Silent Partners

Discussion in 'Business Operations' started by HOOLIE, Aug 6, 2004.

  1. HOOLIE

    HOOLIE LawnSite Gold Member
    Posts: 3,981

    Does anyone have a silent partner? You know, someone that basically invests money in your company looking for a return on the investment without getting in the way of the day-to-day operations? I know a heating/ac contractor with a silent partner, and it works very well for him.

    Just curious...
     
  2. BCSteel

    BCSteel LawnSite Senior Member
    Posts: 876

    Thats how my partnership was, until I bought him out. He was the start up $$ and I was the worker/business man.
     
  3. HOOLIE

    HOOLIE LawnSite Gold Member
    Posts: 3,981

    BCSteel-

    Did the partnership work out for you? I have a customer who's been dropping hints that we should partner up. He says I have the knowledge of the business and he has some cash to invest. But I've been on my own for 3 years now, don't know if I really want to share the business with someone else. But, it is hard to get a loan when you're newly self-employed, so its tempting.
     
  4. 65hoss

    65hoss LawnSite Fanatic
    Posts: 6,360

    "Silent" partners are not usually silent.

    Beware.
     
  5. HOOLIE

    HOOLIE LawnSite Gold Member
    Posts: 3,981

    That's what I was thinking. Not trying to belittle myself, but there are a lot better investment opportunities out there than my biz.
     
  6. BCSteel

    BCSteel LawnSite Senior Member
    Posts: 876

    My deal worked out good. He was the cash in the beginning until I got enough work to go full time. All he wanted was 1% of monthly net, that was something that I could easily live with. When he wanted out he only wanted his original investment money back. I told him that that wasnt enough but he wouldn't take any more. So now hes on a free fert and squirt program.
     
  7. Mudmower

    Mudmower LawnSite Member
    Posts: 102

    That was a SMOKIN' deal BC. Folks I have talked to (not friends) have mentioned 1.5% to 3% monthly payment on initial investment.

    Lets say initial investment was $10,000.00. At 2.5%, payment would be 250.00 per month. Not bad, but consider that the investor is making 2.5% return EVERY month. That works out to 30% return on his 10,000 per YEAR. There is NO principal payment in the 250.00. At the end of the year, you still owe them 10,000.00, and investor has profited 3,000.00. If the deal is not structured properly, you can't write off ANY of the payments as business expenses.

    Silent Partners can work, just know what you are getting into.....

    Jim
     
  8. CamLand

    CamLand LawnSite Bronze Member
    Posts: 1,300

    My Dad was a silent partner in my company.never had a problem with him and most of the time he reinvested all funds he made back into company.Its good as long as you know exactly how it works...
     
  9. Groundcover Solutions

    Groundcover Solutions LawnSite Bronze Member
    Posts: 1,254

    I have one kinda, it was hard to get a loan at my age and just starting out. So I found someone that would loan me the money at a good intrestrate. Made sure i got in writing that they had not say in business just the loan. It is working great so far, they get there regular check and I run the biz.
     
  10. GreenQuest Lawn

    GreenQuest Lawn LawnSite Senior Member
    Posts: 822

    Oh man, I could go on and on. I had the exact partner you are talking about. He loaned me the start up cash, got paid back with interest, put NO time in the company, but when it came time for me to buy him out he still got 50% of the value of the company. I will be buying him out for the next 3 years. Not to mention the business had to reimburse him for taxes he owed cause of him showing 50% of the company profits.

    Bottom line I have paid out almost 15k by the end............and I am a solo operator.

    If you do it make dang sure a lawyer draws up the agreement and has your best interest in mind. I would NEVER recommend a partner. I could have bought one hell of a mower for what he has made.
     

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