Commercial Vs. Residential

dirt diggler

My mid-range goal (next 3-5 years) is to begin doing commercial work

I like the thought of business-to-business atmosphere

however, I have no actual experience to back this feeling up

what pros/cons (and other differences) do you all see between commercial and residential work

dougchips

Commercial work = slower pay at least for me. Have some money set aside to cover your supplies and payroll. Buy coffee for the person who cuts the checks and the 10 people who have to give the check cutter permission.

Tscarborough

Commercial work is more schedule oriented, a bit less personal and terms of payment are longer. Insurance requirements are often greater. On the flip side, the scale is usually greater, and margins are higher (commercial, not municipal).

Peladu

Yea, you have to wait about 90 days to get paid.
But I would rather work commercial over residentail any day of the week.
There is a more laid back feel to it also.
It may be that I feel more comfortable on a commercial job, who knows?

PipeGuy

The part that isn't schedule oriented is price oriented. And if you can't buy the idea that someone being 30 days late on a $200K check is "nothing personal" don't do commercial work - it'll make you crazy otherwise.

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dirt diggler

so im guessing that you have no control over your payment terms??

in other words, i work off draws. The draws get me (and the client) to a certain point in the project. So essentially, I'm never "sitting" on any materials

Now, I get to make that "rule" in a residential setting --- is this not possible in commercial

dirt diggler

i guess what i mean, is I wouldn't mind waiting 30 days for a $200K check ...

...

as long as I didn't have to purchase/provide $150K worth of materials and labor beforehand

dougchips

Dirt, the days of leaving the job on the final day with check in hand will be gone. In my 10 years or so in business, I have been "stiffed" $500 by one old bag and $2600 +/- by a national business when they went out of business. I have never chased a homeowner for payment, the commercial work requires a little collecting. I still do commercial work.

Tscarborough

Dirt, unless you can stand waiting 90 days for that 200,000$ you better tread gently. Oh yeah, don't forget that 20,000$ of that will be retained for 90 to 360 days.

dirt diggler

well, even now, in residential, I could care less about being stiffed on the final draw. I make the final draws so small that it wouldn't hurt much if someone didn't want to cut a check for whatever reason. The amounts are pretty ridiculous actually. In fact, barely worth the gas mileage to pick it [the check] up


like i said, i don't front my own money for materials and labor (I will on jobs that are less than $250). I work after the draws, not before them. If someone wants to default on a draw --- fine--- I get to go home early.... and they're stuck with an incomplete project.

all in all, I create the terms -- not the client. Having it the other way around would make me a glorified employee


Is my practice not "allowed" in the commercial world??

Tscarborough

Yes, Dirt, you do not get to set your terms, you sign their contract.

dirt diggler

well, i guess you can't have the cakes and eat em too

still, i see the wealthy GCs ... and they all have one common denominator .... they do commercial work

maybe that's ignorant, i dunno


and, im still a pup ... ive got a lot of polishing and experience to gain i think. I won't consider this for a couple more years

Tscarborough

As the GC on commercial work you get to write the contract. I thought you were going in as a sub. You will still have to wait for your money from the owner, though, as well as retainage.

dayexco

i have 2 jobs from last summer, both commercial, that they're holding the 10% retainage on me and all the other subs...one is because of the paving sub, and the other has something to do with some interior finishing issues. neither are going to pay until all punch list issues are corrected. so i'm being held up because of somebody else's crap work. i have liens on both projects, so i'm not too worried

btw, i've added this now to all my proposal forms.

Payment to be made as follows: Please take time to read this. We will submit invoices on the 25th of each month for work done up to that point. We will RECEIVE payment by the following 10th. Any payment RECEIVED after that date will be assessed a 2% service fee. At the time of substantial completion, retainage (if any) shall be reduced to 5%. This proposal shall only be considered if owner/contractor agree to the above terms and include the above terms, stipulations in the contract they provide for us to sign. There will be no additions, deletions to this proposal or the project unless authorized by change order.

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someday, i'll be as patient as Nick.

Tscarborough

Here in Texas we have an evil little thing that was promoted by the AGC. It is known as "pay-when-paid". What this means is that no sub/supplier has to be paid until and unless the GC is paid, and it does not matter what you write into your contract.

This is why we are no longer a member of the AGC, after 30 years as a member.

dougchips

How does the "cowboy justice" thing work?

IHI

Granted we've only done a handful of commercial work, but they've all been very good on working with us. I tell them prior to any bids being accepted that I am a smaller crew/company and do not have large amounts of credit and big back sided open ended checking accounts to keep everything rolling to start/finish a project and then wait an additional 90 days to recieve payment.

We've always worked out a pay schedule, just like working with homeowners in which I have to invoice them for a down payment that will cover materials and partial labor to a point, invoice again for the next increment, etc...the progress payments always get pushed through quickly, and the final almost always takes at least 2 months to get...just the way it is, sucks, but that's how they roll

These are not huge projects either, typically under the $15K mark, so whatever happens when figures are above that are beyond me and maybe they are not so lienent with payments and will overlook you/me for the larger corp that can carry it like they want. ALSO, make sure whenever changes orders of unforseen things pop up you talk directly to the person doing the budget/cutting the checks since they figure X amount and do not like changes...Hardee's threw a fit over $212 once, and I tried to explain we have to work 3rd shift and did'nt find this problem until about 3am and did'nt know whom to call at that hour, so I made a judgement call. They paid it, but I was told next time call and at least leave a voice message to keep everybody in the loop at all times.

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PipeGuy

great point

__________________
Fortunately I keep my feathers numbered for...for just such an emergency. -Foghorn Leghorn

Glasshousebltr

Commercial

Positive:
Punch lists don't get so intricate
Generally pays more
The customer/developer understands the biz
The customer/developer is a little more fluid $$$$$
Negative:
The Union can get in your pocket
Local inspectors clamp down
You have to wait longer for your money
Your help can become greedy
Safety should be religious....OSHA's watching

As far as residential.....I'm sure you can already size that up.

Bob

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PipeGuy

The extent to whether or not you are able to "set your own terms" has a lot to do with the market you're in and your history with the GC. I've had good success at either holding to terms that only leave 5% retained at the end of the job or otherwise allow prompt release of the retainage when I'm done with the work.
Enforcing the terms of a contract is another issue entirely. It can be very hard to simply 'stop work' if payment doesn't come when it's supposed to or it comes in an amount less than what was billed. Even worse, in unmodified P-W-P contracts like TS described, you generally can't stop work without being in default of the contract because payment isn't actually do you unless the GC is paid.
One thing is for sure, commercial contract documents vary extensively and typically require thorough (maybe even professional) review prior to signing.

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Fortunately I keep my feathers numbered for...for just such an emergency. -Foghorn Leghorn