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Adding a partner

Discussion in 'Business Operations' started by Heavenly Green, Apr 15, 2003.

  1. Heavenly Green

    Heavenly Green LawnSite Member
    Messages: 171

    Hey, To everyone out there Ive been thinking about adding a partner to my biz. And having trouble understanding or trying to come up with a fair situation. The landscaping end is starting to flourish and Im soon to be overwhelmed trying to keep up with maintenance and landscapes. I have a potential partner, but he wants me to come up with some numbers. Any help on how partnerships are established with an already established company are greatly appreciated.:confused:
  2. IndyProCare

    IndyProCare LawnSite Member
    from Indy
    Messages: 4

    May I suggest you 2 do an LLC partnership. Check the web, there is lots of info on this and an LLC protects YOUR personal assets.
  3. Doh!

    Doh! LawnSite Member
    Messages: 50

    Have you considered hiring this guy or someone else as a foreman? It could even be cheaper in the long run to hire two foremen than adding a partner, (you can't beat splitting money one way). Plus if times ever get tough, you can scale back your operation. Just some considerations to ponder.
  4. HarryD

    HarryD LawnSite Bronze Member
    Messages: 1,068

    Why not sub contract out the work to him. I would think that would be even less of a headache then adding a partner or more foreman. then if times are lean you dont have to worry about letting people go. I believe one top dog is all there is room for adding one is just asking for problems.
  5. LawnLad

    LawnLad LawnSite Senior Member
    Messages: 738

    There has been a fair amount of discussion regarding partnerships on the site over time. A search will yield lots of opinions about how partnerships have worked and how they don't work.

    A couple of suggestions -

    1) Do not use a 50/50 agreement - unequal ownership allows for more expedient decision making, even with a disagreement. If two partners can't decide on something you can be deadlocked in a 50/50 ownership unless you have a provision in your by laws that spells out how conflict is resolved. This is a pain to go through a formal process to make a decision about something, so just agree to one or the other being top dog. If you can't do this - then you shouldn't be parnters anyways.

    2) Create a Buy/Sell agreement before you partner up. Have an attorney draft the agreement. This will answer all of your questions about what happens if one of you is disabled, dies, wants to leave the the business, etc. Consider keyman life insurance so that should one's untimely demise arrise - there is money to buy the shares of the corporation from the estate. If the other partner is married - consider carefully who can own shares of the business. Do you like your potential partner's wife and her family? Worse yet - if not married, that's a time bomb. Let the company have first right of refusal for the stock, and have the company as the beneficiary of the life insurance to buy the stock from the estate so you don't have to go into business with the widow of your partner. Also - what if one of you wants to leave but the other doesn't want to sell? Make a provision that allows for this to occur - a bidding of sorts for the business with a required 110% counteroffer. This way ultimately the price of the business will be established by someone having to say Uncle and bowing out. Get an attorney for all of this.

    3) Make sure there is discussion and a provision for how each of you will be compensated. Salary plus bonus, hourly, etc. This means job descriptions and specific evaluation criteria for how performance will be judged. You'll need measurable objective criteria if possible. What happens if one of you puts in more hours than the other? How will you be compensated for unequal work?

    4) Consider giving your partner B shares of the corporation - where he gets a portion fo the profit but has no voting rights. This will draw the individual into the business and keep them there due to the ownership mentality since they receive a protion of the profit and better yet, you won't loose control through voting rights and potential disagreements.

    5) Remember - as partners your both employees of the company. Being a partner is an investment in the company - and the value fo the company/stock shares is a yield on investment, not an entitlement to certain compesation. Your compensation should be based on what the market would have to pay someone else to perform the job with the skill set each of you posses and the job(s) you perform.

    All of this being said - consider the alternatives that have been listed above by others. Partnerships can be very tricky. It seems like a great concept to bring on someone else to help share that burden in the business. Generally - this won't work. It can, and I've seen it work. But it takes the right people to make this work.

    Everyone thinks their marriage is going to last - but why is it that 50% plus of marriages end in divorce?
  6. Heavenly Green

    Heavenly Green LawnSite Member
    Messages: 171

    Sorry it taken a few days to respond back. I just went through my first experience with the passing of a close family member last Tuesday and had to jump in the car and drive to Texas. So things have been not so good this week:cry:

    Thanks for all the info guys! Im not in a state of mind now to even think about my biz. I just got back home from a 24hr drive but Im sure Ill further investigate this move further in the near future.

    Then to top everything elce the Trans went out on the guys while I was 1500 miles away. Seems like everything hits at once. I did come home to 15 new calls about mowing and 6 new calls about Re- Landscaping. Plus left here with 10 other jobs on the plate to go look at. So Ill be chasing my tail around for a good while.

    Lawn lad thank you for your very informative reply theres a lot there to think about (later):(
  7. Heavenly Green

    Heavenly Green LawnSite Member
    Messages: 171

    Just looking at yalls locations Ive driven past yall twice in the l;ast 5 days. I did think about The LGF as I drove through downtown St. Louis. Saw lots of lco's on my trip down and kept wondering if they might be someone from lawnsite. I even mowed some bermuda grass in Tx. (with a 21"toro) no it wasnt a paying job it was my grandparents yard. Unfotunitly I was there for my grand fathers funneral.
  8. rodfather

    rodfather LawnSite Fanatic
    Messages: 9,501

    Think real, real hard about bringing on a partner...sounds to me like a hard working foreman (compensated correctly and equitably) would be the avenue I would travel.
  9. Wow, coool.

    I did the partner thing, we both agreed to disolve it 10 months later.

    Ask yourself these question to answer your partner idea, do you need more invested money? Do you need more one time shot money? Can you finance yourself?

    If you answered no to the first 2 you don't need a partner.

    Follow the advice above, hire a forman or subcontract it out.

    This is what my expartner and I do, and I do this with other LCO's. We sub/swap work back n forth, or just sub it out.
  10. Heavenly Green

    Heavenly Green LawnSite Member
    Messages: 171

    LGF, Everyone I know that can handle large installs is way backed up as is. Right now Im actually giving more thought to selling the business end of my company. If I can pay off the equipment this season then Ill take all my equipment down to Houston where most of my family is and rebuild the reputation and clientele. Im thinking if I sold the company name and all current clients, company ph#, all my marketing efforts etc. And I just take all the equipment (enough to run two crews and do most anything else maintenance wise) down to Texas paid for. Ive my dad who wants to help me get set up. live with him for free for however long it takes. Hes offered to get things started and set some stuff up for me before I even get down there. And Ive got lots of other family in the Houston area who have told me they have connections and could easily get work rolling for me. Doing the numbers I cant find any reason to stay in MI.

    80 yards at average $25.00cut X 46cuts = $92,000. Thats just mowing.

    80 yards at average $25.00cut X 26cuts = $52,000. Thats the same 80 yards in MI

    Then my 800sq ft. house in MI is valued at $140,000. But in Houston the same house in an comparable area is valued at $80,000. to $90,000. tops.

    Plus my dad wants me to take over his towing biz some day when the time comes so then I would own two companies.

    Please tell me if you see anyway this could possible be a bad decision!

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