To all you partnerships out there.

Discussion in 'Business Operations' started by mottster, Oct 21, 2003.

  1. mottster

    mottster LawnSite Member
    Posts: 191

    A co-worker at my current work and I are fed up with the situation there so next year we're working on setting up a partnership. I'm in a Small Business Management Course at the local community college and he's been doing a lot of reading from books he's bought over the past couple months. I was wondering if any of you partnerships out there would be gracious enough to share your partnership agreements with us so we have a skeleton to work off of with our company. I am 18, still living at home and have very little bills to worry about. He's 26, married and has two kids so he has a few more expenses. His purpose for starting this venture is to pay for the house they are building. A part of me wants to let him have like a 60% share of the company' profit but my mom pointed out today that what happens if we really start growing and in several years we have a lot of money coming in. I would want a full 50% of the money.

    We are just beginning with the workings of this so any agreements would help a lot.

    Yes we both understand that self-proprietorships are easier and more likely to succeed, but we both work full-time jobs of our own and have different schedules. So if we have a partnership is would be nice incase one of us has something that comes up so the other can cover and we can still get our stuff done.

    We're going to begin with your basic lawncare along with a fertilization program. He is soon to get his pesticide application license and i will be a certified applicant once he receives his license. We later want to expand to a Lighting and Hardscapes/landscaping division but as i stated earlier, we're just beginning.

    thanks for any help.
     
  2. Darryl G

    Darryl G LawnSite Fanatic
    Posts: 8,133

    I'd hire an attorney to write the partnership agreement. It's not something I'd do myself.
     
  3. mtdman

    mtdman LawnSite Gold Member
    Posts: 3,137

    My advice about partnerships: Don't do it.
     
  4. twins_lawn_care

    twins_lawn_care LawnSite Senior Member
    Posts: 932

    I am in a partnership as well, and contrary to popular belief, it can work. I will warn you though BE CAREFUL!!! :blob2:
    if you truly do not know who you are working with (99% of the time) it will end in disaster. Make sure to have everything written out to avoid any problems.
    I would say if you are both starting the business from scratch, then plan to go in 50/50, and get out 50/50.
    If you start to realize that he can offer more than you, or vise versa, you'll need to amend how things are run.
    If you find you are doing all the physical labor due to his commitments with the family (which is what I forsee) I would set a 50/50 agreement for business purposes of profit, and then a salary for the actual labor extra. This is a very basic opinion, but I would definitely consider a lawyer to help you out.
    My main reason for doubt in your situation, is you are a lot younger than him, and he has a lot more to lose than you. When you are starting on 2 different ends of the spectrum, it makes it hard to work for both of you fairly.
    I'd say try it out small for a few years, and see how it goes. Try to stay out of debt with equipment, and give it a trial run and see how things go for 2 years. If it seems to be what you both want, go from there.
    Planning on failure from the begining though usually leads to failure.
    I'm a Chevy man myself, but Henry Ford had a great saying..
    Whether you tell yourself you can, or whether you tell yourself that you can't, you're right!

    Good Luck, and keep us posted!:D
     
  5. mottster

    mottster LawnSite Member
    Posts: 191

    Thanks for the help. We both have agreed that we will not go into debt over this business simply because it is a part-time affair for the both of us. I see your point about his family commitments. I think how we're going to work it is when one of us mows a yard...we keep 100$ of the net profit from that. When we mow together we'll split up, either 60/40 or 50/50. that way i get paid for my work and it will make him want to get in and do more work to make more money. I'm sure there are problems with that...but if you can see any point them out.

    He and I know each other from working together in a local LCO this past summer since about March. He was usually my crew leader so we'd always talk about our dislikes about the company we are in. then lately it hit us to combine each of our own personal lawns into a legit partnership and try to expand it so it can be a full time job for me, later on.

    My dad is an accountant brainiac so he will sit in on our initial meeting to make sure the numbers match and then we're both going to just list out everything we can think of. I have my small business class text book to look through and he has a couple books of his own.

    thanks for the help, keep the tips coming.
     
  6. GeorgiaGrassMan

    GeorgiaGrassMan LawnSite Member
    Posts: 147

    Mottster,

    There is no way I would ever do a partnership and I strongly advise you against it. As others have pointed out, there is just too many things that can come between you and your partner.

    One thing you and your friend might consider is for each of you to set up your own business and then subcontract certain work out to one another. For example, you might get (or maybe already have) your persticide license and your buddy could sub out pesticide business to you. He might have an aerator and you could sub out aerating to him. If you guys continue to be friends, your businesses could compliment each other, but if something gets in the way of that friendship, you would be in a position to carry on your business without him. Just an idea...
     
  7. GreatBigTuna

    GreatBigTuna LawnSite Member
    Posts: 22

    Lots of good advice here. Partnerships can work, but you have to be very dilligent in the beginning to be successful. Make sure that your partnership agreement completly specifies each partner's responsibilities and authority. Pre-define your operation and business plans and make sure you define which partner has final say on each. Also, be sure to define a detailed exit plan, or things could get ugly down the road if one of you decides to do something else or you simply can't agree on how to run the business. Also, a 50/50 split can be devistating to a business if the two of you disagree on how something should proceed. You want to make sure that someone (preferably yourself) has a majority share so that a decision can be made definitavely if a deadlock situation occurs.

    Also, are you friends with your partner? If so, just assume that you will no longer be friends once the business picks up. It may not end up that way, but partnerships often do regardless of the intentions at the beginning. Remember, money changes everything, usually for the worse. If you value your friendship more than the business, I would choose another route.

    One more note, you may want to consider an LLC instead of a partnership. The LLC provides most of the liabilty protection of a corporation with the tax advantages of a partnership. Make sure to talk to your attorney and accountant for specific advice on how to organize the company, but an LLC usually works out to be the best route for a small company. Good luck, let us know how it works out.
     
  8. A1 Grass

    A1 Grass LawnSite Senior Member
    Posts: 330

    2 bad things - Partners and Roommates. Great way to lose a friend.

    If you have to do it, make sure you plan a legal way out as well or you'll wish you had one day...
     
  9. promower

    promower LawnSite Bronze Member
    Posts: 1,232

    I had a friend that we talked about starting our own company. The more I got to know him the more I noticed he lied, not always big lies but just the fact that he was dishonest several times. He was really gun ho about starting and I started doing a lot or research (much of it hear). I also started buying equipment here and there. After about a year and a half I had bought everything, did all the research. So I started without him with no plans of including him in the buisness which he hadnt even talked about for a year. I was invited to his wedding people gave me dirty looks and were very rude to me all night, some people that I didnt really even know seemed pissed at me. Come to find out he told everyone he found all the accounts I'm doing and then I just started without him. So in front of few people I mentioned this to him and asked him what account he found that I have, gave me a blank stare and couldnt come up with an answer. Told him thats what I thought and walked out. Your situation is different but I'm glad I started this on my own. If I fail I have no one to blame but myself. You might want to seriously reconsider a partnership. Out of curiosity why dont you want to be solo?
    Good luck
    Matt-
     
  10. mottster

    mottster LawnSite Member
    Posts: 191

    Well, Ideally i'd like to be solo but there are a few reasons

    for starters, time. Working 50-60 hours a week for a local LCO and then having 9 credit hours at the local community college and i'm down to not very much time for anything else. Having a partner would allow us to be able to manage our time better. If i have 5 yards to do some night and he has 5 but more time then i do....if i get tied up at work i can have him catch the ones i won't have time for.

    Another reason is I'm not all that good with some aspects of the business. I'm more of a Residential guy so I usually don't have to do much talking...We're hitting on some nice commercial accounts lately such as doctor's offices and several hotels and small apartments around town. I'm not sure of how to bid on the larger complexes. Also...I know more about the bricks and mortar of the lawn care itself. He had never layed sod until we had a job to do at our current workplace where i had to show him. I think together we make a strong combination. The only hard part is figuring out the money split thing. It seems simple but with all of you saying don't do it it gets difficult.

    I'm still just looking for a partnership agreement if anyone has one. Thank you for all of your opinions but we have both looked at our options and we think we can really make this work.

    My ideas for splitting profit is to have our gross sales then take out the fixed costs, such as insurance, licensing, long-term advertising and so on then figure up an estimate of our variable costs like gas, trimmer line, repairs and so on, then take out a percentage of the rest and put it in the companie's bank account. Then we split the rest up. Earlier i mentioned having it so if we mow one yard by ourselves then we keep that profit. Which would work, until we get to the point down the road that we need to hire employees. So splitting the net profit 50/50 would be better in the long run. and later down the road, with employees we can increase the % that goes intot he company's account.

    We've decided to do this so you don't have to talk us out of it, it won't work, lol. I'm looking for help on the technicalities. No Lawyers! We're civilized, money or no money a well written partnership agreement will settle it. Writing it before the money starts rolling in will keep things fair. We'r eboth going to sign it and we're both going to have a witness there to sign, as well.
     

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