Coping with Customer Foot-Dragging

      Case example: dealing with contract and money issues on a custom job when a customer dawdles. December 2, 2006

Question
I have a customer that signed a contract for a very nice chefís kitchen one year ago this week. The job was supposed to be delivered about half a year ago. I haven't even started on it yet and thatís not my fault.

I have been going back and forth with him on layout and design. We did an initial draft of the layout for him when we signed the contract a year ago, and we waited 9 months for a complete list of the 13 built in appliances so we could finish the kitchen design, can't design it without the appliance specs. Since then I have been waiting on his decisions regarding placement of the appliances, stains, paint colors, and finish type.

I sent him the final drafts with a contract addendum, change order, and a revised payment schedule reflecting the requested changes. He says he has marked up the layout with additional changes, signed the addendum, and will mail it back to me asap. This was weeks ago. Now he is also telling me that while he wants the changes and is willing to pay for them, he is not sure he is willing to send me additional funds and wants to pay for the changes on the end. He says that paying additional money now would give him less leverage. I am not sure what he needs leverage for. I have a good reputation and have always treated him well. In fact he interviewed several of my previous customers before awarding me the contract. This is not how we do business. Changes are paid at the time they are requested.

I have a good contract in place and saved over 300 e-mails back and forth between us which is great because they all have a date stamp on them from the server which cannot be altered. Time and time again over the last year he has promised answers and never gets back to me until I pester him to death.

The only thing I was missing from this contract which I now include is a time performance clause by the customer which basically states that they have a certain amount of time to make decisions, make payments, and make available the delivery and install location before additional charges are incurred.

I know many of you will say "see your attorney" which I already plan to do later this week. But my main question is: have any of you run across customers like this that can't make decisions and then try to blame the delays on you? What do you do with them? I can't just call off the deal and give the money back. I'm sitting on almost $10k worth of materials which is about what he gave me for a deposit. How much time is enough before I write him off and send him a final statement cancelling the job and retaining all of what he has given me so far as damages?

I know that with the contract and the e-mail evidence that I have, if he cancels the job I can retain everything. Iím just not sure of what to do. I also know that he says he is concerned about a final delivery date, which I can't give until I have all the information. Even then my best guess is 4-5 weeks. I also have other customers that I have been sliding in front of him until he gets off his butt. Any input about similar situations would be greatly appreciated.

Forum Responses
(Business and Management Forum)
From contributor T:
Yes, definitely see a lawyer. It sound like itís in your favor but without seeing your contract, itís hard to say. I recently had a client like this, but was not that long a time frame and not as much money. I just put other jobs in front of hers and figured I would do it sometime after she made her final changes and picked her colors. I made it clear that she would have to wait when she finally made her decisions, and she was OK with that.

If you have used up your deposit to purchase materials, you are not getting enough of a deposit. I get half the money in the job on signing a contract, and I get design fees upfront. As far as change orders go, usually I roll them to the end of the job if they are 10 percent or less, anything more will require a restructured payment plan with more money upfront. With this guy, I think that if I sent a change order with a new payment plan and he wouldn't abide by the terms, I would be unwilling to make the changes until he does so.

You say there is no time performance clause on his end; is there one on your end? If not, you may remind your client of this fact (talk about leverage). As this is costing you no more money at this point, get around to the job when your customer comes up with more money. Stack the materials against the wall of the shop and work on other projects; when your customer wants to see job progress, show him the materials. Remind him that you won't continue on his job until he pays for the changes. It sounds like you have kept good track of the communication between your customer and yourself; you have more paperwork than an attorney would generate on your behalf.

That your customer tells you he needs leverage is not a good sign at all, and maybe you will need a lawyer to get you out of this mess. As is ultimately the case with bad projects, you try to cut your losses and move on.



From contributor S:
"As this is costing you no more money at this point, get around to the job when your customer comes up with more money." Every day that passes from the day you give a bid to the time you complete the work you lose money to inflation. A week, month, or even a few months might not be too bad, but look at what happened to prices over the last 2 years. Hardware goes up, lumber goes up, insurance, rent, wages, everything. Not to mention missed opportunity cost. Maybe you could put some pressure on him by suggesting that you will need to adjust your price to allow for cost increases. Give him a set period of time to perform or the cost goes up. If you can't change the original price then add it into the change orders.


From contributor M:
Would it be fair to say that this guy has a problem committing? And he has given you many reasons (excuses) why he has not performed? In which case, he has burdened you with is problem. He many need some help getting out of this.

I would suggest that you would like to meet with him about this project. You are concerned about the lack of progress and would like to see what can be done to get him satisfied and you get paid.

When you meet, tell him that this project has bogged down and you would like to put your heads together and see what can be done to move this along. Ask him what concerns he has at this point. Next, listen, and tell him what you heard him say whether you agree with it or not. And use your own words; don't just repeat what he said.

This shows that you have demonstrated that you have heard him, and more than likely he will be willing to listen to your concerns. People are more cooperative when they believe that they have been understood. I think it is important that you regain some sense of confidence with this guy. Again, probably his issues, but you need to get this out of the way.

Then tell him that, in order to help him get his kitchen in a timely manner, you believe it would help to set up some milestones. These specific things will happen at these specific times. For this to happen though, he will need to do his part, which you describe. Part of that is that he will have to be more respectful of your time. When I get customers who are limitless in their ideas and want to spend my time exploring each idea, I tell them that my shop rate is $65 per hour, or roughly $1 per minute. If you don't be careful, I will have to start charging you for these visits.

You need to let them know that you budgeted a certain amount of time for design and consultation. When they exceed that, it is beginning to cost you money. If they feel it necessary to have more of your time, you need to adjust the price, because nobody works for free.

For me I get these kinds every now and then. After 2 1/2 years one of these is coming to trial. This architect is in to me for around $30,000. There is nothing pleasant or satisfying about dealing with attorneys. As I recognize this type of person, I don't get attached to them because I know that they can be problems. See if you can work it out. And yes, while I do own a cabinet shop, my background is in counseling. It sounds like this guy has problems - be careful not to make them yours.



From contributor V:
You might try telling him you are about to take in and schedule more work and his job will now and from this point on be moved to the end of the schedule until he complies with what you need done - decisions and money. These are the kind of guys that cause me to separate the actual job from the installation on charges and payment for any construction is due upon completion and before delivery.


From contributor C:
Since he hasn't given you any money yet, and appears unreasonable and from all the sign will be a terrible customer, how about saying, "why don't you tear up that contract and we'll call it even".

What can you do on a contract that doesn't have enough specifics to actually build from? Definitely build into your next contract language on timelines, but also consider not even drafting the main contract until you have all the information.



From contributor K:
Put this into perspective, if the situation were in reverse, they would be "calling their attorney", but the reality of it is that you need to continue to follow-through on your end, as you have, documenting everything, but not give an inch at this point. If your contracts state that Change Orders are paid in full after the start of project, stick to it. If he balks, politely explain to him that as a matter of perspective, the big box companies charge you 100% upfront for everything, and you not only took only a percentage upfront on a custom job, but have been floating this project for an inordinate amount of time, and it is at a point of costing you more money.

It is also how you customarily charge for Change Orders, so he is not being treated any different than any other client. Explain to him the reality that all the delays he is causing has pushed you into a new year, and gas prices, COGS, labor, insurance, etc. All have gone up, and now you are losing money, and as patient as you've been, this is no longer acceptable. Everyday that goes by, this project is now costing you and your company money, and that you must politely insist that it get back on track immediately.

300 emails - I can't even begin to fathom how much time and money was lost to the reading and composing responses to over 300 emails. Even if you only spent an average of only 10 minutes composing the responses (which I am sure it is more), never mind the time to read it, that's over 50 hours! 50 hours times an average shop rate of $75/hr = $3,750 for design alone? I hardly think he paid anywhere's near that amount for design and layout.

This also does not include the phone calls, visits to his house, etc. It's one of those hidden costs that eat away at our businesses. I think at this point you've been too lenient and he is walking all over you. I agree with others, meet with him, explain how his project has gone so far, how it is costing you money, and set specific benchmarks for bringing it to conclusion. If after meeting with him, and he is not completely embarrassed/sympathetic at the fact that he is literally costing you thousandís of dollars, and bogging down the production of your shop, than you have made him aware of the damage that he is doing.



From contributor B:
Itís time to move on and service your other clients. It sounds like this client is a flake and will be one of those never-done jobs. There is too much indecision on his part and very little commitment. Sounds as though you've spend enough time and money. Move on and don't worry about it, if it happens it happens, but take care of your other customers. At this point I would be re-bidding the entire job as well. We only honor out bids for 30 days and no more.



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