How to Hire a Contractor: Guide for Small Businesses

Do your research. This is critical, especially if you've never worked with a particular contractor before. Check their references, read online reviews, and get at least three bids for the project.

Create a written contract that includes details on both sides of the arrangement. Establish clear project parameters so each party knows what's expected from them and when it should be completed by - the overall time frame shouldn't exceed 20 percent of the overall job, but can be adjusted as necessary. Include specific payment terms. Spell out how often progress payments will occur and what happens if either party backs out or misses a deadline? To protect yourself in case your contractor defaults on the deal, get an escrow account set up with a neutral third party who will hold the money until you're satisfied with their work.

Create a detailed project plan that breaks the job down into manageable segments. Provide an accurate description of what you have, what your expectations are, and share any images or other supporting material that will help them do their job. If necessary, include examples of similar service providers' styles so they can get a feel for how you want your finished product to turn out.

To prevent all types of disputes, establish clear guidelines for making changes to the original plans after the contractor begins working on your project - this should be limited to emergencies only (such as faulty materials), but keep in mind that unexpected problems may arise during installation that requires some form of the change order. Establish criteria for re-doing work that doesn't meet your expectations.

On the financial side, consider adding what's known as a "hold-back provision" to the contract - this allows you to withhold 10 percent of the payment until you're satisfied with the completed product - you could also adjust this amount based on how much work has been done at each milestone or phase of job completion.