Many new entrepreneurs enjoy going into a business with a partner because they fear going it alone. They also want the companionship of another as they travel down this new business adventure path. But with partners, comes problems. Instead of having one boss, now there are two. Inevitably ideals will clash and one’s desires and wants will conflict with what the other desires and wants. Let us look at one new partnership, from the Gopher Lawn Care Business Forum, and see how they deal with their immediate problem of splitting up the income.
One new lawn care business owner wrote “I just started a lawn care business this summer with a friend. We had our first mulching job this past Saturday and each got paid $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 gas money and then I get 2/3 and he gets 1/3? Any suggestions on how to handle this would be appreciated.”
A second business owner said “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, it’s 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.”
A third added “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 then maybe you need to split before you get too deep into this. If he is open to suggestions, ask him how he thinks you need to split it. You may also suggest something along 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 the 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 go separate ways while you are still on speaking terms. Then you can still go fishing together.”
A fourth said “I find it is better to go it alone. I had considered taking on a partner in the beginning. It’s a bad idea especially with friends or family. In the end, you will either be out of business or one will buy the other out and you won’t be on speaking terms when it’s all said and done.
Buy a couple rakes and shovels now. Avoid the aggravation and expense later. Two people are never going to work ‘just as hard’ as each other. It’s never a 50/50 split on money invested, time, effort, drive etc. This will be especially so if he doesn’t have much invested.
Figure out what yours and his percentage of investment is. If you are just hell-bent on trying to make it work, I would figure it out and 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 $8,500 in and he has $1,500 right? If he wants to be a 50/50 partner and get serious about business then he needs to ante up to a 50/50 investment. In this example he needs to give you $3,500 to bring you two to an equal $5,000 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. 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 and doesn’t want to give up his half of that expense. So now you either
- a) don’t run it and don’t grow.
- b) you pay the whole expense yourself.
If you choose (a) you’re stagnant and he’s holding you back. If you choose (b) and 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 and he can just sit back and collect.
Not really a partnership now is it? Drop him off now before you get off the ground, because by then your choices are drop him from way up there and watch him fall, or crash and burn with him.”
Order the book Lawn Care Business Bidding Tips, Upsells, And Disasters To Avoid. today.
Use these lawn care and snow plow estimators for your Android phone.