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Is this a bad idea

Discussion in 'Business Operations' started by lawnlubber, Mar 25, 2005.

  1. lawnlubber

    lawnlubber LawnSite Member
    Messages: 186

    I have an employee who has been with me a couple years. He has been extemely valuable to me and I would like to reward him better than I have. Unfortunately I,m a better landscaper than I am a businessman. I have a ton of work but don't make enough to give him a decent raise, yet I don't want to lose him. So here is my idea. I have ~50 residentials that receive regular maintenance but are not under contract. I want to shed the mowing aspect, but not lose the customers. I want my employee to set up his own business and take over these 50 mowing jobs. He has been doing them already so the customers would notice no difference except a price change perhaps. I would rent enough equipment to him to run as a solo op and require him to be legit and pay for taxes and insurance. I would rent him office space to facilitate the process,but billing customers etc. would be his responsibility. He is contracting his services directly not an employee or sub of mine when he works on those places. I still have contracted commercial work so I would keep him and the equipment 3 days a week. The rest of the week he would have off to run his solo op and I would focus on more profitable work than mowing. He would rather run a mow only business so he would turn all the profitable "extras" over to me. It looks like a win/win. He would become a business owner and I could pay more for his part time (no overtime). I save significantly in taxes and insurance, receive rental fees and a finders fee for his first 50, and step up to landscaping instead of mowing. You tax experts, does this work for the IRS. Do you see red flags, am I inviting an audit?
  2. derek1

    derek1 LawnSite Member
    Messages: 112

    Yeah this is a bad idea! I know you want to give to your employee but this is clearly not the way. I can see if you set him up taking over the 50 accounts just him, and giving him a bigger piece of the pie while you do landscaping but giving him the whole business and clients, don't know if you want to do that, also what about the customers that you built a relationship with? what will they think and how will you notify them that your worker has taken over that side of your business? think deeply about this one I am personally against it.
  3. LawnScapers of Dayton

    LawnScapers of Dayton LawnSite Silver Member
    Male, from Dayton, OH
    Messages: 2,572

    Whose to say he doesn't undercut you and take all the business, mowing, landscaping, etc........you just handed him your income.....

  4. marko

    marko LawnSite Senior Member
    Messages: 963

    I second that
  5. lawnlubber

    lawnlubber LawnSite Member
    Messages: 186

    Thanks for the input. I guess I need to be a little clearer. I have no fear of him or someone else taking jobs, I have too many. I am not giving him the whole business I am keeping the juiciest mowing jobs and all the side work. He doesn't have the skills, knowledge, experience or equipment to compete with me on this stuff neither does he wish to. I see us as seperate businesses that share a shop and territory so we can complement each other but with different goals so we don't compete. I would still retain my relationship with these 50 customers, they all have plenty of side work that would still go to me. I would simply tell them I'm giving this guy an opportunity, they will notice very little difference beyond a bill that looks different. Tax guys, does this work for Uncle Sam?
  6. lawnandplow42

    lawnandplow42 LawnSite Senior Member
    Messages: 508

    i vote no for this one man. IMO it sounds way too insecure. I couldn't see myself giving up those 50 accounts. Just stick with what you are doing, if your doing alright.
  7. olderthandirt

    olderthandirt LawnSite Platinum Member
    from here
    Messages: 4,899

    I see it working, the part I would change is I would sub the jobs out to him rather than just handing them to him. He would still have to become a business and be legal and I think you would accomplish what you want. I would also be taking a % of the lawns he mows since he is a "sub" He would become a business owner with both of you benefiting from some tax advantages. I Like the idea, but there will come a time when he becomes your competition, it just might take awhile. But if your not making him rich with wages he would be leaving you at some point anyway. :waving:
  8. John'sMaint

    John'sMaint LawnSite Member
    Messages: 14

    You Have a ton of work but cannot give him a raise. Something wrong with this picture. You cannot be making a decent profit on the landscaping if you can't afford a raise. To generate DOLLARS in this business you need employees. I do landscaping also, & MOWING is where I generate the cash flow & 80 % of my income. My Main employee gets a raise every yr. If I were in your situation I would keep it all {Thats if u r in it fulltime} improve my business management skills/planning & organizing/etc and take a good look at my financial records, profit & loss/expenses/etc. Just my two cents Good Luck!
  9. Team Gopher

    Team Gopher LawnSite Platinum Member
    from -
    Messages: 4,040

    Hi lawnlubber,

    These are just some brain storming ideas. Maybe you could have him make a % off of certain jobs or new jobs he gets for the company? Something he will see that it would be better for him to stay with you than branch off and form his own company?
  10. lawnlubber

    lawnlubber LawnSite Member
    Messages: 186

    The IRS can be very prickly when you call someone a sub who is not. I can avoid that landmine if the customers pay him directly,no. I want to keep him part time and don't want there to be a problem. Instead of keeping a % as I would for a sub, I make my cut through selling him the route and the rental fees. If I subbed these jobs I wouldn't achieve my goal of reducing my bookkeeping load. I hate it and thats where I lose money so that I'm not as profitable as I should be. Whencash flow is good and I'm not worrying about money I let that stuff slide. Bills go out late. After a 12 hr day I forget to make entries, no good. I've come to realize I would be happier solo and am working towards a gentle transition.

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