Being ripped off by a Contractor is a tragic, yet somewhat common, occurrence. Let’s use Trinity Church in Bloomfield, Wisconsin as an illustration.
Trinity Church hired a contractor to install a new HVAC system for their new addition. They paid the contractor $17,000 for materials, a portion of which they received. After a month of waiting on materials to deliver to finish the project, the contractor simply vanished. Their money was gone and they still had an HVAC system that needed to be installed.
It is important to vet out contractors before hiring them. Here are five questions to ask a contractor when vetting them for your project
1. How long have you been in business?
It’s a basic question, but an important one. The amount of time they’ve been in business demonstrates the stability of their company financials as well as their trade experience.
Some contractors may say something like “I have been roofing for 20 years.” Do not be fooled by this answer. The question is NOT just about how long they have been roofing, but how long they have operated a business as well. You need to know how long they have operated their business.
2. What projects has your business completed in the area?
Again, it is important to specify the projects HIS BUSINESS completed, rather than projects he worked on with another company.
Obtaining a list of projects his company completed will do two things:
- Showcase the potential for his work.
- Provide you with a list of references to interview.
3. How many employees do you have?
This is an important question because it indicates his work capacity. If you ask a roofer how many employees he has and he says two, then you can reasonably determine that he is not sufficiently equipped to handle a full house re-roof. If he says he has twenty employees, then he has enough for three full roofing crews and one maintenance crew. Now you know the twenty employee roofer can manage three projects at a time and still send two guys for maintenance calls.
4. How many projects are you working on now?
Now that you know our hypothetical roofer has three full crews, then you know his work capacity. He should not have more than three jobs at a time, or else one of three things can happen:
- He ignores the oncoming project, causing a delay on your project altogether.
- He splits one crew in half and hires temporary labor to fill in on the ground. This leads to either poor work quality and/or slow moving projects.
- He will outsource your job to another contractor, causing your work to be done by an unvetted contractor.
5. What are your payment terms?
This question will tell you about his cash flow and his requirements upon billing. A typical billing standard for residential work is payment for materials upfront. The contractor will give you a schedule of prices for the materials needed for the project and ask for the balance of the total amount.
There are red flags to look for in his answers:
– Down-payment above material costs. This is something contractors often do when experiencing a budget problem on another project. You want to fund your project, NOT your neighbors.
– Signing a contract for a factoring company. A factoring company pays the contractor money up front for projects. They require the contractors client on a project sign a contract that basically states you are liable for any money the contractor owes. You do not want that liability.
– Payment immediately upon billing. Most contractors are net 30, which mean payment within 30 days of billing. An immediate requirement for payment is another red flag for cash flow issues.
Don’t experience the same thing that Trinity Church in Bloomfield experienced. Obtain the necessary information about your contractor regarding the five questions above.