To Partner or Not to Partner

Discussion in 'Starting a Lawn Care Business' started by TYTILIDIE, Sep 22, 2019.

  1. TYTILIDIE

    TYTILIDIE LawnSite Member
    Messages: 106

    A seemingly great opportunity has come my way and I want to make the right decision. First off, I'll give some background.

    I have owned my Commercial/HOA Landscape Maintenance company for 15 years. we are going to gross just under 1m this year and I net about 125k. I still have a lot of debt from back taxes that I am paying off, total debt is right around 100k. I am paying about 4k per month on it. We rent our home and have an opportunity to buy the last house we lived which we loved and want to die in. We can't buy the house until spring though.

    Over the years, I was passionate about growing this company however, in 2014, I doubled in size and bought a project car. During the last 4 1/2 years of restoring the car, I also began changing the way I run the business. I wanted to have more time. So I have been hiring "Operations Managers" or moving people up from within. Up until January of this year (2019) I have not found anyone worth a damn. It has been such a struggle that I really want to wack away from Landscape Maintenance. Obviously with the kind of money I am making, I can't just "walk away".

    2012 - I got my pesticide applicators license in CO. I had to test 3 times! Ever since I got it, I have been ultra proud of it. Maybe it's because I never got out of the tenth grade and I feel like I am part of an elite group, I don't know. Once I got my license, noticed almost immediately after buying my 5k spray rig that it sat around most of the season unused. This has always bothered me. Almost right out of the gate the thought has spun through my mind that I should start a Lawn Care company (my definition of Lawn Care is "Spraying/Fert". It has just never really panned out financially.

    This year, I started getting a lot of calls for it from residential home owners. They were going off of my website which is not geared toward it at all. So I took the clients on. We only have about 10 or 20 but I love the simplicity in it. Truthfully, I am fairly miserable doing Landscape Maintenance, the politics has ruined my outlook on this business. HOA's are enough to make your head spin. So the thought of doing resi work with a high margin has really started to turn me on over the last few years. I like getting paid for what I do and not have to be haggled for every dime I can be haggled for on a daily basis.

    1994 - I go to work in the green industry at a Landscape Maintenance company where I stay for 8 years. There, I learn most of what I know today. They were also like a second family. I left there because I felt that I needed to make more money because my daughter was born (2003). I didn't, for a couple years.

    2018 - I decided, that in 2020 I would launch a new company on my own with no money except for a 16-20k marketing budget. I have spent a lot of time planning things out on "paper". The numbers are impressive. I have the guy and all of the equipment and I don't need any money because I am already getting paid from my Landscape Maintenance company. This would allow me to dump the profit right back in for immediate growth. I plan on doing that for 3 - 5 years until it is "safe" or established. We would be vulnerable to financial problems since I have no real capital to put into it.

    Two weeks ago - My old boss contacts me. I have been in touch with him over the years, we do lunch a few times a year and shoot the breeze. He does over 9m a year. He approaches me about my Lawn Care company idea and asks me if I want to partner with him. He says he has 200k he wants to put into it and I run it. He wants a 50k residual from it and 60% ownership until he no longer has to invest and gets his money back. Once that happens, we can reverse the ownership split. we have met twice and I am getting closer to making a decision.

    Numbers - I wouldn't make a dollar for about 2 - 3 years. He would get his 50k starting the second year. He would put any amount of money needed into it to continue growth and or expansion. Says he would have no plans of wanting out any time soon but that I would buy him out when the day comes. That is really the only parts that scares me, a buy out, especially if I don't have the money. I am sure I could finance my end but damn, I have to go back into debt for that. This guy is owner of 5 other businesses. I have met two of his partners, they are pretty damn happy.

    What should I do here?
     
  2. Cam15

    Cam15 LawnSite Silver Member
    Messages: 2,908

    Never been in a partnership. But almost everybody that has says its ended badly.
     
  3. snomaha

    snomaha LawnSite Bronze Member
    from midwest
    Messages: 1,627

    Not understanding why you started a separate turf care company, or why you need a partner? Couldn’t you just of added that service to your current HOA maintenance company?

    Are you paying yourself a fair market wage for what you do in the HOA company, or is the 125k net what’s left over at the end of the year?
     
  4. OP
    OP
    TYTILIDIE

    TYTILIDIE LawnSite Member
    Messages: 106

    I pay myself 65k in salary and then I make another 60k or so on top through net profit or spending money out of the business here and there.

    I want this company to be separate because I ultimately want out of the Landscape Maintenance. Plus, the name of my company does not appeal to Lawn Care. Then you have the competitive side. If I try to get commercial work from other HOA/Commercial guys, they will not want to give money to their competition. My existing company, I eventually want to turn over to my management guys, or at least one of them.
     
  5. OP
    OP
    TYTILIDIE

    TYTILIDIE LawnSite Member
    Messages: 106

    You know what they say about partnerships....

    ....it's the only ship that doesn't sail.

    I get it, I do. I have known this guy 25 years and trust him. I think we could absolutely go to the next level. If I didn't know him the way I do, I wouldn't even consider it.
     
  6. Tara Ann

    Tara Ann LawnSite Senior Member
    from Midwest
    Messages: 736

    Sounds to me like you already know the answer. Don't let people here try to talk you out of it. Go for it.
     
  7. BigJlittleC

    BigJlittleC LawnSite Fanatic
    from Chicago
    Messages: 6,451

    You know the guy and your relationship with him. Will you be willing to lose it over a bad deal? Make sure you two break everything down on paper. Clear responsibilities and compensation. Don't forget to outline how to end the relationship.


    I don't really see why you need a partner outside of some financial start up. Would a small business loan work better then giving away part ownership? What is this guy really bringing to the table outside of a wad of cash?
     
  8. snomaha

    snomaha LawnSite Bronze Member
    from midwest
    Messages: 1,627

    Just playing devils advocate - if this guy has a 9MM dollar company, why does he need to partner with you?
     
  9. OP
    OP
    TYTILIDIE

    TYTILIDIE LawnSite Member
    Messages: 106

    He doesn't. He is starting a spray company with or without me. He has partners in 5 other ventures. I am starting this company with or without him. He has a lot more resources than I do. He wants to be the money and me be the operation which I am more than capable of. We also have a shared vision of expansion outside of our state.

    My main hold up would be the % split. I think 60/40 is fair in the beginning but, once we get moving along, I WILL be putting my own money in and he would regain his investment along with residual. At that point, I would want our contract to change the split to 40/60. (I go to 60). As long he was OK with that, I think I would go for it. I just don't want to have to buy out 60% of a company that might be worth 1.5 million dollars at some point.
     
  10. snomaha

    snomaha LawnSite Bronze Member
    from midwest
    Messages: 1,627

    I think you're smart to focus lawn care applications and the higher margin they bring. What would you buy or do with the 200K?

    Money is cheap right now and choosing an investor is the most expensive cash you can get. If the only resource he is bringing to the table is money, I think there is a better way???
     

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