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Providing equipment with a friend


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  #1  
Old 03-10-2009, 10:46 PM
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Default Providing equipment with a friend

Hello, i just started a lawn care business this summer with a friend. We had our first mulching job this past Sat. We each got payed $100. However, for the business i am providing the Truck, trailer, walk behind, weed eater, blower tarp and storage. He is providing some shovels/rakes and a weed eater. How would you split the income? i thought about equally paying for the gass money and then i get 2/3 he gets 1/3? Any suggestions would be appreciated.
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Old 03-10-2009, 10:51 PM
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This is a great question and this is a reason why partnerships are all to often disasters.

Because you are right, how do you go about splitting that up? It is very difficult to sit down with a friend and say, look I own the truck I need to get paid more. I agree you do, but it never seems to work out right.

Here is my take and others can jump in as well.

Right now, its all an experiment.

Take money out to pay for gas and oil and whatever and then just split the income with him.

Is it fair to you? No, but in the long run you will benefit because you are learning how to do all this and then who knows, maybe one day in the near future, you will go off on your own and run your own business.

What's your take on that?
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Old 03-10-2009, 11:30 PM
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Steve has a good point. Depending how "good" of a friend your partner is, you may want to sit down with him and explain to him that you have a much bigger investment. If he is not open to the matter than maybe you need to split before you get too deep..... If he is open to suggestions ask him how he thinks you need to split it. You may also suggest something down this line:

Figure up what the total equipment investment is between the two of you, including the truck. Let's say you that hypothetically have invested 85% of the total equipment value and he has a 15% investment. Either pay yourselves a same wage, say $10 per hour, and then split the remainder up 85% to you and 15% to him. Or, split the entire thing up 85%/15%. Either of these may be an encouragement to your partner to start investing more himself and thus bring it close to 50/50. So if your job paid $200 and you split it 85/15 then you would get $170 and he would get $30. Yep, its a big difference but if that is the split in investment you deserve the same rate of return on your investment as he does. If it is only because he is unable to afford to make a greater contribution to the cause and you want to help him, that is up to you.

Maybe you need to each throw, lets say 5%, of each job into a pot for expenses such as gas and oil for the truck and mowers. I suppose this money could all come from the owner of the equipment but at that rate the owner of that equipment needs to get more than his percentage because his equipment has recurring expenses that a rake and a shovel will never have (gas, oil, tuneup, and etc).

Something that you need to remember, which is just general business, if your job paid $200 you need to set some of that aside for equipment repair or replacement. Long ago a friend of ours told my dad that if you own a business it is always either growing or dying. It is never at a stand still. Thus you need to always be investing money into it. This does not mean you have to spend money every day, every week, or even every month. But it does mean that some of your profits need to be used to grow even if you are saving it for that bigger trailer, bigger mower, 2nd mower, new trimmer, equipment to start a 2nd crew, or whatever.

Hopefully your friend will be understanding and be willing to allow you the same rate of return on investment. If not, perhaps you need to seperate ways while you are still on speaking terms. Then you can still go fishing together...

Sorry for the long narration but I hope it helps.....

Eli

Last edited by SuperiorPower; 03-10-2009 at 11:35 PM.
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Old 03-10-2009, 11:57 PM
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Great reply Eli. Very insightful.
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Old 03-11-2009, 01:13 AM
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Default Doesn't (work)

I have been in 2 partnerships in my life and both ended in disaster. The first one with unequal investment and the second with equal investments.

Returning from my 3rd tour in Viet Nam, 8 of us had the opportunity to by a beer and wine bar in Jacksonville Florida. We each put in $1,500.00. Everyone equal so there would be no problems. Wrong!!

After the novelty of ownership wore off, only 3 of the eight put in any time (work), but everyone wanted an equal share!

At the start, we all agreed to take specific shifts. If because of duty conflicts (we all were still GI's), or any other reason the schedule couldn't be kept it was up to the problem owner to pay someone to take his shift. Only 3 of us kept the place open Monday - Saturday 10A -2+P.

Equal investment is fine only when equal responsibility it present. With partnerships this is never the case.

Don't take on a partner! Take on an employee!

Steve
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  #6  
Old 03-11-2009, 06:30 PM
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I'm with Steve here man. Go it alone. I had considered taking on a partner in the beggining. It's a bad idea especialy with friends or family. You will in the end, end up either out of business or one buys the other out & you will not be on speaking terms when all is said & done. Buy a couple rakes & shovels now, & avoid the aggrivation & expense later. 2 People are never going to work "just as hard" as each other, it's never a 50/50 split on moneyinvested, time, effort, drive etc. This will be especially so if he doesn't have much invested. Above the mentioned figuring out what the percentage of investment is.... If you are just hell-bent on trying to make it work, I would figure it out & if it is say a 85% to 15% split worth say a total of $10,000 (using round numbers to make it easy) Then you have $8500 in & he has $1500 right? If he wants to be a 50/50 partner & get serious about business then he needs to ante up to a 50/50 investment. In this example he needs to give you $3500 to bring you two to an equal $5000 dollar investment. He needs to "buy in" to the company as a partner, right now he should be viewed as help.

There will be problems later though too. There will be times when you see that you need to advertise to continue to grow. Maybe the ad you want to run costs $200 a month. But he's not as good with money so he's personally broke & doesn't want to give up his half of that expense. So now you either A) don't run it & don't grow. Or B) you pay the whole expense yourself.
If you choose (A) your stagnant & he's holding you back. If you choose (B) & gain 5 new clients from that ad at say $100/month each
(a total of $500/month) Does he get an equal $250 of that? You wouldn't have that business if not for you right? He didn't put in so what do you do now? If you cut him out he'll be pissed! IF you pay him equally then he just learned that he no longer needs to put in the money,effort, time, etc. because your going to do it all anyway & he can just sit back & collect.
Not really a partnership now is it? Drop him him off now now before you get off the ground, cause by then your choices are drop him from way up there & watch him fall, or crash & burn with him.
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  #7  
Old 03-11-2009, 09:14 PM
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Originally Posted by musician/lawnman View Post
There will be times when you see that you need to advertise to continue to grow. Maybe the ad you want to run costs $200 a month. But he's not as good with money so he's personally broke & doesn't want to give up his half of that expense. So now you either A) don't run it & don't grow. Or B) you pay the whole expense yourself.
If you choose (A) your stagnant & he's holding you back. If you choose (B) & gain 5 new clients from that ad at say $100/month each
(a total of $500/month) Does he get an equal $250 of that? You wouldn't have that business if not for you right? He didn't put in so what do you do now? If you cut him out he'll be pissed! IF you pay him equally then he just learned that he no longer needs to put in the money,effort, time, etc. because your going to do it all anyway & he can just sit back & collect.

Ahhh, very good example of what could happen. Like I said originally, both "partners" deserve the same rate of return on their investment. Invest little, reap little.

I have been told that anythign with 2 heads is a freak and is dead already. You and I both know that if you are partners you will disagree and both of you think the other should see it your way. That is what I mean by having 2 heads.

I agree with everyone else, go it alone. You may upset him now but he won't be as upset as he would be later when you cut him out of the profits that he did not help earn.
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Old 03-11-2009, 11:02 PM
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This post brings up many good points.

It is fascinating how often we as people when just getting started in the business world, don't want to go out on our own. We figure if we can get a friend to go along with us, that is great, as long as we aren't doing it alone.

It's like a reaffirmation. If my friend feels we can do it, then maybe we can do it!

So I think that is why many new businesses get started like that, especially when you are in your teens.
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Old 03-12-2009, 04:09 AM
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Quote:
Originally Posted by Steve View Post
This post brings up many good points.

It is fascinating how often we as people when just getting started in the business world, don't want to go out on our own. We figure if we can get a friend to go along with us, that is great, as long as we aren't doing it alone.

It's like a reaffirmation. If my friend feels we can do it, then maybe we can do it!

So I think that is why many new businesses get started like that, especially when you are in your teens.
I thought about this thread yesterday driving back from an auction, I am a go it alone person, I think due to 18 years of banking and seeing issues with just about every partnership that came across my desk, only one person can drive the ship, doesn't mean you can't have a great first mate to help you.

I was taking the garbage out a week or so ago, a neighbour was out walking his dog, he stopped and we talked, he loves tractors and wanted to see the new unit, Jack is a super guy but when it comes to machinery he just doesn't have what it takes however he has the best looking property in our subdivision. He asked who would be doing our landscape design as he is retiring next year and has been thinking of offering this service and starting a business, I explained we would contract this out until we are big enough, he suggested we partner, I said yes however you start your own company and we will sub to you or if you are doing a job sub to us. He would have rather joined our company however I know that motivation comes when you have to push yourself to bring in the business and I do not want/need a partner other than my son as we have workied together since he was 12 and it always worked great.
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Old 03-12-2009, 07:25 PM
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Default Great help

Thank you for all the reply's. I am very surprised with the number of interest in this post. Every reply has some very valueable information. I think i am going to take the advise and try to go solo. It seems that everybody that has some business experience knows that you are digging yourself in a hole if you try to make it a partnership.

The only thing is that im in highschool and play football and basketball. I am pretty busy in the summer, but for the most part i think i can do it myself. I plan on getting 10 to 15 houses. If that means i have to work on Sat + Sun i will do that. However, i do have 2 adays for football and have team camps for basketball which will be very tireing and it would be stressful to balance both. I have an older brother who said he would help me when ever i needed it and i also have a brother-in-law who also said he would help, also. Besides who doesnt need some extra money with the economy the way it is? I dont want to get in over my head, but i do think i have the resources to do it.

I think i will print off some flyers with my name and number and if i need some help, i think it would be very easy to find someone. However, the hard part is, how do i tell my friend i dont need him anymore? We already had 3 of his neighbors lined up and already had a mulch job in his neighborhood. I would feel bad leaving him because this would be his summer job, but i think it would be for the better.

Any help would be appreciated, Thanks for all the help, Pat
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