When I first struck out on my own as a small contractor, I took any job I could get. I was new to running a business and really didn’t have much life experience. As is typical for new contractors, I couldn’t tell a lucrative project from a resource vacuum. I remember one job in particular that took me out at the knees. I almost didn’t recover.
It was getting late in the season and I was looking for jobs to carry me through the end of the year. One day, a guy reached out to me about a small construction project. He just purchased a maple syrup farm about an hour from my home in upstate New York and was looking for some fence work.
The property owner (I hesitate to call him a farmer) wanted to fence in a section of the property for their dog. This included about 300 yards of privacy fencing, which was a pretty big job for me at the time. He also wanted the fence run through the wood line on the outside of roughly 25 maple trees.
The best part was that those maples connected to each other with a network of tubing to collect sap. Some of these trees had two or three spouts. Sap doesn’t even run in the fall.
It sounded like a great idea to me. Me, the new contractor that didn’t know enough to say “no” to anyone, especially the syrup-maker with a cute dog and a big checkbook. I was excited to take on a good-sized project on my own.
Spotting red flags
When I surveyed the property for the estimate, I told him that the maples were going to make the job a challenge. I knew enough to tell him that I wouldn’t be able to run a straight fence because of the roots and trees. I ran a string-line to show him, to which he agreed.
I also knew there was no way to get equipment to the fence line. Each post would require a two-man post-hole digger, and I was going to have to carry water and bags of cement to each post.
The price reflected it. I thought I was doing great. Gosh, I couldn’t figure out why anyone wouldn’t want this job.
The property owner agreed to a crooked fence line, his only concern was matching the new fencing with an existing section. We shook hands, signed a contract, and I took a deposit to cover the materials. We broke ground the first week in November.
Immediately, several issues came up (looking back, they’re more like red flags):
- The tubing was a nightmare. We had to cut it and run it through sections of the fence.
- The tree roots were unbearable. We dug every hole by hand.
- The hand-digging led to the worst poison ivy I’ve ever experienced. We all got it.
That’s how I learned that not only can you get poison ivy in the fall, but that the roots are especially potent. This job was off to a great start.
Ghosted by the homeowner
Once we reached about 75 percent completion, with no warning or explanation, the property owner called off the job. I tried to contact him to discuss payment, but he wouldn’t return my calls. I’m still not sure why.
I waited a week and sent an invoice. I allowed a few days for it to arrive and started calling again but with the same results. I sent another invoice two weeks later, hoping to give him the benefit of the doubt. I even drove to the house and knocked on the door more than once.
I tried for months. I was trying to be a nice guy. I thought I’d catch more flies with honey, as the saying goes. I’d hoped this guy would have a change of heart and do the right thing.
This created a huge cash flow issue for me. As a new contractor, I had no cash reserves or any idea what my options were.
I already used my progress payments to clear my tab with my supplier so I could float another job. I had to use my own personal savings to pay my guys.
I ended up eating the bad debt. I never recovered my cash.
What I did wrong as a small contractor
I tell you this story, half tongue-in-cheek because a lot of us have been there. But it’s important to highlight where I went wrong.
As a new, small-time contractor, there were things I was doing wrong that I wasn’t even aware of. The worst of which was that I didn’t protect my payment.
I took a bad job
To get some work on the books, I took a bad job riddled with red flags. The tree roots and tubing should’ve been a clue.
A seasoned contractor would’ve seen these headaches coming and either turned the job down or protected their payment.
I never sent a preliminary notice
What a difference a preliminary notice makes. It’s an official document that clearly shows you know what you’re doing as a contractor. It sends a strong signal to a homeowner that you run a professional outfit. In New York, sending preliminary notice aren’t required to protect lien rights, so I didn’t realize the incredible benefits they can bring.
I sent an invoice, but not a payment reminder
The mistake here is not sending the invoice, it’s sending the same invoice twice. While hindsight is twenty-twenty, it’s fair to say this guy knew he owed me money. Why try the invoicing approach twice?
Sending a payment reminder says, “Hey, I recognize there’s an issue here. Let’s work this out.” I could’ve opened the line of communication by addressing the issue head on.
I never considered filing a mechanics lien
The thought of filing a mechanics lien was intimidating. I thought that as a small contractor, I had no place filing liens against people’s properties.
I also thought the mechanics lien process was expensive and challenging, and that there must’ve been a minimum value for the lien to be worth it. I wasn’t prepared for that.
I was also worried about my reputation, which is ironic in its own right. Without taking action, I could’ve garnered a reputation as a push-over.
I never took the homeowner to court
I thought that the cost of a lawyer and litigation would have destroyed my fledgling bank account. I needed that cash to start other jobs.
While I weighed my options, I decided that cutting my losses — and working twice as hard to find other work — was my best option.
Small contractors (and nice guys) have the right to get paid
Profit margins on smaller projects can be incredibly tight. Even if we’re not talking in percentages, the dollar value of your profit might not bankroll your operating costs.
For small residential contractors, protecting your payment (and filing a mechanics lien when necessary) is unbelievably important to your company’s survival and growth.
Sending preliminary notice might’ve been all it took to protect my payment. The homeowner would’ve known that I was prepared to protect my payment. Regardless of state requirements, prelims set the groundwork for a fair deal.
A payment reminder and notice of intent to lien might’ve also pushed the homeowner to do the right thing and square up with me. While a reminder can politely draw attention to the missed payment, the notice shows some teeth.
Ultimately, filing a mechanics lien under New York law would have been the fastest and surest way to collect the money owed to me for my work. If I had acted upon my right to get paid and filed a mechanics lien, I would’ve received payment, and my company wouldn’t have been plagued by cashflow-related issues.
Being a nice guy doesn’t have to mean being a pushover. A nice guy can stand up for himself, his family, and his contracting business, making sure that he gets paid what he earns.
The post Small Contractor Problems: When a nice guy doesn’t get paid appeared first on Levelset.