Starting a small business/how much?

[Anonymous Poster]

I have a cousin who does not have the best job in the world,and I was wanting to help him out...I was thinking about a little lawn care work and I would buy a pickup/trailer mower/ I would buy the insurance and pay for the up keep/fuel etc...now if I make the investment leave it up to him to find the work and do the work(though I could help him if in a bind etc)...what would be a fair amount to compensate him?He is very reliable and trustworthy,not to menion a hard worker,I would trust him with anything of mine(and that means a lot when doing business) Would 50/50 be too generous? I want to make it worth his time and mind as well.Any suggestions/comments?

Thanks

 

[rdln]

Will you adopt me?

Seriously, its sounds like he needs to put some monetary risk in the business too.

Let him buy the Mower/trimmer/blower
and you buy the truck/trailer, that way if things go south your assets will sell quicker.

Or maybe he can get a part time job mowing first to make sure he feels like it is not another bad job.

Known people that have been there/done that.

 

[Anonymous Poster]

</font><font color="blue" class="small">( Will you adopt me )</font> /forums/images/graemlins/grin.gif I kinda of typed the original post quickly and wondered who would be the 1st one to say something like that....now I know. That probably would be pretty generous, although$5000 or $6000 would not set me back too much if it did end up a disaster....he has done a lot of lawn care work...he just needs some support to help him build some equity and confidence....

 

[Gary_in_Indiana]

Years ago I had an arrangement with someone regarding a business which might work for you. I'd been using a particular body shop and, while I liked the guys working there and their work I had problems dealing with the owner. I made a deal with the guy who was running the shop and here are the basics.

I set up a small business corporation (subchapter S) and gave him 1/2 of the issued stock shares and kept the other half. I bought all of the equipment personally then leased it to the corporation. The business paid me on those leases and the manager ran the show. He was salaried at about what he'd been making before.

My goal was a little different than yours in that I wanted to be able to get my work done from my other business but the principles still apply. Your goal is just to help this guy out and that's fine.

At the end of the year we would tally up where we were and decide what we might want to buy for the shop, how much we wanted to keep as operating capital, etc., then divide the rest. His incentive was to maximize profits as they were half his. Anything we bought for the shop was half his, etc., and, at the end of the terms on the finance leases on the capital equipment that was half his as well.

That way he built equity and so did I. He participated in profits and so did I. Eventually, he bought me out and had his own business. The plus I see in a situation like this for you is that he'll have earned the business and not had it given to him.

Good luck with whatever you decide. I hope this helps. /forums/images/graemlins/smile.gif

 

[MarkV]

Steel Wheels,

I kind of agree that it is important for your cousin to assume some of the financial risk if you want him to become an independent businessman. When you start out in a new business it is real easy to get into the "I'll do that tomorrow", unless you have to pay the bills for the equipment you have to have. Just ask any of us that have gone through many employees we just could not get motivated. I have tried better salaries, more employees at lower salaries, profit sharing, bonuses, and after 20 years still expect a new forest fire to put out every week. It takes a lot of time to start a client base and those first few years can be a killer. It's is a sad statement of the times but for the most part if it isn't your money that’s on the line you just don't go that extra mile to make things happen. Lawn care is a very competitive business, at least in my area, and it takes a real self-motivated person to get it started and make it profitable. I mean no disrespect but most self-motivated people find their way out of lousy jobs pretty fast by them selves. A little financial responsibility can add a lot of motivation.

By the way I think your wanting to give him a hand toward a better life says volumes about you.

MarkV

 

[Anonymous Poster]

Thanks Gary?Mark..everyone for the info,I have had aspirations myself to run a business as well and I thought maybe this would give us both a chance to try,I have a good job and have had one for 22 years I have always thought I would like to do something like this,but right now I am just thinking.....I have only been on this forum for a few weeks and I wonder how I ever got along without it.. /forums/images/graemlins/cool.gif

 

[Anonymous Poster]

The first and most important piece of equipment you NEED is a corporation. It will protect you personally from liability, and believe me, there is plenty of liability to go around in today's world.
Without that level of protection, you are setting yourself up to loose far more than your planned investment.

 

[Anonymous Poster]

I think it is great that you want to help, I agree that it says a lot about you. I would like to pass along the advice my father gave to me.

Five months ago I was forced out of my main occupation. My brother and I have had a part time landscaping business for five years and I decided this was my chance to try it full time.

In the past we shared the work, expenses and profits. Now there was to be a different formula - I would work more, use the equipment (that we purchased together) more, etc. I was unsure how to keep track of everything and make it fair for both of us.

Instead of telling me how split everything my dad told me this: Money can come between anyone. Money can come between a man and woman who share the same bed, money can come between life long friends and it can come between brothers, and the damage it can do is sometimes never undone.

My brother and I had a long talk one night in the woodshop and I told him I now wanted to make a living off what we had built together. At the end of the night we had filled in the blanks of how, when and how much. But most importantly, we agreed to speak up at the first moment either of us felt uneasy about the money situation. So far this is working well because we both know exactly what to expect from each other.

If you have never been in the lawn service business heed this: It is not easy money, but it can be good money. However, the guy on the seat who is sweating in 95-degree heat, running through spider webs with grass clipping stuck to every part of his body, while constantly being bitten by everything that bites will at some point ask himself "why am I doing this?" My answer to myself, while mowing 100+ acres a month, was that it paid some bills and would one day lead to something bigger and better - It has. &#61514;

I know this is a long thread and I am not sure if it helps at all but I hope it does. Good luck to you.

 

[Gomez]

Agreeing with what others have posted here, I recently formed my own S-corp. Depending on the state, the costs can vary. In PA, I paid $545 thru an online business service (bizfilings.com). I think Delaware has the lowest cost for incorporating. One thing you may want to look into is forming an LLP (Limited Liability Partnership, and work your cousin into it. This will help protect your personal assets, and give him some additional ownership.

As far as fair compensation, I would say whatever others in his position in your area are getting, less a bit for bank rolling
him.

Also, look into the cost of insurance. I consider myself lucky in that I only needed liabilty insurance. As it turned out, I got the liabilty plus some property coverage for $500/yr. I would imagine landscaping would carry quite a bit higher premium than my consulting service company.

Good Luck /forums/images/graemlins/laugh.gif

 

[thcri]

1st thing is an accountant. He can tell you if a corporation or Limited Partnership is best for you.

2nd thing is most business's fail when there is a 50/50 partnership. (kind of like a marriage, someone has to make a final decision in a stale mate whether it is right or wrong. Statistic show that 80% of business's fail when 50/50. You could start out even at 100/0% with incentive's for him to increase. That way the equipment at least if business fails it all comes back to you. Creat goals that are achievable for him that earn him more percentage.

I like Gary In Indiana and Markv's ideas. Incorporate some of them some way. Your friend has to have some risk here also. Pay him on a lower scale with some of the money going to ownership, reward him for bringing in new customers not in stock but wages to make up for the lower upfront wages. That way you retain stock on a longer basis.

Develope a business plan with revenue and expense forecast. Figure out how many customers you can get the first year and how much revenue you can make. Make a list of customers and how much revenue each one will attribute, don't add the numbers up yet. Put that part of the forecast away and then figure out how much money the venture is going to cost you the first year, payments on equipment, maintenance, supplies, wages and advertising. Then bring back out the revenue forecast, add the numbers up and see if you have enough revenue to cover the expenses. If you keep these two sections together you will adjust them and adjust them to make the plan work, you can't do that.

Now I am not an expert in business, some of this is lessons I learned in my business by just luck and by making mistakes.

I honor your decision to help someone out. You will only help him out if this works so make sure you have everything in order. Also put that carrot out there for him so that it is good for both of you but also so that he can reach it.

Murph