After over a decade of dealing with a variety of customers and situations, I've learned the hard way to recognize 'red flags' that potentially pose a risk to my business and peace of mind. The best protection I have found is to avoid working for certain prospects and projects. The 3 main red flags that I pick up on are:
1. Unreasonable expectations. A year a half ago I received a phone call that perfectly illustrates this red flag. In the middle of peak season a lady called and asked if we are available to paint the interior of her house in short order. She needed it done in two weeks. But there was a catch - she was on a very tight budget. Normally I like to look at every job, but I didn't think there was any way we could squeeze it in and the low margin was not an incentive to even try. Out of curiously I asked what the size of the house was. She replied 5000 square feet. That was pretty much the end of the conversation. For our small and busy business there was no way we could even think of taking this on. Going any further would have been a complete waste of both of our time.
When I started my business I had a very keen desire to help everyone and try to take on every job. This was not modest and it exposed me to quite a bit of stress and risk. As a rule of thumb a job consists of three factors - quality, scheduling and cost. I can usually accommodate 2 out of 3 (as long as one factor is quality). If someone expects all three, or makes other unreasonable demands, it's time to reset expectations or walk away...
2. Lack of integrity. There could be many hints as to a person's ethics, but if you pick up on too many of them it might be time to second guess your involvement. You are not obligated to work with everyone who asks. Asking you to work under the table, involvement in criminal activity, history of taking advantage of other contractors, and so on should stand out to you during the estimating process. Just as a prospect should want to see your references, you too should be able to do a little digging around if something doesn't feel quite right. Subtly ask who has performed _____ work for them recently. Give them a call.
3. Providing deposits. Deposits help a small business to keep the cash flowing and stay in the black. Perhaps more importantly, deposits also help to keep the transaction at a level of mutual risk, and therefore mutual trust. Almost all jobs where I had a problem getting paid were jobs where I broke my policy of taking a deposit before buying materials and starting the work. If you are going to have a problem collecting, you will likely find out when requesting the deposit. Requiring a deposit establishes respect, confirms the commitment both parties agreed to, reduces the risk of getting a last minute cancellation, reduces the risk of getting ripped off.
The functions of doing an estimate is not only to provide cost and scheduling, but to determine if the opportunity will be a business builder or a threat to your business.
There are other red flags that you may take into consideration. Please feel free to share in the comments section.
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