BiggerPockets

I had a partnership that didn't work out because we all had competing goals. It really didn't get ugly, but it would have served us all well to talk about our goals before spending so much energy building a partnership that didn't work out.

No....they were too different. I have the financial stability to want to invest for the long term and hold money made for long-term gain of the company. The other guys in the partnership needed to eat on the money we made while adding significant value to the business. The partnership really would not have worked without all of us being engaged and ultimately the lack of clarity on how to invest retained earnings was our undoing.

We had very precise agreements drawn up prior to starting the business and it was very successful for about 6 months or so. If people aren't forthcoming about their goals up front though it doesn't matter what the partnership says. People will stop producing and doing work if it doesn't serve their needs at the time.

No...we didn't Vikram. Those are lessons learned from guys that were all trying to do the right thing. When we were bootstrapping there really wasn't enough money for everyone to take a salary fat enough to sustain their lifestyle though. Perhaps with more starting capital this could have worked well, but in the throws of the credit crisis it was hard for that to be an option.

9 out of 10 businesses fail because they are under-capitalized. I really think this was the root cause of our problem because what you have described was not possible with our capitalization.

The business generated pretty good profit for about 6 months or so. Fundamentally, the business model had flaws though and we didn't have enough cash to sustain our lifestyle and work through the flaws to make it viable long term. Sufficient capital and margins allow for you to screw stuff up for a while to get it right. I guess we just didn't have enough reserve to make that happen.

We also made the decision at the beginning of the business not to take on debt capital so that constraint tied our hands a bit for expansion. Equity capital would have been welcome, but the track record wasn't sufficient to procure angel funding or anything else when it was needed.

The partnership was a great learning experience and we did make some decent money, but ultimately the capital wasn't sufficient to let us screw it up long enough to get it right and viable for the long term. Competing partnership interests were a big drain on cash too, which made our margin for error on spending capital smaller.

Holy cow, Don, it sounds like a script for a movie. You might anticipate something like this with a new partner, but not one you've done prior deals with.

I bought a short sales course and began to seek people to pick their brains. I ran across a guy who was a loss mitigator and we had an idea for a business. He sold me on building 2 websites (I'm a web developer) for him and he would split the profits. what was my mistake. I HAD NO AGREEMENT!

So when I pushed for an agreement, he cut me loose and took all of my work. There is more to the story, but the bottom line is to trust and get a freaking agreement. I lost alot of time with that bozo.

Don't worry so much about your self- esteem. Worry more about your character. Integrity is its own reward.
~ Laura Schlessinger

Don't trust people you meet at guru boot camps!

Friends to enemies to friends again. I'm sure some of you have been in this situation at some point in your REI career. The last deal I did. I purchased a property that was vacant for a few years which happend to be accross the street from my best friends of 30years, house. Husband and wife. You know that feeling you get when you come accross a deal you know is to good to pass up. There is money to be made and tunnel vision sets in. As an ex realtor from FL now in Pa. where the prop is. I did my DueDili and went for it. Knowing my friends would help rehabbing. There idea to partner up. My money there help.
You know where this is going already Im sure.
Not knowing the local area. I learned the hard way that he and I would be doing most of the work. We are the fixerupper types that enjoy the challenge. After interviewing over 20 different subs. Roofer, plumbers and electricians and other scum bags that after finding out you are flipping the property think you are full of cash and highball the job. After literally tossing several of them off the property knowing full well what a job should cost. We decided to handle more of the work ourselves. Note to beginners! Do not tell someone you hire to do work for you that the prop is a flip! Unless you have worked with them before and they know what you do. Good help is hard to find.
After close to 8 months of work due to weather. Snow! who knew, right? I did by owner for a bit being an ex realtor. Lack of exposure. I finally listed and sold. Made close to 30% roi. Now pay day comes. I gave my friends 1/3 of the profits. Key word Profits! Which was agreed upon orginally. Invested my money and my full time to there part time help. They have full time jobs. Some how she(friends wife) got in here head a fixed amount of money which was double the amount I paid them. If the property sold for what I had originally hoped for, than yes. I could and would be happy to have paid them. She couldn't get it out of her head a fixed amount. Which at that point would be most of the profits. Her time was more valuable than mine. In her mind. He understood and tried to explain to her. She would not let it go. This caused close to 6months of seperation of our friendship which I thought would never happen. Who is really at fault? In my opinion. Me for not clarifying the obvious. No matter what you think is true. Someone else will see it differently. Before entering something with friends. Make sure they understand A+B=C. Happy Ending? Maybe. After some time she admitted to having a fixed number in her head and couldn't let it go. Back to being friends again like nothing happend. No apology from her to this day. Am I asking to much? Live and learn.

So your friend took over 60 hours to put in some switches and light fixtures for 3,000??

That is highway robbery!! You can rewire a whole house down to the main connection faster than that.

I can also tell you from my restaurant builds when I owned my pizza place.NEVER leave your check book anywhere on the premises or open the check book when discussing payments or fees for a job.They will look for how much you have (balance) and try to justify that much for a bill to milk you dry.

Have a clause where if the work isn't completed up to standard and passes inspection and certification within a certain time frame for each day past the date so much is taken off the job price.

This will keep them from being hot on your job and then jumping to a bigger job they land in the middle of yours.Having the inspection requirements and certifications makes sure they can't just slam in a junk job to finish it.

I believe having a GC on site is critical to make sure jobs are completed right so you don't lose time tracking them back down to redo something or touch it up.

On the partnership thing people even if on the same page starting out change down the line.

You might all start out with the same goals but then want to take the business 2 different directions for a growth strategy.

So talking upfront helps but will not solve all partnership changes down the line.

My experience has been friends and family will burn you more than anything else.When you are business partners everything is based on the performance of the agreement.When you are best friends it's hard to remain objective and not be sympathetic to their problems.This often times puts the business especially at start up at a systemic risk for failure.

Having family in management positions in the past really put me in a bad situation (restaurant business) .Had to make tough choices and never will do that again.Family is fine today but learned from that one.

what happened to this thread?? i wanna hear more stories..

BUMP!!