Business coaching and advice for the best version of your electrical contracting business

At some point all trade-based businesses consider doing a project for a commercial builder. Winning the tender for a project can book you up with work for months, giving you the confidence to expand your team and grow your business. While these projects can appear appealing, they can also be a trap for inexperienced electrical contractors.

Legal Rights
Be careful with the contract you sign with the builder. Often these commercial construction contracts are one sided, favouring the builder. The clauses they contain may eliminate all control you have over the project, rendering you a labour hire business but one that carries all the risk. As a business coaching firm, we have seen clients’ contracts that specify that the sub-contractor may be instructed to complete variations without approval. If the variations are later challenged by the client, that would mean the sub-contractor wears the cost. If the sub-contractor doesn’t complete the variations before approval, they could be found to be in breach of contract. Sound fair? Nah, it’s not. That’s why you need to be careful with commercial contracts.

Payment
Be careful of the time it takes to receive your payments on these contracts. With such large sums of money involved, a two week delay can cause catastrophic issues in your business, especially when you still need to pay any specialist contractors you have engaged. They often also include a retention amount of around 5% of the total project cost. When you work on thin margins, as many sub-contractors do with these contracts, the value of the retention could be your whole profit for the project.

Timeframes
The commercial builder typically controls the project timeframes. Some builders are good operators and have experienced Site Managers running the job on-site. But we some of the businesses we coach have reported of Site Managers being out of their depth. The subcontractors often don’t get accurate and reliable schedules. Often in these cases the builder can ring up at the last minute and demand you throw all of your labour on the project for a sustained period of time, even work weekends and overtime. If you can’t do it or won’t do it, they may have the right to engage another sub-contractor at YOUR expense.

Commercial building projects can be profitable, but be very aware and manage your risks as best you can. Select good reputable builders to work with and keep track of your profitability at all times.

When you know better, you do better.