What happens when the dream of starting a business with your friend turns into a nightmare when that friend stops doing half the work, doesn’t show up on time and shows no interest in growing the business? It’s time for a split, but if there’s no real agreement in place, how can one do this the right way? One LawnSite member is going through this experience now. Here, he shares his story.
HOPOLB33: Me and a friend started our lawn care company last spring. We have 83 accounts. Last summer, he never showed up on time — always 30 minutes to one hour late. I keep all equipment at my house. I do all the billing and order all the parts and equipment. I also came up with the company name and have designed all our signs, logos and so on. He is terrible with computers. I deal with 90 percent of the customers. He has a laid-back mentality. I gave him the job to rent a skid-steer for snow and he never did it.
I am married with two kids and every day I am thinking of ways to grow, while he lives at home with his mom and doesn’t really have bills. He is a great worker, but that is it.
I am thinking about talking to him about splitting the company, but I am worried he is going to want a buyout because he won’t want to do it on his own. There is no way I will be able to give him enough cash straight up. Any ideas on what I can do?
RedSox4Life: Were each of your responsibilities not discussed before forming the partnership? Sounds like a lot of problems could’ve been avoided. I’d offer him half of fair market value for any assets you have, assume any debt on your own and offer the guy a job as an employee.
hopolb33: No we didn’t discuss responsibility for each of us. I would be fine doing all the computer work and for him to deal with customers or equipment but he doesn’t do things on his own; I have to tell him what to do. And a lot of the time he forgets to do it so I end up doing it.
grassmasterswilson: Probably best to consult an attorney. Buy him out? How is everything recorded and titled? Is his name on anything like the business registration, loans, etc.?
Sounds like you need to part ways but make sure everything is recorded and legal to prevent any backlash from him down the road. Get a noncompete signed also.
hopolb33: I am going to make sure everything is recorded when we separate. The 36-inch mower is in my name and the 60-inch mower is in both of our names (we still owe money on it). Equipment was paid for by the company.
RedSox4Life: Sounds like you don’t have many assets. Your partner might be jumping at the opportunity to get out.
RussellB: Does he know you are about to break the partnership? If not, tell him. It may be enough to get him straightened out. Some people need a push, not the daily, “I am mad because you’re late again,” but a real scare/threat to end it. If it doesn’t help, just do what you think you need to do. Put the onus on him. Sometimes this stuff needs to get deep before you can find your way out. Good luck and keep your cool.
gettingafarmerstan: Seems like the fairest way to split it would be to pay the mower off with the business account and split the rest after all business-related items are paid. It would be best if you could come to an agreement on who gets what accounts so they are all nearest each other. If you can’t come together on that, then you pick one, he picks one and so on until all lawns have been taken. Regardless of who did the most work, you guys are 50/50 partners. Next season, you will feel lighter on your feet and in a better position to move forward and grow.
duemaswalker85: Is his name on anything? Get a lawyer! Also, look out for yourself. Watch your back when it comes to money; he might not be that good of a friend. You can still be nice, but just cover yourself.
hopolb33: Yes, he is an owner. We talked in July and I told him I think I want to go on my own because he was late every day, and he said he’d prefer a buyout. The next few weeks it seemed like he was more motivated so I changed my mind but it slowly went back to normal.
duemaswalker85: That guy is not serious about growing a business. Looks like you’re going to have to pay. Get him gone fast. Before spring.
JLSLLC: Whatever you decide to do, do it quick, like ripping a Band-Aid off.
Malk.Lawncare: If I were in your shoes, I would offer him $5,000 in cash, you take full liability of the debt, and move on. If he is what you say he is, he will jump on that, but get it in writing and have him sign a split agreement.
GRANTSKI: I swear it’s like you took a page out of my diary. Believe me he’s not going to want to split; why would he? You’re doing almost everything and he’s just showing up and collecting the money. The busier you get, all that adds up and if he was doing his part with marketing, etc., you would be getting more accounts. Now you have to work twice as much to pay him the same amount you get? No way. Once I started putting in eight to 10 extra hours a week, that was enough for me. If you try to split the route and stay partners, you will have more headaches when he doesn’t work or bill on schedule.
hopolb33: How did you end it?
GRANTSKI: Well, nothing was in writing. Over the course of our second season, we both got our own setup (truck, trailer, mower, etc.). We split the accounts down the middle. We tried each running our own routes, but he wasn’t staying on schedule or showing up. And he turned on me saying I was ripping him off and that I gave him fewer accounts even though both routes added up to the same weekly income. Also, I decided to buy a plow truck, and he somehow thought that wasn’t OK that I made extra money on my side even though I only broke even on that investment (and it was my profit I spent on the plow). So, of his 15 or so accounts he ended up giving up five willingly after a month. Another five came back to me after he disappeared. The others I’m not sure about. He didn’t last two months on his own. The original plan was to expand and run our own routes, but it went sour very fast.
hopolb33: I talked to him. It went pretty well. He said he just wants me to buy him out. So, do I split the money we have made as a company and then add up all of our equipment and give him half of what we spent on equipment? Also, he said he thinks it is fair that he gets half of the income for first cuts in April only on the properties we had acquired until now.
knox gsl: I would give a depreciated value on the machines. I would take all of your current customers and figure out your estimated gross and net and give him half now. Cut ties and start 2017 as a new man.
sehitchman: Equipment value is what it could be sold for now, and half that. If he insists on half of the original purchase price, sell everything, split the money and do the deal from that point.
JLSLLC: Make a cash offer. Try to keep it real (just to get rid of him) and tell him to take it or leave it. Don’t pay squat/commission in any month in 2017. Shut that down; that’s one of the busier times.
RedSox4Life: Whatever you end up doing, please come back and update us. Your experience can be a good lesson to guys who may go through this in the future.