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Woodworking Business #4: Contracting For The Work

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Blog entry by billb posted 10-31-2010 07:31 PM 842 reads 1 time favorited 8 comments Add to Favorites Watch
« Part 3: Contracting For Woodworking Part 4 of Woodworking Business series Part 5: Consistent Quality and Guarantees »

Many of you have already mentioned some of these ideas but I wanted to include them anyway.

Once a prospect is ready to become a customer based on the information you have conveyed, the two of you have laid the groundwork for an agreement. Such agreements should always be committed to paper. Perhaps there was a time when a handshake was enough and there may well be people with whom that would be adequate but it is much too risky when you are investing funds for materials and many hours of your valuable time. For that kind of arrangement a written contract is essential and it protects both parties should issues or differences arise.

Policy 2 – Before facing your first customer you should have a standard and brief contract form to be signed by you and the customer before the work begins. The contract should describe the work in detail, list the total price for the work, and set a specific date of completion. There are three additional parts that should be included with the contract. The first two of these are important and the third is critical to your financial success. The first one is a set of simple specifications describing the materials to be used and any other basic information that should be understood by both parties. The second one is a scale drawing of the project with several views so the customer has no doubt as to what he or she is buying from you. The third item is so important that I have listed it below as another firm policy.

Policy 3 – Require a deposit equal to 50% of the contract price to be paid upon execution of the contract for the specified work.

This is where some woodworkers balk and tell me their customers would never consider paying a 50% deposit before they even begin the job. I can’t speak for other woodworkers but after hundreds of jobs over more than 20 years, only three customers ever balked about the deposit. I refused to do all of the jobs. One of these customers returned to my shop deposit in hand the next day. Another one mailed me a check a week later. Both of these signed the contract later and I did their work. The third absolutely refused even though I had completed a beautiful job for their next door neighbor who had recommended me to them. That job I lost. In these calculations I am not counting General Contractors. I don’t count them because almost all of them want you to do the job and wait for payment until they get their draw from the bank. My policy pretty much left contractors to someone else and that was fine with me.

-- Bill, Austin, Texas, http://woodworking-business.com



8 comments so far

View billb's profile

billb

112 posts in 1602 days


#1 posted 10-31-2010 09:16 PM

Knucklenut,

Thanks for your comments and you definitely must adhere to local laws. Nevertheless, it seems that this law specifically refers to a downpayment which would be upfront before the job begins. That would preclude you from collecting 50% as I advise but it wouldn’t stop you from requiring a second payment of perhaps 40% once the work has progressed to somewhere between 30 and 40% completion with the entire balance due upon completion. That may not be as good as having the full amount up front but it would put more money on your side before the job is finished.

The other thing to consider is that it seems this law is intended to protect homeowners during home improvement jobs. All cabinet jobs are not home improvement. If it is a kitchen or bathroom cabinet attached to the real estate, that is a home improvement but cabinets that you would take with you if you moved elsewhere are normally not considered home improvements. Naturally, you would need someone more versed on the law to make that distinction accurately.

-- Bill, Austin, Texas, http://woodworking-business.com

View Div's profile

Div

1653 posts in 1598 days


#2 posted 10-31-2010 09:43 PM

Amen, 50% or no go!

-- Div @ the bottom end of Africa. "A woodworker's sharpest tool should be his mind."

View Mario's profile

Mario

104 posts in 2054 days


#3 posted 11-01-2010 12:43 AM

Definitely, a written agreement clearly stating the job, warranties, and scale drawing is a must anywhere. As for upfront deposits, it´s 60% for me or no no. I found out through raw experience that if a customer is serious about custom work this amount is acceptable, had more people balking when the deposit was 50%.

View a1Jim's profile

a1Jim

112104 posts in 2235 days


#4 posted 11-01-2010 12:55 AM

Most of the time I get 50% down and then 25% at a good breaking point and then 25% on completion I always try and stay ahead of the job financially. In California you can do what Bill said get started and have a payment schedule to keep you ahead of the game even if it’s 10 payments .
Something like this.
10 percent down.
25 percent after demo
20 percent after framing
15 percent after siding
etc. etc.

-- http://artisticwoodstudio.com Custom furniture

View Broglea's profile

Broglea

665 posts in 1748 days


#5 posted 11-01-2010 03:31 AM

Does anyone have a template they use when writing out a contract? I’m not in a business. But, if I was approached by someone wanting a piece built a template or something I could reference would be a big help.

Great blog Bill.

View billb's profile

billb

112 posts in 1602 days


#6 posted 11-01-2010 02:51 PM

Broglea, I have a set of forms that I keep online for my readers and I will certainly make it available to any LJs. I must qualify them first because there will be situations like Knucklenut’s where these forms would not work. There may also be other such situations. The other thing is that I’m not an attorney and don’t even play one. So, I think everyone should determine on their own if these forms are legally sufficient for their area. That being said, I used these forms for over twenty years and here is a link to a web page that links to these ready to edit forms.

http://woodworkers-business-guide.com/forms.html

-- Bill, Austin, Texas, http://woodworking-business.com

View Maveric777's profile

Maveric777

2690 posts in 1734 days


#7 posted 11-01-2010 07:20 PM

Good information Bill. Thank you very much for sharing your experience.

-- Dan ~ Texarkana, Tx.

View FreshSawDust's profile

FreshSawDust

66 posts in 987 days


#8 posted 02-25-2013 03:50 PM

Thank You for making those forms available, I have been needing one and you provided an excellent jumping off spot.

-- TJ - Perryville, Missouri

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