimney service company asks for deposits in the range of 25 to 33 per cent of the project total.
Yvette Aube, Aim Chimney Sweep and Stove Shop, weighs in on the discussion about Deposits: how much should contractors ask for?
“In my company we will NOT order any product without a deposit of 25-33% of the project total AND a signed proposal for work. We will occasionally get a secondary payment before we start work, depending on the size of the project.
It is not that we are going to run and hide when we get the money but that the client will at least have paid for some of the materials before we begin a project.
(Our upfront) costs can broken down to include: initial visit time and travel, office time to prepare paperwork, sending the paperwork out to client, material costs, travel time and delivery to site.
So a contractor MUST get some of his/her money up front in order to NOT have to absorb all the fees in case the client decides to “run out” on the final billing.
We do NO work without signed work proposal/contract which definitely delineates our terms for the project’s duration and payment times.
We have had no problems with this procedure in 38 years of business and we have only been stung three times. And in each and every case, we did work on trust alone with no contract. Goes to show you.
We once purchased a large unit for a client and he backed out two days before installation was due to start. According to our terms (in this situation he would) not get his deposit back. He did not want the unit so indeed we kept the deposit.
His lawyer called us and we read him our Terms of Cancellation – and that he had signed that he had read them. No contest. The lawyer said thank you and hung up.
Contractors, GET YOUR DEPOSITS and proposals SIGNED by the client.”
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We have had very little bad debt ever since we started taking deposits for any job over $1000.00 about 15 years ago. An old mentor of mine used to say, “I just want to see the colour of your money”. I believe the best value is that it stops the shopping around that some people would do if they had not signed a contract and given a deposit.
Almost all our bad debt has actually been from General Contractors doing home renovation type work. We are approached about once every couple months from supposedly established General Contractors looking for a new Electrical Contractor. I have a few qualifying questions which I ask, and one of them is whether or not they get deposits from their clients. More than half get angry when I ask this question. From my perspective if they don’t take deposits they are a big credit risk no matter how the credit check comes back. And people with good business sense want to associate themselves with other like minded sub trades.
“Keep your customer on a financial leash” is a term that at first made me gulp and wonder if I was working with a shady General Contractor. Now I wonder why anyone wouldn’t have a schedule including a payment schedule.
Agree with deposits fully, why should contractors order equipment and not get paid… …. Also ensures client commits….otherwise you get the Sunday call the client will delay or changed there mind….. No deposit…. I do not book resources, end of discussion.
This is such an important issue it really is a make or break practice for getting established and staying established. So much depends on perception. Many contractors have a preconceived notion of what customers think and plan their strategy accordingly. A mentor of mine always said “create the ballpark you want them to play in, don’t play in their ballpark” or another way to phrase it “are they buying your story or are you buying their story”. You need to establish the rules of the game from the start (create your own ballpark). There are plenty of justifications for taking deposits, you are ordering products that don’t fit any other home like cabinets and windows etc, you are spending time to travel prepare quotes, design work, preparing job scopes etc. And if you don’t value your time by charging for it, how are you going to convince some else the value of it. In my province (Ab) there is a Provincial Pre-Paid Contractors License as well as our Municipal Business Licenses. I show these licenses to every prospective client before we discuss their project and I tell them without these licences any contractor in not legally allowed to take a deposit. So I establish from the start that to do otherwise is illegal (and probably foolish) and at the same time it shows my legitimacy by being transparent (building trust). Now when they talk to other contractors what do you think they are comparing them to. I’ve started to establish the rules of the game from the start and established in their mind that deposits are legitimate (if you have the license).