I am in the middle of my second flip as deal manager, and I am trying to figure out the best way to keep my contractor's motivated?
This is the second flip where we have realized during multiple weeks the contractor had not completed any work, and we have already put a clause in the work contract that if the work is not completed by a certain day, there is a daily financial penalty (200$ a day). The contractor agreed at the beginning that the scope of the work was well within the time limit agreed upon, but now seems to be struggling to meet the deadline. I know this is one of his first flips as a lead contractor, and I want to stay positive with him because I believe this is the best form of motivation, but we also have a deadline and need to have it completed by then.
It’s going to be the same thing that motivates you to flip houses. $$$$$. Just out of curiosity was he one of the lower bids?
Just relay what you have posted here, to him. Don't be afraid to have a talk with him about your concerns/expectations. If you are unhappy with what he has to say then you can make a decision. Just avoiding the situation and being hopeful for the best outcome isn't going to get either of you anywhere.
@Matt Dickens , congrats on your 2nd flip. However, I know that you want to give a 'start-up' an opportunity and it is quite commendable. I have done the same. BUT... if you have investors and lenders that want their money back, much less you wanting to make money, you have to take action NOW. You really need to ask why there is a delay. Seasoned and inexperienced contractors, nationwide, are all facing labor shortage. So, this could be the reason. Also, is your contractor- self-performing the work, so that he can keep his costs down? If so, then this is an issue for you if he cannot keep on track with timelines.
With that being said, what can you do with the situation that you are in? First, do you have a termination clause and does it state "with cause" or "without cause"? Without cause is better but if it is with cause- it will depend on the terms that you agreed upon. However, you might be able to go to your local AGC (Associated General Contractors) to get referrals or maybe utilize HomeAdvisor, if you determine that you need to let your contractor go. But, don't forget if you do let him go, look at his completed work and see if he is willing to provide a guarantee or warranty.
I will be remiss if I do not mention that this situation can get quite complicated. But, it doesn't mean that it won't work out for you! BEST WISHES and SUCCESS to YOU.
@Jacqueline Peterson Yes, we do have a termination clause, but I need to refresh on exactly which option we are using. I appreciate the feedback. I do not think we are quite to the place of firing him yet, but I appreciate that reminder that there may be an option to do so. It seems like his biggest challenge is that he has too many projects going on at once, and therefore is not getting to ours. He still says he will have it done by the deadline, but based upon what we have seen of the work left to complete he is not leaving himself much room for error.
@Matt Dickens I see you said you are the "deal manager". I assume this means you are the manager of the contractor? If so this is the time to do two things.
The first thing is to begin reaching out to other contractors. If you wait too long here, you will be in a worse place. Reach out, explain that you have a current company under contract, however he is falling behind and you are taking steps to possibly replace him. Contractors sometimes like this, sometimes don't. At the end of the day this is your job and you need to look out for it, not the contractor.
The second thing is to have a face to face schedule meeting with the current contractor. This needs to be just short of confrontational. He needs to provide you real dates for milestones, and assurance he will hit them. It may be hard to penalize him now, but do whatever your contract allows to force his hand on these milestones. If he isn't coming to your job, he is going to another that he has placed as higher priority. If that is the case, good luck getting him to make yours the more/most important one. All you can do is simply lay it out there. What you expect, what he will do, and what happens when things don't get done. Be prepared to fire him and follow through if he stumbles.
@Brian Pulaski Those are actually the steps that I have come to terms with as well. I appreciate your confirmation that those are the correct things to do! We are having a conversation this evening.