Consulting Question

[Archigeek]

Question for you guys. I've been offered a contract position at a pretty decent rate, and run through my company instead of through your typical contracting company, but there's a catch. They don't want to pay me till they get paid.

On the plus side, business is slow, and we can use the money, and this applies to both me and my business partner. Additionally, I have worked with these guys before and am confident that they would not deliberately screw me over. They're pretty trustworthy.

But basically they're asking me, a very small business owner to float them for 70 days. If this were a contract for a set fee and I was a subcontractor to them, I would be less bothered by it, but basically this is a straight up labor contract in all other ways, so we don't have the protections we would normally have. Specifically, if we were working for them and owed them a set of architectural plans and they refused to pay, we'd have a couple of ways to seek recourse, but since it's just our labor, we don't have the liability/responsibility that goes with signing construction documents etc.

So the question really is this. What can I add to the contract to give some teeth, without losing what is otherwise a pretty lucrative deal?

So far I am considering adding at least a retainer or that they pay us at least some of the overhead portion of the deal. I can live without salary for a bit, but the rent gotta be paid. And bear in mind that it is fairly normal in the architecture/engineering business that you subcontract to someone else, and may not get paid unless they get paid. It just isn't normal for straight labor deals. Thanks in advance for your help.

[BriarFox]

If it's not normal to ask what they're asking, then I think you'd be well within your rights to ask for at least enough to cover operating expenses for those 70 days.

[JustDan]

Question for you guys. I've been offered a contract position at a pretty decent rate, and run through my company instead of through your typical contracting company, but there's a catch. They don't want to pay me till they get paid.

On the plus side, business is slow, and we can use the money, and this applies to both me and my business partner. Additionally, I have worked with these guys before and am confident that they would not deliberately screw me over. They're pretty trustworthy.

But basically they're asking me, a very small business owner to float them for 70 days. If this were a contract for a set fee and I was a subcontractor to them, I would be less bothered by it, but basically this is a straight up labor contract in all other ways, so we don't have the protections we would normally have. Specifically, if we were working for them and owed them a set of architectural plans and they refused to pay, we'd have a couple of ways to seek recourse, but since it's just our labor, we don't have the liability/responsibility that goes with signing construction documents etc.

So the question really is this. What can I add to the contract to give some teeth, without losing what is otherwise a pretty lucrative deal?

So far I am considering adding at least a retainer or that they pay us at least some of the overhead portion of the deal. I can live without salary for a bit, but the rent gotta be paid. And bear in mind that it is fairly normal in the architecture/engineering business that you subcontract to someone else, and may not get paid unless they get paid. It just isn't normal for straight labor deals. Thanks in advance for your help.

For what it's worth, I'd suggest breaking the project up into biweekly or monthly phases. You deliver on schedule, they pay you for whatever the negotiated portion of the total contract is represented by that particular phase. Then if they DO hose you somehow, you're only on the hook for that phase's level of work. It also allows for incremental communication and review, to make sure that there are no misunderstandings at the end of 70 days which could delay you getting paid.

Just my $0.02. I've been there, and done quite a bit of engineering and design work on contract. I've always used this approach, usually having the increments total about 65% of the contract's total value, with the remaining 35% billed and paid upon satisfactory completion.

[msconstrew]

Question for you guys. I've been offered a contract position at a pretty decent rate, and run through my company instead of through your typical contracting company, but there's a catch. They don't want to pay me till they get paid.

On the plus side, business is slow, and we can use the money, and this applies to both me and my business partner. Additionally, I have worked with these guys before and am confident that they would not deliberately screw me over. They're pretty trustworthy.

But basically they're asking me, a very small business owner to float them for 70 days. If this were a contract for a set fee and I was a subcontractor to them, I would be less bothered by it, but basically this is a straight up labor contract in all other ways, so we don't have the protections we would normally have. Specifically, if we were working for them and owed them a set of architectural plans and they refused to pay, we'd have a couple of ways to seek recourse, but since it's just our labor, we don't have the liability/responsibility that goes with signing construction documents etc.

So the question really is this. What can I add to the contract to give some teeth, without losing what is otherwise a pretty lucrative deal?

So far I am considering adding at least a retainer or that they pay us at least some of the overhead portion of the deal. I can live without salary for a bit, but the rent gotta be paid. And bear in mind that it is fairly normal in the architecture/engineering business that you subcontract to someone else, and may not get paid unless they get paid. It just isn't normal for straight labor deals. Thanks in advance for your help.

Without knowing more about it, I'd say that you should at least incorporate some terms where they pay your operating expenses upfront (or directly by them, if possible, thus reducing your exposure).

The way you've posed it would make me feel uncomfortable agreeing to those terms. Is there a guarantee that the contract will be fulfilled within 70 days? Otherwise you're putting yourself in a position where you've contributed your skills and/or product to a project, with no true guarantee you'll be paid within the allotted time period. You could consider adding a term to the contract that says, in essence, "I agree to wait until July 31 (or whatever) for payment, but if the contract is not completed by that date, then I require payment in part." And for me, that part would need to be at least 50%, with the other 50% due within the next 30 days.

In addition, because of the risk you're taking on, consider increasing your fee. The last things I'd add would be an attorney's fees/costs provision (which I am happy to PM you, if you like).

Finally, I think that a retainer - probably somewhere in the range of $5-10k - is completely appropriate here. Obviously it would then have to be applied to the eventual balance. Good luck.

[bluesmith]

This seems pretty typical for government contracting (my wife is in that field)...but it might come down to your cashflow situation.

The money for her at least is pretty reliable -- maybe ask for a bit more understanding of who the client is to get a sense for how reliable they are at ultimately paying? We've had a few stretches where the wife has worked for a quarter (90 days) on the understanding that payment would be near the end of that period and then had to wait another 90 for a variety of reasons (none to do with her performance).

Getting some help toward your operating expenses isn't a bad intermediate position to aim for. That might help you float them a bit longer if payments are delayed at all.

[Archigeek]

Thanks all. This is looking more and more like their corporate Guy mistakenly viewed this as a sub contract rather than a labor agreement. Hopefully we can just clarify that and get paid every 2 weeks.