Dan Fellman

6 posts

Should I Be My Own General Contractor?

I understand why people wonder why they have to pay a general contractor when it's actually the sub-contractors who do the work. But there are a number of reasons you should want to pay for a general contractor:

  • When you hire a CG, you're not just hiring the GC, you're hiring the relationships that GC has with their sub-contractors. This is probably the most important and valuable thing the GC provides. Why is this important? The reason is because when a GC hires a sub-contractor, the sub-contractor is motivated to go a good job in a timely manner at a fair price so that the GC will hire them again and keep them busy with more work. When a home owner hires a sub-contractor, the sub-contractor has no motivation to do a good job, or complete it on time, or for a fair price. Even if a sub-contractor is recommended by a GC, that is no guarantee that the sub will give you the same service (or price) as they give to GC's.

  • When you hire a CG, you're not just hiring the GC, you're hiring the relationship and experience that GC has with the local building permit authorities and building inspectors and inspection process. If you have never had any experience in getting construction permits, or construction inspections, you might think that this should all just be a matter of following legal procedure, but in reality it is anything but that. You might also think that building inspectors would treat you the same as they treat licensed general contractors, but that isn’t always the case. Suffice it to say, applying for a building permit, and having the construction project inspected can be like going to court without an attorney. It’s not impossible, just a lot more risky.

  • Another important thing the GC provides is project scheduling and management. Work and events on construction projects has to follow a strict sequence. You cannot expect sub-contractors to be conscious or aware of this, or to advise you or take responsibility for it. Everything out of their sphere of work is not their responsibility, so they cannot be expected to take responsibility for it. For example, if you hire a drywall sub-contractor to install drywall, they’re going to come and do it regardless of whether you have had all of the inspections you’re supposed to get before the drywall is installed. If you don’t know what inspections need to be done, and take responsibility for getting them done before the drywall is installed, then the building inspector can require you to have the drywall removed so that the inspections can be made. You will be responsible not only for having the drywall removed, but also for having it re-installed.

  • Sub-contractors also cannot be expected to take responsibility for making decisions or judgements about how the work they do might affect or interact with the work done by, or materials installed by, other sub-contractors. Construction projects contain hundreds of examples of this, and only an experienced general contractor can be expected to anticipate or be aware of these sort of things.

  • Sub-contractors also cannot be expected to be aware of, or take responsibility for, building code implications for decisions they make, or work that they do. For example, when the plumber installs plumbing for gas lines, they will install the plumbing to the gas meter wherever you tell them to put it, but you might later find out that code requires the meter to be placed somewhere else.

The GC is responsible for all of this, and if the GC fails in managing all of these details and logistics in such a way that it ends up costing more, or delaying the project significantly, then the GC can be held responsible for it. Without a GC, then it’s all on you.

  • Another important thing the GC provides is quality control. Not only is everything outside of the sphere of a sub-contractor’s work not their responsibility, but some sub-contractors do not even take responsibility for the quality of their own work. Some sub-contractors will assume that home owners are not going to know how to judge the quality of their work, and since you’re not going to need to hire them again, they really don’t have a lot of incentive to do a good job for you. But because they know the GC knows the difference, and they know their next job could come from the GC that hired them, they’re going to want to go a good job for the GC.

  • Another thing the GC provides is protection against legal liability for personal injury of workers on your property. If a sub-contractor gets injured while working on your property, and you don’t have all of the appropriate insurance in place to cover it, you will be personally liable. This is another one of the important things that a general contractor provides for you.

So, the question is, should you be your own general contractor, or is it worth hiring one? It’s up to you, but consider the points above in your decision.

ContractorTools on Protractor Podcast

Joel Grasmeyer, the co-founder of ContractorTools was recently interviewed on the Protractor Podcast. In this conversation he shared:

  • 5 common issues that face contractors and how to solve them.

  • How to put together a $40,000 bathroom remodeling estimate in less than 10 minutes and have it in the hands of the customer before you leave the job site!

  • How Millennial homeowners are going to expect contractors to present estimates and change orders. Hint: It has to do with technology.

  • An easy way to calculate and keep track of taxes when you work in multiple states.

  • The missing ingredient that will allow you to charge more.

Joel also talks about how how ContractorTools got started as well as some lessons learned along the way.

And… toward the end of the show, Joel gave a very generous offer which you do not want to miss out on.

Check out the ContractorTools episode of the Protractor podcast today!

Checklist for Texas Contractors

The following is a re-post of an article by Gary Moselle of the Craftsman Book Company:

Checklist for Texas Contractors

By Gary Moselle

As I write this, Hurricane Harvey is camped on the Texas coast, dumping rain that will be measured in feet rather than inches. More than 200,000 homes will be affected. Insured damage is likely to exceed $1 billion. The cost of repairing uninsured damage will be billions more. That spells years of work for residential contractors, including many who have never worked in Texas - until now.

As a refresher for experienced Texas contractors and as a checklist for others, here's a summary of the five principal ways that Texas residential construction contracts have to be different from residential contracts in other states.

Written list of subs. Before construction begins, Texas Property Code § 53.256 requires that the general contractor provide the name, address, and telephone number of each subcontractor and supplier the general contractor intends to use on the job. If subs and suppliers change as the job progresses, no problem. Just amend the list within 15 days.

RCLA notice. Claims for repair of construction defects have to follow the procedure outlined in Texas Property Code § 27.001 to § 27.007. Contracts for work on residences with four units and less must include the RCLA notice. Owners have to follow steps outlined in the RCLA before filing suit. Failure to include the RCLA notice in your contracts gives an owner the right to recover a $500 penalty.

Home Solicitation Sales Notice. If work is on the home of an owner and the contract is signed and negotiated somewhere other than at the contractor's store, Texas Business & Commercial Code § 601.001 to § 601.205 require a three-day right to cancel in the contract. Omitting that little form voids the contract and gives an owner the right to collect actual damages plus attorney's fees. You're required to mention the right to cancel at the time the contract is signed. This Texas sales notice is in addition to the Regulation Z three-day right to cancel notice required by federal law.

Lien law. If you're working on a property that qualifies as a homestead - and most homes do -- liens aren't automatic. The contract has to be (1) written (2) signed before work is done or materials delivered (3) signed by both spouses and (4) a copy has to be filed with the clerk of the county where the homestead is located.

Residential Disclosures. Texas Property Code Section 53.255 requires a long list of disclosures in residential contracts: Know your rights. Know your contractor. Get it in writing. Read before you sign. Monitor the work. Monitor payments. Lien law warning. Get title insurance. And more. It's all good advice and has to be in all of your Texas residential contracts.

Texas has no storm damage repair law. In 18 other states, owners have the right to cancel a contract for storm damage repair as late as three days after the insurance carrier denies any part of the claim. Not so in Texas.

If you're too busy to bother with all these details, there's an easy way to be sure your Texas contracts are perfectly legal. Get the Texas edition of Construction Contract Writer. The trial version is free.

If you're new to flood damage repair, the best source of cost data for dry-out work is our Craftsman Costbooks 2017 National Home Improvement Estimator. This is available either as a printed book or PDF file, or as searchable cost data integrated into our companion ContractorTools estimating app for the iPhone, iPad, and Mac.

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Gary W. Moselle is a California attorney specializing in state-specific construction contracts. Disclaimer: Nothing in this blog should be interpreted as a substitute for professional advice from an attorney practicing in your community. Only local counsel can appreciate the business and legal environment under which a construction contract is drafted, negotiated and executed. Gary W. Moselle represents Craftsman Book Company, publisher of Construction Contract Writer.

The Chicken and the Egg

The chicken and the egg parable comes in handy in describing a lot of the problems we deal with in attempting to operate and grow a construction business.

To make more money, I need to turn more business. But in order to turn more business, I need more people to get all the work done. But in order to hire more people, I need to make more money.

The image of a treadmill also comes to mind. But that’s a bit pessimistic. At least with a chicken and egg, you could get somewhere if you had a chicken. Or an egg.

So how do you come up with a chicken, or an egg? Don’t get discouraged. The answer is simpler than you think! It’s the same reason why humans no longer live in caves. It’s called tools!

Humans have always lived in a chicken and egg situation, but we have progressed from one level of existence to the next because, at each step of the way, we came up with a tool that broke the chicken and egg cycle by dramatically reducing or eliminating one of the hurdles in the cycle.

Funny we should mention tools in reference to construction! Can we think of any tools that have made construction work more efficient over time? Well, let’s see… there are electric hand tools like the skil saw, reciprocating saw, and drill. And then battery powered hand tools. And pneumatic nailers, there’s a big one… And laser levels, and…

OK, you get my point.

So the idea is that the right tool disrupts the chicken and egg cycle by making one of the required elements of the cycle so much more efficient that it no longer limits you from getting to the next level of productivity. As construction people, we are very familiar with the idea with using tools to become more efficient.

Well, ladies and gentlemen, I give you… ContractorTools!

OK, ContractorTools… what does it do? And why do I need it? How is it going to help me get more work done so I can turn more business so I can make more money so I can hire more people so I can get more work done so I can make more money?

There is plenty to discuss in describing how ContractorTools will improve your construction business. But to begin with, it is important to note that improving your business is only half of what using ContractorTools can do for you. The other half is what it can do for your relationship with your customers.

Your Relationship With Your Customer

This is a difficult subject that many contractors would rather not have to deal with, and so it tends to get ignored. But like it or not, the quality of your relationship with your customers is as important as any other part of running your construction business. Why?

Let me count the ways…

1) Your customers are human.

Psychology research reveals that a new home construction or major remodeling project is one of the most stressful and anxiety producing experiences that people might have. Most people who have been through it say they would never do it again. Why?

Major purchases are stressful for everyone. Even when you can see and touch what you are buying – like a car. But a major purchase – the largest purchase of your life – is much more stressful when it is for something that does not even exist yet. Your customer is signing their life away, and putting all of their trust in you… their contractor.

People get anxious when they are out of control and don’t trust the people who are in control.

Yes, hiring a contractor to do a custom construction or remodel project means the customer is not in control – you, their contractor, is in control. But why do your customers lose trust in their contractor?

People fear (don’t trust) what they don’t know.

Your customers lose confidence and trust if they don’t know what’s going on. They reasonably assume that if they don’t know what’s going on, then you may not know what’s going on either. How do you build and maintain your customer’s confidence? I will discuss this in detail in later posts, but it can be summed up in two words: Documentation and Communication.

You can build and maintain your customer’s confidence and trust by providing complete and accurate documentation of their entire job, starting with the estimate, and including detailed change orders, and clear and accurate invoices, and making that documentation readily available to your customer.

How do you do that? With ContractorTools. Just by using ContractorTools, you will by default create and maintain complete documentation of the job project. Good construction management software will make it easy to present that information in a personalized and professional manner to your customer, either on paper or by email.

2) Your customers talk

People like to talk to their friends and family about their major acquisitions, right? And they don’t just talk about the good parts… they also talk about what they didn’t like. This is what’s known as “word of mouth advertising”.

Guess what? Your customers talk to their friends and family about their experience with you, their contractor. Do you think your relationship with your customer is going to make a difference in how many referrals you get? You better believe it! Successful construction contractors don’t need to do any advertising or job prospecting because they get a steady stream of new clients from their past clients’ referrals.

So here I have brought up key areas of your business that can benefit from the use of ContractorTools:

  • More efficient, organized, and accurate estimating, change orders, and invoices.
  • Improved customer relationships.

I’m here to tell you that these benefits can be achieved without having to hire an army of clerical staff. All you need is good construction software.

ContractorTools and QuickBooks

Sometimes we have the opportunity to work with people who are just starting a contracting business, and they will ask us: Do I need to use QuickBooks with ContractorTools?

You don’t have to use QuickBooks with ContractorTools right away, but once the money starts coming in and going out, you will want to for the following reasons:

  1. For the two or three hundred bucks that it costs, paying an accounting firm to prepare your taxes is cheap insurance to protect you against problems with the IRS, and money well spent for tax planning advice (to avoid paying more tax than you need to). All accountants know and use QuickBooks, so using QuickBooks is a very efficient and economical way to prepare and provide all of your accounting information to your accountant when it comes time to do taxes. If you don’t use QuickBooks, you’ll still have to keep track of all of the information that would go into it, but doing so otherwise is a pain, and handing your accountant a shoe box full of receipts at the end of the year is going to cost you a lot more (for the time it will take them to deal with that) than $200 or $300 for a QuickBooks subscription.

  2. At some point, you might want to take advantage of a line of credit with your local lending institution. For example, say things slow down during winter and you need something to tide you over, or say you decide you want to build something on “spec”. You’ll need a loan from a bank. And in order to get a loan from a bank, a business needs to provide a Balance Sheet and a Profit and Loss statement. These are the fundamental accounting reports that are provided by QuickBooks.

  3. As business owners and operators, you will soon become aware of the importance of being able to look at your profit and loss statement on a monthly, quarterly, and yearly basis. This is a crucial instrument panel that tells you a number of things you need to know, such as how much you need to bring in on a monthly basis in order to cover your expenses and income needs. This is very important in order to have peace of mind. Without it, you are “flying blind”, and that’s not going to help you get to sleep at night.

  4. Basic accounting: keeping track of the dollars and cents. ContractorTools provides “job accounting”, which covers everything involved with a job for your customers’ needs. But job accounting does not include everything that goes into the operation of your business. You also need to keep track of overhead expenses – costs that are not allocated to specific jobs, but are part of the cost of operating the business. Keeping track of all of that is necessary for tax purposes as well as for your monthly profit and loss reporting.

So, our advice is to get familiar with ContractorTools, maybe do a few jobs with it first, and then sign up with QuickBooks (Online) and let us help you connect ContractorTools to it. ContractorTools will write all of your job related information into QuickBooks, but then you will use QuickBooks to:

  • Record your business expenses,
  • Pay bills (for both job costs and business expenses),
  • Run Payroll (if you have enployees),
  • Print checks,
  • Reconcile your bank statement (balance your checkbook)
  • Generate your financial reports (Profit and Loss, Balance Sheet)

Our Philosophy

The design of ContractorTools incorporates two basic philosophies:

  • "Systematize" to improve efficiency, control and profit, and
  • "Documentation and Communication" to improve your customer relationships.

What does "systematize" mean?

It means, rather than doing everything as though it is the first time you did it, you decide what is the best way to do it, and then you always do it the same way, or until it makes sense to do it another way.

The advantages of using a "system" for everything you do are...

  • Efficiency: Figure out the best way to do a task and repeat that method each time, rather than starting from scratch for each task.
  • Consistency: If you use the same process for tasks you repeat, you know your process will produce consistent results.
  • Scalability: You can teach someone else, like an employee, how to do a task and then never have to do it again, and you'll know that it will always be done the way you want. You can apply a system to everything you do in your life, but especially everything you do in a construction business.

ContractorTools is a "system" (actually, a lot of "systems"). It is a computer program that automates the best way to do a lot of little things that need to be done in the process of estimating, invoicing, and accounting construction projects.

The idea behind ContractorTools is that you're not just buying "software," you're buying a "system" that will guide you down the path of operating your business efficiently, consistently, and profitably.

When you learn to use ContractorTools, you're not just learning to use software, you're learning practices that will...

  • Allow you to estimate more accurately,
  • Allow you to record change orders more accurately,
  • Allow you to invoice your customers more accurately,
  • Provide better documentation and communication to your customers,
  • Improve your professional image.

Documentation and Communication

In our years of experience in the contract construction business, we have made a few observations about the relationships between contractors and their customers:

  • Many contract construction customers complain that their contractors are disorganized.
  • Many contractors complain that their customers constantly pick apart and dispute their invoices.
  • Many people who have had the experience of remodeling their home, or of building a custom home, say that it was extremely stressful and that they would never do it again.
  • Many contractors complain that their customers are a pain in the neck. We believe that no one is trying to cheat each other. Contractors aren't in business to deceive or swindle their customers, and people who hire a contractor to build or remodel their home do not go into it with the intention of cheating the contractor out of what they owe for it. We believe that all problems between contractors and their customers are a result of one thing: poor documentation and communication.

What do we mean by "documentation"?

Documentation starts with a good estimate. If you don't start with a clear, detailed, and accurate definition of what work is being proposed, then you have no way of knowing what was agreed upon once work is started and it comes time to invoice the customer. This is probably the single biggest source of trouble in customer relationships.

ContractorTools gives you a quick and easy way to create an accurate estimate and proposal. If you start with an accurate and detailed estimate, and if you print it out for your customer in the form of a proposal or contract, then you have a very clear definition and communication of the scope of work that you are proposing. Which means that you have something to refer to when any disagreement arises about an invoice.

Good documentation also means creating detailed change orders for any deviations from the original contract. Consistent and complete change orders are just as important as a clearly defined estimate before you start the work. As work progresses, the original estimate is only as good as the accuracy and completeness of the change orders that you enter to document every change from the estimate.

ContractorTools makes it very quick and easy to create (and print, or email) change orders.

So as long as you start with an accurate and detailed estimate, and as long as you always create a change order for any changes from the estimate, then when it comes time to invoice your customer, it's all down in black and white. If your customer signs the job proposal, and signs every change order, then if there is any question about anything on an invoice, it is very easy to talk about because it's all in black and white.

What do we mean by "communication"?

Communication means making all of the information about the estimate, changes, and accounting of the job available to the customer whenever they want to see it. Communication means presenting all of this information in a very clear, consistent way and presenting it with a professional image.