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I am small residential remodeler and also a licensed professional civil engineer. A friend of mine also has his own construction/remodeling company. Bigger than me but still fairly small. To help with the labor shortage we are considering “sharing the wealth” and starting to do more projects together. I would like to stay as two separate companies and work as sub-contractors to each other. I know we would have to do a number of projects on our own or for others to still be classified as subs. Is this a good idea? Are we better off merging and forming one company? The catch of course is when in comes to distributing the “real wealth”, money. I would like to pay each other an hourly wage while working in site and come up with a fair distribution of profit at the end of job based on whose lead it was, estimating time, tools, amount of time on site, etc. Any ideas or thoughts would be appreciated. Thanks
Dave
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Creature-Wish we could have a cup of coffee together. I was in a partnership for 8 years. It could have been great, but it seems the inevitable differences of opinion on how to run the business, what jobs to take, effort and/or hours expended by each individual verses compensation on and on and on. Eventually the stress of the partnership greatly exceeded the stress of the jobs and I bowed out. Because I was the partner who wanted out I took a big beating in recieving my fair share of the value.
In short I have seen scores of partnerships fail(most with hard feelings) and only a handful survive. Ours was one of the longest lasting. One partnership I know of lasted 40 yrs. It only ended when the partners retired. There were three of them. all they did was frame new homes. they had aformula worked out based on time spent on the job. One partner did the books for 10% off the top and they divided the rest equally based on time spent on the job. they usually worked for 2-3 builders so they weren't selling jobs to the general public.
My vote(for what it's worth) goes to subbing out to each other based on who sells the job. That way you guys have a better chance of keeping your friendship if working together doesn't work out.
By the way, that successful partnership was two brothers and a brother-in-law(talk about beating the odds!) John
*John:Thanks for the response. You addressed some of the problems Ive been going back and forth on. Im more for the sub route than the merger for many of the reasons you cited. In my civil engineering side of life I work for my dad, and that can be trying enough at times!! Great day for coffee here...rainy and mid-fifties. Hope you had a good day.
*Dave,I have a general "sub " agreement with several freinds who are also contractors. Who ever sells the job runs it & that's who every one works for. I have subs that work for me on regular basis & I also share them. Having been in 2 partnerships that didn't work i find this the best way.
*Hi Dave,Like to add my two cents worth,Self employed tradesmen are by nature independent beast and generally become self employed, in the first place, due to disatisfaction working under someone else.Partnerships are like marriages, easy to get into and expensive to get out of if it doesn't work out.Arms lenght, working arrangements between subs or contractors, allow you to maintain your identity without sacrifices.At the end of the project, you both decide if you do another, and you both have the opportunity to re-write the rules to suit the new job.A partnership, is very, very binding for a long time. Just equate to couples living together and not being married. They sometimes get along better that way because the have to maintain a healthy respect for the other, knowing that they can leave at any time.Food for thought,Gabe
*Thanks again guys...everyone is expressing my same thoughts...just helps to hear it from someone else now and then.
*Dave: I'll chime in for subbing as well. Who ever sells the job is the general and the other guy puts in a bid like any other sub. And if it's not competitive, the GC uses another sub on that job, no hard feelings. Now because of your history with each other and a desire to keep getting and giving work to each other, you will each give more honest (as opposed to best case) bids, do good work, etc. Wouldn't it be great to have a sub you had a great long-term relationship with? And a GC that valued your work as a sub? Leave it at that. A "fair distribution of profit" is hard to acheive. The perception of it even harder to maintain. Let the marketplace determine the sub's bid. Verbal feedback or the occasional use of other subs keeps those bids on track. -David (owner-builder and Civil PE)
*We all have seen few partnerships work out for a variety of reasons, and yet, the idea still holds great appeal to me, in much the same way marriage does. The key for me would be finding the right partner. Someone whose strengths complimented mine, and visa-versa. I still think (after 2 disolved partnerships) that having someone to share the toil and rewards with, to bounce ideas off of regularly, and just to work and laugh with every day would be great. Now, how to identify that person?Creature - if you think you have found the right guy - give it a try. I really believe that, like a good marriage, a good partnership could be a real treasure. - yb