Rule #1: Always Get It In Writing For each project to be done, you need to complete a bid proposal and bid acceptance agreement that lays out the details of the job. See Appendix A: Forms and Worksheets for a bid proposal and acceptance template. Whether you use these or other acceptable forms make sure you get the job in writing.

Rule #2: Use a Non-Performance Clause Make sure you have a non-performance clause in your contract that allows you to impose a penalty if the sub-contractor doesn’t complete the work. $50-$100 a day for non-performance is generally sufficient. Many contractors are famous for starting a job, getting funds released for materials, and then stringing you on for weeks while they are out working on other jobs.  You want a definite start and end date. Give them a few days slack, and then start imposing penalties.

Rule #3: Never Give Final Payment Without a Lien Release Never, never, never pay for a job in full before it is complete, and always get a lien release from the contractor when you deliver the final payment (don’t leave the money without the release). Violate this rule and you may have a big surprise when you go to close escrow. The con-tractor could have an unpaid materials bill for $10,000 leined against your property!

Rule #4: Get Rid of the Bad Ones Do not be afraid to terminate contractors who don’t perform. This is a must. If you surround yourself with flakes, your business will suffer. Get rid of contractors that can’t afford to buy materials or that need to get paid every 5 minutes.  You don’t want their financial problems becoming yours.There are plenty of competent, capable contractors out there that pride themselves on quality work and getting the job done fast. Find them and you will make a lot of money. Don’t always go with the lowest bidder. Reputation in this area is a must. I have wasted far, far too much time and money trying to save a buck by using less than competent contractors. I have bought into their victim hood stories and have wasted weeks on jobs that should have been done in days. I cannot emphasize competence enough. Use poor contractors and you will go to an expensive seminar, guaranteed.

Rule #5: Build Your Team As you find good contractors, keep using them.  Over time, you will acquire a team of qualified professionals that you can trust. As you give them more business, they will be more willing to work with you and help you meet your time tables. Take furnace guys, for instance. I recently had to replace a furnace, and my normal subcontractor had just retired, so I needed a new guy. I had my main contractor call, and get a few bids. They ranged from $1,200-$1,600 for the specified furnace, installed. I knew I should only pay a third of that, so I kept calling around and found a guy that did a lot of new construction. Once he realized it wasn’t a one-time job, and that he would get my maintenance calls as well, a bid came in for $600. Right where I wanted it. These types of relationships take a little time to find and develop. You don’t always want the cheapest bidder, but you can’t afford to go into a project paying retail for everything either.