As an installer, whether to work directly with the homeowner or act as a subcontractor is a big decision that requires careful reflection. Sure, asking industry colleagues for their experiences will help you decide. It might also confuse you more. What works for them may not work for you. Ultimately, the choice is a personal one. How much risk are you comfortable with? Are you OK ceding control of the installation? Consider the following pros and cons of serving homeowners directly and decide which choice better serves you.
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As an installer, whether to work directly with the homeowner or act as a subcontractor is a big decision that requires careful reflection. Sure, asking industry colleagues for their experiences will help you decide. It might also confuse you more. What works for them may not work for you. Ultimately, the choice is a personal one. How much risk are you comfortable with? Are you OK ceding control of the installation? Consider the following pros and cons of serving homeowners directly and decide which choice better serves you.
Change Orders
A direct contract means no intermediary between you and the homeowner. So, if the homeowner wants to change the layout, add a medallion, change the species, etc., it is easy for both of you to accomplish this with a simple change order to adjust the price of the additional work. On the other hand, dealing with homeowners is all about communication, which can require a lot of hand holding. If your business model is built on turning around many jobs quickly, you can save aggravation by having the customer work with a retailer’s customer service representative so you can focus on getting the job done.
Getting Paid
When it comes to getting paid, realize that in some states you cannot record a mechanic’s lien if you do not contract directly with the homeowner. On a bigger job where you might have to carry much of the expense up front, you may want to have the lien option. By contrast, on smaller jobs the time and expense of a mechanic’s lien may not be justifiable, so working with a retailer may be advantageous to avoid the risk of non-payment or even a delay in payment while you resolve a customer satisfaction issue. Also, when working directly with the homeowner, you may have to wait for the homeowner to get lender approval for payment, whereas if you are a subcontractor the developer or retailer may have to pay you regardless of whether the payment has yet come in from the homeowner or lender.
Booking and Project Control
Working with a retail store, developer or GC as a preferred installer can save on the costs associated with marketing your business. Instead of advertising or hunting for individual jobs, you can get a contract for a series of jobs or a standing contract for all installations from a retailer or developer. But when you deal with a larger retail establishment or developer, you face much greater negotiating pressure that can force you to drive down your prices, reducing your per-project profitability.
Additionally, you might have less ability to control the product you install and less time to complete installations. You are faced with the “quality versus quantity” issue, and you may be forced to do re-work for a failed product. Whether or not your contract addresses your right to additional compensation for product defect re-work, realize that you may be forced to incur the cost yourself to maintain the relationship with your “meal ticket,” and even when you are in the right, the big retailer or developer will generally have more money to litigate. Thus, you may end up taking a loss rather than fighting for your right to additional compensation.
When you work directly with the homeowner you potentially have more control over the choice of products that you install. That means you can become an expert on installation of a particular product. Or you can have control over your choice of manufacturers and avoid low-quality products or products that frequently fail in your locale. However, unless you are the manufacturer’s recommended installer, you may not have the purchasing power that a larger developer or retailer may have. That could make it difficult for you to offer competitive pricing, which in turn may make it harder for you to get jobs.
Disputes
When a dispute arises, having a contract with someone other than the homeowner can be a bit of a double-edged sword. On the one hand, a supportive retailer, developer or contractor may stand behind you when dealing with a homeowner who has unrealistic expectations (e.g, when there are small imperfections in a natural product). On the other hand, when there is a dispute between you and the manufacturer regarding responsibility for a failed product, the retailer, developer or contractor may side with the homeowner and may not support your effort to compel the manufacturer to pay for removal and replacement of a failed product. In standing your ground, you may end up fighting with multiple parties. You might also be forced to have multiple proceedings, like when your installation contract has an arbitration clause but you have to bring a product liability lawsuit against the manufacturer in federal court.
By now you might be thinking that this article is addressing practical issues, not legal issues. Generally, though, the two go hand in hand. The practical issues will lead you to make choices, which decide the terms of your contract. Those terms dictate your legal rights and responsibilities on issues like how warranty issues are addressed, the timing of payment, and even how and where you resolve disputes.
