Automobile restoration shop help - from the inside

[MGRAB]

7 hours ago, Frank DuVal said:

 

 

And a contract would have helped the investors how? I'm sure he wrote many contracts. Worthless pieces of paper, right?

 

 

 

 

 

So, your argument is that if I were his client I would be just as fine if I just pulled money out of my pocket, shook his hand and hoped for the best?  Personally, I would have preferred to be a client with a contract and paper trail so when his homes got sold, I got my share of the three cents on the dollar.  My main point with brining him up was not about a contact.  Here is a man that was invited to weddings of his client's children.  Many considered him a very close friend, he burned them all.

 

Many restorations discussed here take $100, $200, $300k+.. the price of a home for many people.  When you go to closing you sign a pile of paper.. all CYA.  Even after that I still had a problem with my closing attorneys missing abandoned roadway that required a quit claim deed to be signed after.  To me the thought of paying that kind of money with no recourse is pure insanity.  Anyone who thinks otherwise has either never been stiffed by a customer or ripped by a fraudster.

[Xander Wildeisen]

My guess is if you add up the total over head cost, of all money spent. You will come to the conclusion it was not a Ponzi scam. On the car shop issue, it all comes down to your customers. Have customers with ill intentions for your business, and you will pay a price. 

[playswithbrass]

Help me out here,what exactly would a contract have in it to get a car restored?

[MGRAB]

2 hours ago, playswithbrass said:

Help me out here,what exactly would a contract have in it to get a car restored?

It depends on many factors.  First what is the pricing model reimbursable or fixed price?  Either of these models have different levels of risk and shift that risk to one party or the other.  A fixed price contract puts the proprietor at risk, i.e., profit is a fixed amount.  If the shop has quoted the work low the risk is on them and profit can be lost up to and potentially over the price, i.e. I tell you I will restore your car for $150k but it really costs $200k.  The shop has to "eat" that money, i.e., the customer can force performance for that price.  Bad situation for both parties.  I see many times where a proprietor will win business by trying to bid work low and change-order high.  Very unlikely experienced shops would do this, but I see it with startups that don't know any better all the time.  Sometimes both parties are unaware of what this type of contract means and if the customer doesn't challenge can overpay, but on the flipside, performance can be hard to enforce.  The only time it would be acceptable to pay a higher price would be a legitimate change in scope, i.e. full paint vs just the front-end we agreed upon etc., but many times I see original scopes getting inflated.  A reimbursable contract puts the owner at risk, i.e., costs and scope creep can occur on these contracts.  Most common for rebuilding and repair of anything old with what is called with unknows (i.e., your car).  

 

There are many other pricing models, but these two are the most common.  For any contract that goes across my desk I look for basic stuff in addition to standard commercial boilerplate:  Scope of work - detailed work breakdown by components and subcomponents (If fixed price, must be very detailed or both parties could be at risk). Rates (if reimbursable) - what you charge (in some cases expectations for increases too "4% at year-end" - think a multi-year project (so you don't get surprised when they double the rate on you), material MU's, equipment rental rates (if applicable).  Inclusions and Exclusions - what will be done by me, what will be done or supplied by you (think parts), Acceptance of work - when, how, progress reports etc., Remedies for non-performance - i.e., if you park my car at the back of your shop after I gave you a downpayment and it's two years later etc. These are a few of the basics... something I've learned is that contracts can't be long enough sometimes.  Fences make good neighbors; contracts make good business dealings.  There is nothing worse than two parties that have a completely different opinion on an expected outcome or price.

[Restorer32]

There is an alternative way to run a restoration shop.  Require NO deposit up front.  Sell whatever experience and expertise you have by the hour.  Bill the client monthly and expect to be paid monthly.  Make it clear that the client can purchase as many or as few hours as he pleases.  Hopefully he purchases enough hours to finish the project but if not that's OK too.  Make it clear that the client can stop the work for any or no reason.  Likewise the shop can stop work for any or no reason. Under this scenario neither the shop nor the owner stands to lose more than a month's billing.  Tell the client the following.  "You will see lots of progress at the beginning  when we are taking things apart, stripping paint, sandblasting etc.  You will also see lots of progress at the end when we are polishing paint, installing upholstery, mounting the shiny bits etc. but there is a long interval in between those exciting times when we will be doing the thousands of operations necessary to properly restore a vehicle and you will be paying invoices without seeing near as much progress as is evident at the beginning and the end of the project".  Bottom line, in the automobile restoration business reputation is everything !  Comments welcome.

 

 

 

 

 

 

 

 

 

 

 

 

[a griffin]

4 hours ago, Restorer32 said:

There is an alternative way to run a restoration shop.  Require NO deposit up front.  Sell whatever experience and expertise you have by the hour.  Bill the client monthly and expect to be paid monthly.  Make it clear that the client can purchase as many or as few hours as he pleases.  Hopefully he purchases enough hours to finish the project but if not that's OK too.  Make it clear that the client can stop the work for any or no reason.  Likewise the shop can stop work for any or no reason. Under this scenario neither the shop nor the owner stands to lose more than a month's billing.  Tell the client the following.  "You will see lots of progress at the beginning  when we are taking things apart, stripping paint, sandblasting etc.  You will also see lots of progress at the end when we are polishing paint, installing upholstery, mounting the shiny bits etc. but there is a long interval in between those exciting times when we will be doing the thousands of operations necessary to properly restore a vehicle and you will be paying invoices without seeing near as much progress as is evident at the beginning and the end of the project".  Bottom line, in the automobile restoration business reputation is everything !  Comments welcome.

 

 

 

Perfect statement. Bravo!

 

 

 

 

 

 

 

 

 

[alsancle]

On 4/18/2023 at 7:20 AM, MGRAB said:

So, your argument is that if I were his client I would be just as fine if I just pulled money out of my pocket, shook his hand and hoped for the best?  Personally, I would have preferred to be a client with a contract and paper trail so when his homes got sold, I got my share of the three cents on the dollar.  My main point with brining him up was not about a contact.  Here is a man that was invited to weddings of his client's children.  Many considered him a very close friend, he burned them all.

 

Many restorations discussed here take $100, $200, $300k+.. the price of a home for many people.  When you go to closing you sign a pile of paper.. all CYA.  Even after that I still had a problem with my closing attorneys missing abandoned roadway that required a quit claim deed to be signed after.  To me the thought of paying that kind of money with no recourse is pure insanity.  Anyone who thinks otherwise has either never been stiffed by a customer or ripped by a fraudster.

 

You are correct that almost all business transactions that are measured in tens or hundreds of thousands of dollars are done with a contract.    But the reality of the current restoration market is that you as a potential customer will have to pass an interview and a probably a credit check with the shop,  then beg them to take your car.   The contract will say something like you will pay the bills net 48 hours and if you don't we will push your car out in the snow.   This is the reality with all the good shops I'm familiar with.  

[TAKerry]

I agree with mgrab in theory. Yes, IF I were sending a car to a restoration shop I would indeed want some kind of a contract. I think one could be made that is fair to all parties, after all thats what we want. To pay a fair price for like work as the consumer, and to make a decent living off of the job as the restorer. I do think that things could be spelled out in all but minute detail, and cost can be associated with tasks at hand. However I dont think there is a need to address each piece of sandpaper used in the process.  I dont restore cars, I build things and I do everything with a contract, some more in detail than others. I am sure if I were running a car resto shop I would come up with a template. AJ hit the nail on the head. I think the shop has as much a need for a credit check as the car owner needs to make sure the shop is reputable. When buying a new house a credit evaluation is first and foremost to see how much the buyer can afford. I dont know why thats not done in the construction world?

[Xander Wildeisen]

You can not build a house until you are approved for the loan or have cash. Estimated cost for lot, site prep, under ground, lumber package, wall cover and finish materials. Standard stuff, you know going into it about what it could cost. Changes can be made, upgrades and extras can be added and do ad to the finished cost. Now go to that same home builder, show him the  1940’s built house you bought. Tell him you want to strip it to the studs, redo everything with some upgrades and bring it up to code. See if he gives you a price. I bet he will say I have no idea what I will be dealing with until we open up walls. Very easy to give numbers on kit or reproduction cars built in a assembly line order, pick what you want. Reproduction Cobra’s are a good example. A dead rotten car in the field, no way you will know total cost involved. Just a cracked engine block can add thousands by itself. Quality shops, quality customers. That is the only way it works.

[MGRAB]

4 hours ago, alsancle said:

 

You are correct that almost all business transactions that are measured in tens or hundreds of thousands of dollars are done with a contract.    But the reality of the current restoration market is that you as a potential customer will have to pass an interview and a probably a credit check with the shop,  then beg them to take your car.   The contract will say something like you will pay the bills net 48 hours and if you don't we will push your car out in the snow.   This is the reality with all the good shops I'm familiar with.  

So, some of that is good.  The first person to put out cash is the one at risk.  Everyone on my team has a subscription to Dunn and Bradstreet and we do many reviews for liens, credit rating etc...  My suspicion is that anyone who would do a credit check on a client would require you to sign a contract as it would be difficult to enforce payment without one.  Net 48 hours is a bad sign, I would do a credit check of the shop!  Net 30 is pretty standard; we pay some vendors net 90.  In my world that would be a huge red flag that someone has a serious cashflow problem, in fact only a senior VP of sourcing could even approve that at my company.  There is nothing wrong with due diligence... good sign.  However, take it or leave it and pay what I tell you with no transparency (invoice suport and detail) probably means you are getting an excellent product but paying the ultimate premium if not more than you should, the old definition of a monopoly.

 

I would be lying if I said both personally and professionally there aren't times when I have to take a risk.  The one thing that I always consider is my risk tolerance, i.e., how much can I afford to walk away from?  For me it's $5k personally (professionally it's a LOT higher), over that I might lose some sleep.  Everyone needs to consider their own tolerance and proceed with caution with that in mind.  When friends and family ask my advice for home improvements etc. and say something like "It's a friend of the neighbor and he doesn't do contracts, what should I do?"  My first question is "How do you like their children?... Well, that's who you're dealing with if God forbid so and so dies."  Verbals go to the grave and people do sell businesses.

Edited April 20, 2023 by MGRAB (see edit history)

[Frank DuVal]

2 hours ago, MGRAB said:

Net 30 is pretty standard; we pay some vendors net 90.

So what do you do with the car when waiting for the customer to pay in 90 days? You do not want to put more work in it without seeing the work you have already invested in it get paid for. Start a storage business? Push it in the street? You need to work on other cars to keep up the cash flow. Hard to do when the bays are full of waiting for 90 day payers. I see you have no grasp of reality in restoration work. 

[alsancle]

7 hours ago, Frank DuVal said:

So what do you do with the car when waiting for the customer to pay in 90 days? You do not want to put more work in it without seeing the work you have already invested in it get paid for. Start a storage business? Push it in the street? You need to work on other cars to keep up the cash flow. Hard to do when the bays are full of waiting for 90 day payers. I see you have no grasp of reality in restoration work. 

All of the shops that I have dealt with in the last 10 or 15 years are pay on receipt.  

[bryankazmer]

8 hours ago, Frank DuVal said:

So what do you do with the car when waiting for the customer to pay in 90 days? You do not want to put more work in it without seeing the work you have already invested in it get paid for. Start a storage business? Push it in the street? You need to work on other cars to keep up the cash flow. Hard to do when the bays are full of waiting for 90 day payers. I see you have no grasp of reality in restoration work. 

And that OEM's net 90 is often more like another week or two at least.  Reputations get around - known for poor dealings with suppliers.  I agree, not a model to emulate.

[alsancle]

Net 90 is a recipe for going bankrupt in almost any industry.     I've had buddies that got too far out on receivables and ended up losing their businesses.

[playswithbrass]

On 1/24/2023 at 12:07 PM, Xander Wildeisen said:

Question, a customer brings out a project car to your shop on a trailer. You knew they were coming, at a certain time. You meet with them, watch or help unload the car. Move it in the building. BS for a couple of minutes. Customer leaves. Do you charge for that hour or two? It is your time. Is that a freebie? That you for shopping with us, no charge getting you in the door? A couple of employees helping just moving a car in will result in a few combined work hours.

Going back up this thread-A couple of employees helping just moving a car in will result in a few combined work hours- who paid? The guy who,s car they were supposed to be working on,ever walk around around a restoration shop,nobody breaks a sweat that’s why flat rate was invented,starting with the model T. I know you can not flat rate a restoration,but how does the customer know he is getting bang for his buck.

[Xander Wildeisen]

I go back to my statement above. Quality shops and quality customers. If a shop has other interests, or the customers have other interests. The project and experience for all parties will go south. I have been busy the last few days, moving cars around. The Cadillac sold, it will be picked up tomorrow. Might have a buyer for the Hudson truck. Will let the 47 convertible go, and sell out of all the 46-47 parts. Get down to the Jag and the Hornet. Working towards making a move out of the State of Idaho with all my stuff. To much stuff to move. I guess where I am going with this is there are other ways of looking at things. Idaho and customers lost a quality business. All in an attempt to own a person. Many of you on here have read my comments over the years. I can give you a list of names, as a business you would not want to do any work for these people. Big public meeting coming up on may 9th. I guess we will see what people intend to do. Customers and shops have a lot to deal with on these expensive builds/restorations. I have seen the harm people can bring to your business. When I hear stories of customers getting ripped off by shops, it falls pretty flat in my opinion. I never ripped anyone off. But I have seen questionable shops somehow keep the doors open. I guess we all have a purpose. Will look for a small space to lease down the road. And get back to what I enjoy doing.

[MGRAB]

11 hours ago, Frank DuVal said:

So what do you do with the car when waiting for the customer to pay in 90 days? You do not want to put more work in it without seeing the work you have already invested in it get paid for. Start a storage business? Push it in the street? You need to work on other cars to keep up the cash flow. Hard to do when the bays are full of waiting for 90 day payers. I see you have no grasp of reality in restoration work. 

C'mon now... did I say shops should be Net 90??  Here we go again...

 

Most people don't get the concept of the "Time Value of Money."  Net 30 is the benchmark for most... your mortgage, your car payment. etc.  When you pay faster than 30 you typically get a discount: 1/15 Net 30, 2/10 Net 30 are pretty standard.  Why do you get a discount?  If the money sits in your account, you accrue interest.  So, for a $1000 invoice if you pay in 2 days you are essentially paying more than the face value of the invoice, obviously, Net 90 you would get the benefit of the interest earned.  So why would someone agree to that?  A few reasons, but the most notable would be the pricing is above market price... they may want to show a higher sales figure, but we will negotiate a better payment and offset that with interest earned.  When someone wants immediate payment, i.e. COD it sends a message, and that message is a lack of cashflow or trust.  Emergency repairs come to mind, middle of the night repair and a vendor isn't set up in our system, a credit card might get used since they don't know us. But, for an established business and long-term customer, there is no good reason for a solvent company to demand immediate cash.  To me this sends a message they cannot get working capital.  The bank won't lend, angel investors won't lend, vendors they deal with want cash on delivery, employees get paid cash.  It's not a position of strength, it's one of weakness.  I would personally only deal with someone in this manner (repeatedly, not once for emergency) if they were the only vendor selling food and water, i.e. something I desperately need.  Cash management is a very important concept that few truly understand.

[Restorer32]

3 hours ago, playswithbrass said:

Going back up this thread-A couple of employees helping just moving a car in will result in a few combined work hours- who paid? The guy who,s car they were supposed to be working on,ever walk around around a restoration shop,nobody breaks a sweat that’s why flat rate was invented,starting with the model T. I know you can not flat rate a restoration,but how does the customer know he is getting bang for his buck.

A shop I am very familiar with does not charge in the above circumstances. Nor do they charge to travel a reasonable distance to look at a potential resto job.  They also do not charge for their time on the show field. For instance the shop recently hauled a car 500 miles to Charlotte for the AACA show.  Client paid for the fuel, not inconsequential these days, and lodging.  They expect a client to visit or request pics often enough that they know what bang they are getting for their buck.

Reminds me of the sign my lawyer had on his desk. "Time spent discussing an invoice will be billed at regular hourly rates."

[bryankazmer]

1 hour ago, MGRAB said:

When someone wants immediate payment, i.e. COD it sends a message, and that message is a lack of cashflow or trust.

I suppose this falls under "trust", but terms of "cash" also result from a history of not paying your past invoices on time.  Chasing receivables is time you'd rather spend elsewhere.  Some companies actually reward their payables people for how long over terms they are.  All good fun until that stop ship notice arrives.

 

My experience is that a customer who pays late on 30 days, will still be late if you give 60, or 90 days.  He either has cash flow problems or just plans to cheat as much as he can get away with.  

 

 

[JACK M]

The interest rates these days don't amount to much in the numbers we are talking about here.

A guy gets billed for a couple of thousand might earn a dollar in holding out for 90 days.

Payable on receipt might translate to a week or so. Thats how it should be. Penalty after 15 days.

[Frank DuVal]

3 hours ago, MGRAB said:

C'mon now... did I say shops should be Net 90??  Here we go again...

 

Most people don't get the concept of the "Time Value of Money."  Net 30 is the benchmark for most... your mortgage, your car payment. etc.  When you pay faster than 30 you typically get a discount: 1/15 Net 30, 2/10 Net 30 are pretty standard.  Why do you get a discount?  If the money sits in your account, you accrue interest.  So, for a $1000 invoice if you pay in 2 days you are essentially paying more than the face value of the invoice, obviously, Net 90 you would get the benefit of the interest earned.  So why would someone agree to that?  A few reasons, but the most notable would be the pricing is above market price... they may want to show a higher sales figure, but we will negotiate a better payment and offset that with interest earned.  When someone wants immediate payment, i.e. COD it sends a message, and that message is a lack of cashflow or trust.  Emergency repairs come to mind, middle of the night repair and a vendor isn't set up in our system, a credit card might get used since they don't know us. But, for an established business and long-term customer, there is no good reason for a solvent company to demand immediate cash.  To me this sends a message they cannot get working capital.  The bank won't lend, angel investors won't lend, vendors they deal with want cash on delivery, employees get paid cash.  It's not a position of strength, it's one of weakness.  I would personally only deal with someone in this manner (repeatedly, not once for emergency) if they were the only vendor selling food and water, i.e. something I desperately need.  Cash management is a very important concept that few truly understand.

Yep, nothing in your words apply to restoration shops.

 

Suppliers, yes, but that is not the subject of this thread. 

[Xander Wildeisen]

Working by myself I liked having two customers cars going at once. 40 hours worked, was 40 hours billed with any other cost on my end. I would jump on the other car, customer billed would need to pay for work done. Then I would continue on their car. Simple billing, easy for everyone.

[MGRAB]

19 minutes ago, Frank DuVal said:

Yep, nothing in your words apply to restoration shops.

 

Suppliers, yes, but that is not the subject of this thread. 

Read what I wrote again sir... it does.

[TAKerry]

MGRAB, it is obvious to me that you are leaps and bounds smarter than myself, however I think the corporate world mentality and working with contractors/suppliers etc in a multi million dollar environment are out of touch with the reality of an average guy trying to run a car shop. I do think that a lot of what you have said is relevant and could be applied to any business. But there also needs to be a bit of common sense. Not everyone in business deals with D&B on a regular basis. I own my own business and if not for my previous endeavors and dealing with bonding for jobs I would have no idea what that is (not that I do now). I have a pay on demand policy. I submit a bill and expect payment. My billing is for work accomplished and materials purchased. I typically bill a month behind so in reality its already a 30 day net. 

 

As for unseen circumstances, I deal with this on a regular basis. With years of experience I can look at an old building and have a good idea of what will need to be accomplished. If there is doubt I will spell things out with a unit cost. i.e. if a roof needs new shingles that is an easy estimate, if the substrate is unkown a unit cost per piece is included for any damages that need to be corrected. I think if a person has a good knowledge on what a car restoration entails this could be relevant. Looking at a rusty quarter panel and the experience will tell you the substructure most likely is bad as well. Even more so if its a marque specialist doing the work. 

[MGRAB]

I will add a little more context and try to create an example that related to your businesses so you can perhaps see my perspective.  I welcome any challenge that gives a real-life example rather than banter that doesn't explain why I'm wrong.

 

I'm a high-net worth client with a car I want on the show tour.  I come to you, get on your list, you conduct a credit check and take on my project.  You find me to have excellent credit and begin work.  Now, let's say we have no contract, and we don't clarify in writing.  I would expect Net 30 payment, if we did clarify and you told me Net 48 hrs., I would look at you funny and ask why.  There is no good reason to do a credit check on someone then require rapid payment, none whatsoever unless the shop is in trouble and has more cash going out than in.  That's the only business reason.  That isn't the finance conversation I would expect to happen at the clubhouse over brandy and cigars, it's the conversation I would expect to hear at the 7-Eleven next to the title loan store.  I would love to know an actual business case for a successful shop (good credit) and an affluent customer (good credit) to have net terms any more aggressive than 15 days (what I have seen for people with marginal credit).

 

One day you have a show at your site and welcome a club to park there.  I have a water pump fail; you invite me inside and graciously fix me up.  I ask you want I need to pay and I offer cash, CC or check and you take my card.  I would never expect payment terms of Net 30.  You don't know me, I don't know you.  

 

The payment terms and framework I described above is standard for all industries and businesses and clients that do repeat (the important part) business where credit is checked, and agreements are made.  I don't care if you make snow cone machines, run a strip club or restore cars, business finance and credit collections is totally agnostic.  If you can't check credit, absolutely cash is king, pay me now!  

[Frank DuVal]

3 minutes ago, MGRAB said:

none whatsoever unless the shop is in trouble and has more cash going out than in. 

Exactly! If it is a one or two car at a time shop, the shop has cash going out for parts, supplies and payroll while your car is being worked on. You might get 30 days on supplies and parts, but your employees do not like 30 day delay in pay! So it does have more cash gong out than in! Why is this so hard for you to see on a small operation? Cash flow is one of the biggest issues in small business. So the client has good credit, if the shop does not see that cash soon* when the bill is presented, it needs to get a loan from the bank, more expense. 

 

*I do agree net 48 hours on incremental billing is weird, especially if the bill is mailed!   But all bills paid before car is released is standard, as when the car leaves, so does your right to a mechanic's lien.

[MGRAB]

23 minutes ago, Frank DuVal said:

Exactly! If it is a one or two car at a time shop, the shop has cash going out for parts, supplies and payroll while your car is being worked on. You might get 30 days on supplies and parts, but your employees do not like 30 day delay in pay! So it does have more cash gong out than in! Why is this so hard for you to see on a small operation? Cash flow is one of the biggest issues in small business. So the client has good credit, if the shop does not see that cash soon* when the bill is presented, it needs to get a loan from the bank, more expense. 

 

*I do agree net 48 hours on incremental billing is weird, especially if the bill is mailed!   But all bills paid before car is released is standard, as when the car leaves, so does your right to a mechanic's lien.

I completely agree that I would want full payment before releasing a car.  However, if payroll alone puts you over the edge... you're barely hanging in there, all businesses have to make payroll.  You should have enough cashflow from the previous month and retained earnings to cover that.  Net 30 is the standard that everyone works off, I have cash coming in, cash going out hand to mouth.  If someone were that tight on cash (such as the one discussed in this thread), my suggestion would be to offer discounted terms to accelerate payment to 10 or 15 days that would alleviate that problem and suggest a closer look at bad debt allowance and collections.

[JACK M]

Yawn

[64avanti]

On 4/19/2023 at 9:06 PM, MGRAB said:

So, some of that is good.  The first person to put out cash is the one at risk.  Everyone on my team has a subscription to Dunn and Bradstreet and we do many reviews for liens, credit rating etc...  My suspicion is that anyone who would do a credit check on a client would require you to sign a contract as it would be difficult to enforce payment without one.  Net 48 hours is a bad sign, I would do a credit check of the shop!  Net 30 is pretty standard; we pay some vendors net 90.  In my world that would be a huge red flag that someone has a serious cashflow problem, in fact only a senior VP of sourcing could even approve that at my company.

You have described in detail how very large companies do things. Believe me, no small company is run this way. We can't afford the staff nor the time to so thoroughly vet customers. Any staff we do have is busy with payroll, accounts payable/receivable, federal and state compliances, quoting, designing, and engineering jobs, and so on.

 

We spend a lot of our time doing all the things needed to run a successful business. It's just in a completely different environment than the one you work in.

 

90 days to get paid for a job? HAHAHAHAHAHAHAHA!!!

 

Nope. Those terms don't work. You want me to do the job? My terms for residential work are 30% down, 30% progress payment due at the halfway point of the job, 30% on delivery, final 10% on completion.

Commercial work is negotiable, but payment is always net 30 or less, I always try to negotiate for no retainage, with return of retainage on completion of my work, not everyone else's.

 

And yes, I always write up a detailed scope of work, be it fixed price or time and materials.

 

I stand my ground on terms, as I personally can't afford to be your bank. It doesn't matter how large the company or the contract, I'm not your bank.

 

I agree that a detailed scope of work and a contract with terms, conditions, and exclusions should be part of any job, just on a different level.

Edited April 23, 2023 by 64avanti (see edit history)

[MGRAB]

9 hours ago, 64avanti said:

You have described in detail how very large companies do things. Believe me, no small company is run this way. We can't afford the staff nor the time to so thoroughly vet customers. Any staff we do have is busy with payroll, accounts payable/receivable, federal and state compliances, quoting, designing, and engineering jobs, and so on.

 

We spend a lot of our time doing all the things needed to run a successful business. It's just in a completely different environment than the one you work in.

 

90 days to get paid for a job? HAHAHAHAHAHAHAHA!!!

 

Nope. Those terms don't work. You want me to do the job? My terms for residential work are 30% down, 30% progress payment due at the halfway point of the job, 30% on delivery, final 10% on completion.

Commercial work is negotiable, but payment is always net 30 or less, I always try to negotiate for no retainage, with return of retainage on completion of my work, not everyone else's.

 

And yes, I always write up a detailed scope of work, be it fixed price or time and materials.

 

I stand my ground on terms, as I personally can't afford to be your bank. It doesn't matter how large the company or the contract, I'm not your bank.

 

I agree that a detailed scope of work and a contract with terms, conditions, and exclusions should be part of any job, just on a different level.

I was told above "shops are checking credit and having people pay Net 48 hours."  I later stated if you can't check credit you get cash.  If your doing a $200k car.. I could see someone doing a check.  Maybe, maybe not.

 

There are 20K contractors and vendors in our system large and small, all but maybe a small handful that work with us  have established payment terms.  Just because your small doesn't mean you don't conform when you work with someone large if you choose to do so.

 

Why do large companies roll this way? They are best practices that lead to higher returns.  This is why locally owned franchises succeed at a high rate, the large parent won't let the small investor fail by going rouge.  Something any failing business should ponder.

[edinmass]

The big shops doing the big early cars certainly know their customers long before the car arrives today. Taking one friend to a shop to leave his car the owner said as they rolled it into the building that it would run 500-800 as a ball park. It ended up at 9 and change from a rough car that had bees done once poorly. Shops don’t want to own cars. They bill once or twice a month depending on several factors. Also understand that a chrome bill for a single batch of stuff can easily hit 40k in a month.  Restoring cars today is not for the faint of heart. Especially if you’re doing it for the circuit. I do it every day, and frankly the cost in the last five years is simply astounding. 

[Restorer32]

Believe it or not in Pennsylvania a "mechanic's lien" does not apply to cars. Ask me how I know.

[64avanti]

48 minutes ago, MGRAB said:

Why do large companies roll this way? They are best practices that lead to higher returns.

Higher returns for the large company, not the vendor waiting to get paid.

 

I have worked for a larger company, so I am well aware how they use their power to their advantage. I've experienced it from both sides. Believe me, being the little guy requires a great deal of intestinal fortitude.

 

General Motors goes to the bank and gets a line of credit on the corporate name; I go to the bank and have to personally guarantee that I will pay back the line. I have skin in the game, and GM doesn't.

 

Point being that what works for General Motors isn't going to work for a small shop in any industry, especially the shops doing high end one off work.

 

You see things from the large corporation point of view, and myself and other posters see things from the other side. No offense intended, but while you've made many valid points, I think that you are having difficulty seeing this issue from the other perspective.

 

What this thread has made clear to me is that there is no perfect way to protect both the shop doing the work and the customer writing the checks.

 

 

[MGRAB]

36 minutes ago, 64avanti said:

Higher returns for the large company, not the vendor waiting to get paid.

 

I have worked for a larger company, so I am well aware how they use their power to their advantage. I've experienced it from both sides. Believe me, being the little guy requires a great deal of intestinal fortitude.

 

General Motors goes to the bank and gets a line of credit on the corporate name; I go to the bank and have to personally guarantee that I will pay back the line. I have skin in the game, and GM doesn't.

 

Point being that what works for General Motors isn't going to work for a small shop in any industry, especially the shops doing high end one off work.

 

You see things from the large corporation point of view, and myself and other posters see things from the other side. No offense intended, but while you've made many valid points, I think that you are having difficulty seeing this issue from the other perspective.

 

What this thread has made clear to me is that there is no perfect way to protect both the shop doing the work and the customer writing the checks.

 

 

I think your failing to consider the other side of the equation.  I guarantee the shop in this thread is paying for most everything via credit card instead of picking up the phone and negotiating credit with suppliers to maximize cashflow.  If you never try, you'll never know.

 

I spent a decent amount of my career on turnaround teams working seven days a week trying to make unprofitable plants profitable.  All of these facilities had the worst use of POs and undisciplined operations calling in people without negotiating anything.  

[Frank DuVal]

3 hours ago, MGRAB said:

I guarantee the shop in this thread is paying for most everything via credit card instead of picking up the phone and negotiating credit with suppliers to maximize cashflow.

??? A credit card is credit. It's right in the name. Paying by check for parts is not using credit.  Sure if you charge parts on the last day of the "card cycle" you do not get maximum time before the free credit needs to be paid, but you still have 20 days? 

 

I want you to prove a small shop can get better than 30 days credit with a supplier. A small shop is defined as one who's annual purchases of parts form a supplier is under $50K, more like $10K because it has to buy from so many different sources to get the job done.

 

We are not speaking of franchise collision shops, as we are discussing shops capable of producing good work, like a restoration should be. Ever see a franchise restoration business? 🤣

[MGRAB]

3 hours ago, Frank DuVal said:

??? A credit card is credit. It's right in the name. Paying by check for parts is not using credit.  Sure if you charge parts on the last day of the "card cycle" you do not get maximum time before the free credit needs to be paid, but you still have 20 days? 

 

I want you to prove a small shop can get better than 30 days credit with a supplier. A small shop is defined as one who's annual purchases of parts form a supplier is under $50K, more like $10K because it has to buy from so many different sources to get the job done.

 

We are not speaking of franchise collision shops, as we are discussing shops capable of producing good work, like a restoration should be. Ever see a franchise restoration business? 🤣

Credit is not credit, a CC has a much higher interest rate if you carry a balance and I'm assuming this shop would have one. How many average people never escape the CC trap.

 

My challenge back would be have you ever tried to get better than Net 30? We have some Net 45, 60 etc. When I heard Net 90 I thought it was crazy town too.  Someone from a competitor came onboard and I remember the day he told the sourcing team with particular OEM "we were leaving money on the table." I had to see it to believe it.  From there it happened with a couple others too.  

 

I don't think restoration shops should be francises however, I bet you could find ten things they do well that would improve this shop if implemented.

[bryankazmer]

You may be leaving money on the table, but I'll tell you what else you are leaving with your approach.  And spare me the denial about we're so big and powerful we get what we want, I am speaking from experience.  When supplies are tight other customers get supplied first.  When new innovations come out you get them last, because your "pricing model" doesn't recognize the market value.  Micromanaging the accounting misses the total value of the business relationship. One of Deming's points is to end the practice of awarding business on price alone.  

[Frank DuVal]

What restoration shop deals with an OEM directly? They buy from a dealer for the OEM or parts suppliers (local auto parts stores/jobbers/online sources).  These dealers and locals are also probably under your definition of small business, surely not OEMS. This is why I say you have no idea how a small business is run. 

 

Credit is credit! Sure one can get into the trap of owing interest charges to their credit holder, whether to a credit card company OR to a vendor of parts/services (medical bills too). I knew small suppliers that liked their customers to owe them interest, as long as it was above what the bank would charge! Easy money.

[alsancle]

By coincidence I'm helping an older computer illiterate friend scan a bunch of paperwork he has on a car he bought.   The car is prewar and was restored about 13 years ago by one of the most well known restoration shops in the country.  I think they have a Pebble Beach best of show to their credit as well as numerous class wins.  This particular car has a class award the year it was finished.

There is a 1 page contract which is very basic. 

 

1. Stipulates the hourly rate and the that invoices are due immediately on delivery.  

2. The owner will maintain insurance on the car.

3. The shop commits to beginning work by a certain date.  Nothing on when they finish.

4.  A 25K deposit is due on signing of the contract.

 

The invoices came in once a week for about 18 months.   They started immediately around 20k a week and some were as high as 50k/60K for a single week.  I see as many as 8 different guys working on the car.   This was a million dollar restoration and the contract looks like a napkin.   This is typical from my experience.  

 

 

Edited April 24, 2023 by alsancle (see edit history)

[MGRAB]

1 hour ago, Frank DuVal said:

What restoration shop deals with an OEM directly? They buy from a dealer for the OEM or parts suppliers (local auto parts stores/jobbers/online sources).  These dealers and locals are also probably under your definition of small business, surely not OEMS. This is why I say you have no idea how a small business is run. 

 

Credit is credit! Sure one can get into the trap of owing interest charges to their credit holder, whether to a credit card company OR to a vendor of parts/services (medical bills too). I knew small suppliers that liked their customers to owe them interest, as long as it was above what the bank would charge! Easy money.

Think we're going to have to keep agreeing to disagree.  I work with all sizes of contractors and vendors daily, I see it all.

 

My company has many customers, most of which are a LOT smaller than we are.  All get different deals, and none are the same.

Example:  One small mom and pop distributor sells 100% of our product in a region they own, i.e. only show in town.  Two states over a regional vendor (much larger) sells ~20% our product.  Who do you think gets a better deal from us?  Here's a hint the one that buys more.. not the bigger one.  If you buy from maybe 10 distributors probably don't have much leverage, but if it's from one and your loyal and have good credit, why not try.. your money.

 

Credit is not credit.  If you want, I'll have my buddy Rocko slide by in his black Town Car... he'll make you a good deal.