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Posted by RicodJour on June 8, 2007, 9:18 pm
On Jun 8, 7:53 pm, sabinbl...@gmail.com wrote:
>
> So it seems like I would have to build some trust with these
> construction firms so that I would know that they will pay me in a
> timely fashion. Since I'm starting out, I don't have any connections
> with any of the firms, so should I just go in and trust the first
> construction firm that hires me? I'm guessing there really isn't a
> tip to figure out if a firm is trustworthy or not.
This is conjuring images of a runaway kid arriving by bus at the Port
Authority in NYC. Lambs to the slaughter.
There is far more to construction than technical skills. Without
business skills your business is unlikely to be in business in three
years. Cash flow problems are the major cause of small startups going
belly up.
Construction and contracting are all about risk. With no business
experience and no track record, it's extremely unlikely that anyone
would award a contract that large to you. You represent a big risk to
the GC and owner. I would suggest you either hire some knowledge or
start with far smaller projects. There will be less risk for you and
the contractor/owner.
> I am willing to put up 20k or even take out a loan IF I know I will
> get the money back in a timely fashion, such as within a month or two
> after I purchase the materials. I really do need the money in a
> timely fashion because if I invest all the money I have saved up and I
> can't pay off my car loan, it puts me in a horrible position. Also if
> I don't get the money by then, it will halt my current operations
> since I need that money to continue on and do other projects. Do
> these details have to outlined in the contract? Does that mean the
> construction firm that hires me will give me a contract to sign, and I
> will have to make my own contract for the construction firm to sign
> too?
Most firms prefer to use their contracts or standardized contracts.
Since you have no experience you won't be able to create a contract on
your own that would protect you. The standardized forms are a bit
better. You can purchase AIA or AGC contracts and work with those.
Most larger contractors and owners are familiar with them and will
have standardized changes and addenda. That does not mean that the
contractor/owner changes are necessarily in your best interest.
Almost assuredly, they're not.
> For example, if I take on a 2-month-estimated job and the bid estimate
> is $100,000 where the cost breakdown is as follows:
> 1) the bare material cost is $30,000
> 2) labor cost for employee(s) is $20,000
> 3) My labor and taxes is $50,000
>
> What do you think the "average" payment procedures? Do I pay $20,000
> for the first month of materials and do work for a month, then send in
> an invoice. Then purchase the next $10,000 worth material and
> continue on with the work and by the time I'm finished with the work,
> I would have gotten the payment for the first invoice I sent in. So
> once the work is done, I would send in my last invoice which should
> hopefully be received a month later. Is this how the current industry
> works?
Most contractors would be willing to pay for materials delivered to
the job site and stored in a secure area. Most payment procedures on
larger projects are based on percentage of completion with retainage
(typically 10% or so will be held back from the payment of completed
work which will be released upon a predetermined point called
Substantial Completion).
> Also, how often do you guys send in an invoice? And if the firm
> doesn't pay within the grace period how much longer do you wait to
> take further action? What further actions can you take? There is
> always the option to sue, but I really don't like that idea because
> it's a hassle for every party involved (except the lawyers). If it's
> not that much trouble, if someone can lay down out a simple list of
> processes they take to start and end a contractor job, it would help
> me out a lot.
There is no simple list. There are no shortcuts. You need to hire
help or get a crap load of knowledge quickly, otherwise they'll be
eating your lunch while you _think_ you're making money. A newsgroup
is not the place to get that volume of information. Neither is the
internet. You're starting a business and you need to methodically
bring yourself up to speed without leaving any glaring holes in your
education.
Go to the library and get some books, buy some online (eBay has used
books for far less) and study.
> Lastly, what types of forms should I have prepared (my own contract,
> invoice, etc)? For example, I know I need an invoice form. Do I also
> need a form for when the firm doesn't pay the bill on time and I have
> send a second notice?
An accountant would be a good place to start, but some software that
will take care of billing and invoicing can get you up and running
more cheaply. Something like Quick Books or Peachtree will have
business templates so the forms will be tailored to your trade.
Neither will replace an accountant if you don't understand what the
accountant is doing in the first place. No software will help you
with that.
> Thanks so much. I'm glad I can get good feedback from you guys. I
> just want to do all my research before I venture further into this
> business.
Exactly. You'll either spend a lot of time learning the stuff you
need to protect your money, or you will be losing a lot of money
you've earned and spending more trying to get it back.
R
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