[This is something I wrote a long time ago and never posted, because I didn’t feel it was polished enough or quite finished. I’m not in the reno business anymore, but… what the hell, I’m posting it as is anyway.
Cheers, onestring]
For better or for worse I am in the renovation business. In slogging my way along in the lifestyle that this work demands, one thing in particular has been a major eye opener for me: When you run a construction or renovation business, you almost never have the money you need on hand to pay for work. Unless you’ve got a war chest, the money is simply not available and won’t be until you can show progress to the customer. As the renovator you are constantly in the middle of a tug-of-war between trades who want you to pay them, and customers who don’t want to pay you before seeing results.
This is a different position to be in than what I’m used to. When I used to have renovations done on my own houses I saved up my money, and when I had what I needed I would hire someone to do the work. I didn’t necessarily pay in advance. But I made sure I had the money before the work started.
However, if you are in the construction or renovation business the opposite is true. What you do is you procure work to be performed for no money down and then you pay for it later. The later, the better. That is, you are always working from a debt position. You are always seeking to delay paying out on your expenses for as long as possible, getting as much work done on credit as possible. The goal is to create as much of a gap as possible between the money you have to pay out and the money you have coming in. You are always using money obtained in this job to pay for work done for you in the previous job. You are always working under the premise that although you don’t have the money to pay for the work now, you will have it by the time the invoice arrives. When you’re a company just starting out and have no war chest — have made no significant profits yet — this is a tenuous (and stressful!) position to be in. It’s a bizarre “robbing Peter to pay Paul” sort of game, but it’s the way the entire industry operates.
Why does the industry function in this way? It all boils down to one simple truth about human nature. And that is: if you pay someone in advance of doing work, you remove their incentive to do it. I have paid people — good people — in advance and have had difficulty in getting the work completed. When you pay someone they will immediately use that money to pay bills. Then, when it comes time to do the work for you they have other debts. And, putting yourself in the worker’s shoes, what work is more attractive to do: A) work that they won’t be receiving any more money for, or B) work that will provide new money? It’s the latter, of course, which means that you — the well-meaning, overly-trusting, good-faith customer — get screwed.
Lesson: Don’t pay someone in full in advance of work being done. Even if they are perfectly trustworthy. Always hold money back in order to incentivize them to come back and finish.
On a similar note: be aware that it is ILLEGAL for a company to take or demand money in advance of doing the work if the company is not bonded. A company that has gotten bonded has legally committed assets that can be sued for if a contract is not honoured. This is the only protection you as the customer have, so ask to see a bond certificate. If they can’t produce one for you, then they are not legally allowed to take money in advance of doing work. That is, they are lot allowed to take deposits.