Re: Advice
Originally posted by GG:
I said sounds great but where are you going to get all the work to pay for all these things you think we will need. He just keeps saying he will get us the work. ... Do you think it is worth the risk to see if he can bring in the work?
I can get more work for you than you can do. You'll have to hire 8 men to keep up with me. All I have to do is always be the low bid on all of the projects that I bid for you. Of course, that doesn't mean you can do the work for "our" bid price (Partner).
When you do your own work, if you bid a small project too low, you just work for less per hour. You hardly ever actually take money out of your own pocket to complete the work (and if you do, it's usually a small amount).
When you grow to the point that you are having other men do the work for you, you can actually take money out of your pocket to complete a project if it is bid too low. Sometimes, you have to take a LOT of money out of your own pocket to complete a project.
If you have someone else "bringing in the work for you", unless it is hourly rate billable service calls, then it will be by bids. That's a great way to go broke very quickly. How many jobs can you afford to do when you have to spend your own money to complete them?
In the mean time, until the music stops, I can run up some really enormous debts for you "Partner". I can even prolong the music by doing some creative accounting, charging costs for older jobs to new projects to make the older jobs look profitable. If I just keep doing this and keep adding new projects fast enough, I can play this game (cost shifting) a long time. I can live the high-life on your credit and buy and hide a lot of nifty stuff where you will never find it -- or sell it and keep the cash where it can't be found.
Another ploy -- Your partner does some small projects on the side (that you don't know about), gets paid for them, and keeps the money. But he charges all of the materials and other costs to your account, charging it to jobs that you do know about.
I've seen these very things happen several times to contractors that I know and have done work for. I could add a number of other ploys and schemes that I have seen, too, but you get the idea and I don't want to give anyone more or better ideas (not that I think any of you guys would do things like this).
When the music stops, you are the one still left standing in the middle of the dance floor, stuck with paying all of the bills.
Stay small and control your costs until you really understand the contracting business and until you have built up a good chunk of capital. Don't grow faster than your education or your capital. Be sure you understand the risks and how to control them before you grow larger and have to depend on employees completing projects within budget. Failing to do this is the second most common reason that most small contractors go broke (the first reason is doing the work, and then not getting paid, on a project that's too large for you to absorb within your capital -- you're almost instantly broke, maybe even deeply in debt!)
Petersonra said:
"By the way, NEVER casually refer to someone as a partner, either verbally or in writing, unless you actually have a written partnership arrangement. I once heard a story about a GC in this area who who?used that word to describe what were actually his subs. One of the subs went south and a lumber yard was able to convince a judge the GC was liable for the purchases of his "partner" that the sub had not paid for. As I heard it, this included projects the GC was not even involved in."
I agree!!! That's why I said it is very easy to unintentionally become someone's "Partner". You can then get stuck with his debts, even if you didn't have anything to do with them. Even if you eventually win in court, your legal costs and time lost fighting it can be staggering. NEVER call anyone your "Partner".
This is no joke -- I've seen this happen several different times.
, a few beers and the kids all making a joyous racket. 
