Any of you guys that own shops have the owners sign contracts? and would any one care to share an example. I have a guy that want me to build a traditional rod for him but he wants to do pay as you go. and from my experience and hearing other people complane about costomers it usually dosen't work out. I figured if I could write a contract to hold him to it even if he backs out I won't get burned.
you need a written contract , estimante , that will comply with your state laws otherwise you can get f$%^&& but pay as you go is common and your gonna need to do it. just make it so the customer knows th e deal $ say like payment every time it reaches ?? and then decide about parts if he buys and drop ships or you buy and charge, liitle misc pieces you just have to ad to your bill but it is the big items that add up. and you better hav eyour storage charges posted to just in case
My contract with each customer includes an outline of my understanding of what he wants done to the car. In the case of a ground up job that outline can get rather lengthy and is subject to revision as the project progresses. It also contains this section: All work done by Highway 99 Hot Rods, Inc. will be on a time and material basis. Shop Rates: $65 per hour for mechanical work, body work, and paint work. $85 per hour for fabrication, customizing and welding. Some tasks will be sub-contracted to other businesses (e.g. interior work, powdercoating, etc.). The owner will be responsible for actual charges by the sub-contractors. At the end of each week Highway 99 Hot Rods, Inc. will provide an invoice for parts, services and work performed that week. It will be the owner’s responsibility to pay that invoice in full before additional work begins in the subsequent week. Projects left at the shop with delinquent invoices will be subject to additional charges for storage at a rate of $100 per week. For budgeting purposes, the owner requests that weekly invoices will be limited to $___________ per week. (initials _______). If at any time either the owner or the shop wishes to discontinue the project, it will be the owner’s responsibility to pay any outstanding invoices and pick the project up within two weeks. _____________________________________________________________________ With this agreement neither of us can get burned for more than a week's worth of work and I never have more in a car than I can sell it for. I don't take money up front unless the customer wants me to purchase big ticket items for the project, on those items I prefer them to do their own purchasing. This arrangement is working very well for me. I'm happy and all of my customers are happy (at least that's what they tell me). There was a shop here in Visalia that got busted and shut down a couple of weeks ago. The guy had taken substantial deposits on as many as 80 project cars and never did any work on them. There's a whole bunch of pissed off people with unfinished projects around here now.
"At the end of each week Highway 99 Hot Rods, Inc. will provide an invoice for parts, services and work performed that week. It will be the owners responsibility to pay that invoice in full before additional work begins in the subsequent week" If you don't do anything else....this is the single best advice to heed. Stick to it like glue! The stories I could tell of what happens when the owner gets behind. You'll be tempted from time to time to go ahead and just "do a couple more things". DON"T DO IT. If you do you'll live to regret it. Promise.
Highway 99 has a good looking contract there. I used to do quite a lot of a build out of my pocket. NO MORE. Have the owner buy all parts, and materials. If not, you could be sitting on a lot of money for months if not years !! Week to Week or Two Week to Two Week payments are the best. That way no one really gets burned if the project goes South for any reason. The owner gets what he paid for and you get you money. Unfortunately, even the nicest people can turn on you. Luckily, I haven't had that experience and have build some nice rides. Good luck . VR&C.
A clearly defined "Statement of Work" is what I use, along with a pretty standard contract template once the SOW is agreed upon and signed by both parties. A good SOW will have a face fage with who the two parties are, and a brief description or overview of the work to be done, and what vehicle it is being done on. The face page has a signature line for both parties. Next is a pretty complete "Project Description" section where the work to be done is laid out. Section two is the "Scope of Work" which tells that (customer) wants to contract with (you) to do (another overview) Section three is "Obligations of Parties" where you lay out what the custoemr's responsibilities are, in total, and then what your responsibilities are, in total. section four is detailed contact info for both parties. Section five is Billing and costs. No, that doesn't make it fool proof. There needs to be verbiage in there that deals with unforseen costs and functions, as well as provisions for communication between you and the customer to be sure everything, especially cost overruns, are communicated beforehand. I should note, I have both parties initial each and every page.
And with all these tips, don't forget THAT YOU NEED TO BE LEGAL. If you don't have a legitimate business license for the address where the work is actually being performed, a contract won't hold up in court. Zoning, liability insurance, taxes, all that shit needs to be in order....
Make sure that you have some type of "If customer doesn't make payments to continue work as planned, then they agree to pick-up the project and get it out of your hair" clause. If he runs out of money or loses a job, then how long can you reasonably be expected to store the project? I'm sure there's some required notice period in your state before you can either just put it out front or try to sell it. If you do sell it because he lost financing, then what are you required to do if the payment is less than 'fair market value'..whatever that is. Most deals that go south were good intentioned deals in the first place. You don't want to get stuck holding the bag in this economy. I know good people who lost their job...a hot rod project won't be a major concern if that happens to your client.
Keep the comments coming this is proving to be very helpful and educational for me and hopefully some others. I appreciate the professional advice you guys give.
I have been involved as a witness in a few deals gone south. I have not had anything come against my shop yet. Knock on wood. Remember, everything you say in your contract binds you also. "At the end of each week Highway 99 Hot Rods, Inc. will provide an invoice for parts, services and work performed that week. It will be the owner’s responsibility to pay that invoice in full before additional work begins in the subsequent week" If you bill a guy on Friday and he doesn't pay you before Monday morning, (none of my customers pay this fast. Send the invoice on Friday evening email and you won't have a check from a out of town customer by Monday morning) If you start work at 8 Monday morning and the check doesn't show up in the mail till 10, you are in breach of contract! They can file a law suit over it. I saw it happen. The storage fee thing is usually put in a contract to scare people into paying on time. If the guy has not paid you in six months and you stop sending him invoices every Friday, you are in breach of contract. They can file a law suit over it. I saw it happen. I had a contract like this at one time. After watching a few customers use the contract against the shops doing work for them, I quit using mine. I worked with one of the top classic car attorneys in the country once (needed an expert witness in a scam, I knew the guy who had been scamed and he wanted my help) I had him read my contract that was six pages long and I thought a pretty iron clad deal, he laughed at me on the phone and said it would hold up like toilet paper in the court of law. Just be aware that every word you type in a contract can come back to bite you in the butt. I was hunting with a friend of my dads who is an attorney. Talked to him about it a little bit and he said at least with the "he said she said" it is your word against theirs. I will close by saying I really really hate this business! I love building cars, but I really really hate the business end of it.
I just read my post and it sounds like I am comming off as better than thou... I am not anti contract. I have seen some pitfalls in the contract deal and am just throwing this out there to let you know what can happen. I could type all night on some of the stuff I have seen, heard, and had happen to me in the last ten years. You need good shop policies and some great ones have been posted but, open communication and lots of it is the best way to prevent a problem from starting. The only time I have had any problems with customers is when there was a lack of comunication.
Get storage costs and conditions, in writing. Otherwise, you will end up storing stuff, for free, that they can't afford to pay you to work on.
Having been the guy that collected the bills when the owners backbone was out to lunch all I can say is good luck! Humans as a general rule are stupid critters. We like to hear what we want to hear and forget all the rest in the end. It amazed me how the customer that would stop in every day would suddenly be AWOL when the bill was due at the end of the week. Or the incredulous looks you would get when the work and parts (quoted in writing) were ten times what they thought they should be when the checkbook came out. No matter how clear things are in writing and on paper YOU WILL have problems somewhere dowwn the line.
Then there is the question of what to do with a dead beat. The shop owner will tend to give the customer the benefit of the doubt, and no shop wants a reputation as a place that sues or puts mechanics liens on their customers. Yet all of a sudden the customer will go dark. You're not getting weekly payments and good luck on collecting storage, especially after a while since it adds up quickly. Unfortunately most states set up their rules for automotive shops to protect Grandma from getting banged by the local muffler shop. It's one thing to protect the consumer for balljoints and shocks. When you are talking custom work, all bets are off, but the same laws apply and it can come back to bite the shop owner. Of course, some shops are not legit, and that is a problem, too.
so for what it's worth , by all means draw up a contract , the problem is , it relies on people keeping their word . if they stop paying , it will lkely cost you money to recover the debt , or you may end up with a car or parts that you really don't want . the only advise i could give is check the guy out first , ask if anyone knows him , this is a relatively small group of people , someone knows someone that knows the customer . lastly , be prepared if it all goes bad to become the bad guy . there are always two sides , you may not think he's paying enough , i guarantee he [the customer ] thinks he's paying too much and it's taking too long . i love the creative part of this job , but the buisness and money aspect of it almost killed me . best of luck !
Including, how long you have to wait, before selling the car off to cover unpaid storage costs. Laws vary by state, know the law.
X2.............no SANE owner would transfer title to his car to a shop for the build AND pay them as the work progresses..........how would the owner expect to get the title back (with any certainty) and he may may very well be subject sales tax for the entire value of the finished vehicle, depending the State's tax laws. Maybe the original owner puts a lien on the car to retain some ownership interest in it, but that would require an obligation, and a contract, on the the part of the builder...........waaaaaay too complicated...IMO Ray
No matter how well you think you know the guy, you don't know his life, you don;t know his old lady, you don't know how quickly paying $500 or $1000 per week (which does not really buy that much custom work) gets old and all of a sudden things start heading south. For the larger jobs, for every shop/customer success there are probably several that go south. Everybody loses. If it is a smaller job that you can estimate and the customer can just pay it off with maybe not going out on the town for a few nights, no problem. When you are talking about jobs of $400o and up well all of a sudden the customer is no longer your best buddy. For the shops that can pull this off with happy customers, I give them credit.
And you that because............???????? the post being commented upon by FLOYDJER didn't give any hints it was humor........ Ray
i completely agree with plm49 even the most genuine guy might have a change of heart / circumstances , i really don't know how you can 'qualify ' someone , i worked for some great people , and some real famous ones who didn't pay the bill as i say good luck .
This thread is very timely for me...I'm going from a small, home based shop to leasing my first space, and adding a couple of part-time employees. I think I will use a contract, but I will be very careful...and have an attorney look it over.
After a couple deadbeat customers come up missing you will have a better time collecting bills...........................
Hi there folks...just chippin in my .02....I've been in business here for bout 12yrs and I almost never use contracts....I'd say communication is the key...from builder AND customer..I've only ever had the occasional problem with clients..and usually because of the financials.I work on hourly rate plus materials.Outwork is usually left to my clients to pay directly. Unrealistic expectations..spouses who just don't understand what's involved gettin work done on cars...customers who just plain run outta money...people chewin their ear sayin "jeez you've been charged HOW much???"...the list goes on... by far the majority of my clients are happy and i still get lots of repeat clients and referrals...I take lots of photos and communicate,communicate communicate...always like to think how I'd want to be dealt with if it was my car...or my house...just my .02..
No, It wasn`t. SOP for many years. And any shop that requires money up front can`t afford to be in business...Move on to one that can.
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