Business certification question

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hardworkingstiff

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Wilmington, NC
If you did not have certifications would you give up 10% of the sale (on 2 of the 4 certifications) of a job for 5 years to have a partner/employee that brings the certifications?

Person brings in the General Contractor classification: Building, Marine, Fuel distribution and also Electrical. Person wants 10% of electrical and fuel, but lets the building and marine come in with no fees.

Fair or no?

Thanks to all that answer.
 
Re: Business certification question

HWS, That doesn't seem like a good deal. I'd suggest a percent of the profit on those jobs not a percent of the sale.
 
Re: Business certification question

Not a good deal for the business. There shouldn't be a 10% fee based upon sale price. The fee should be a percent of the profit on the sale after the job is complete.
 
Re: Business certification question

HSW -- I'm STRONGLY AGAINST ever taking on a "Partner". Don't even use the word. You can become one just by telling people that you are "partners". In many states it's as bad or worse than getting married, and easier to get into than a common-law marriage.

A partner can fully commit and obligate you to almost anything (even unrelated to your business) -- and you are equally and severally liable for it even if you didn't know about it or even if you told him not to do it. It's a train wreck waiting to happen.

I've spent over 2 years getting a friend of mine through his troubles, liabilities, and debts caused directly by a "Partner". It's cost my friend well over $1,000,000 so far. If he didn't have it to lose, he would have already gone bankrupt. And he's still not out of the woods, as there are still some pending lawsuits.

Also, I think it's asking for trouble to take on jobs where you depend on anyone else's license or certification. If you get into a dispute with them mid-stream, it can shut down a project until you find someone to replace him that has the required certifications.

I've seen businesses literally blackmailed by a guy that held the credentials that were required to perform/complete a contract that was already signed and underway. It cost the business big $$$!

If they're so qualified, why don't they just do this on their own? Why do they need you?

Get the certifications yourself if you want to do that type of work.

If you decide to do this anyway, do it as a corporation or as some other legal vehicle that will protect you from personal bankruptcy if things go sour.

Edited to add:
If they are bringing in the work that they are getting 10% of, what's to keep them from bringing in a bunch of losing work, collect their %, disappearing and leave you holding the bag and paying out of your pocket to complete the work at a loss? I've seen this done and it bankrupted the business and the owner. But the "sales" guy left town with his $ and a big smile!

[ September 22, 2005, 02:14 AM: Message edited by: tx2step ]
 
Re: Business certification question

Thanks tx,

Actually, I'm the one that has the certifications and these people would like me involved in their business. I'm a one man show and over the last couple of years my business has gravitated to nearly 100% involved in projects with these guys. It's somewhat of a quandary. If I say no, there is a real possibility that I start losing very profitable work. If I say yes, I lose my autonomy and have the problems of other owners in a LLC (vs a "partnership").

I'm just looking for a way to have a good income that is not contingent on others running a business (hence trying to get monies out ahead of profits) without handicapping the business model to the point of guaranteeing failure.
 
Re: Business certification question

As an engineer, I don't know the business side of the electrical trade. Before I saw it was you who had the certifications, I was inclined to ask whether the certified person was going to do actual work for the company, in exchange for the fees you described, or was he just going to allow the company to "use" his certifications. From the perspective of the company, that is still the question I would ask.

From your perspective, however, I would suggest that you consider the following philosophical statement. I use it in connection with any job for which I am considering applying, and I use it in connection with giving my clients a fair return for the fees that my company charges them.
I want the company (client) to make more money with my help then they would have made without it, and I want a fair share of the difference. ? Charlie Beck 2005
Click to expand...
 
Re: Business certification question

HWS -- well, that puts a little different light on things.

I've seen problems come from a situation somewhat similar to yours.

The instance that comes immediately to mind was on a project that was a "Joint Venture" (a form of "partnership" between two existing companies).

One (call it company #1) had a high-profit project in their hand that they didn't really want to do. The other (call it company #2) had the capacity and desire to perform the project.

The project was entered into as a JV with company #2 directly managing and performing the work (and also keeping all of the cost records) and company #1 to get a 40% share in the final job profits.

The problem came at the end of the job when Co. #2 told Co. #1 that all of the projected profits had gone down the tubes -- nothing left to share. In looking at the accounting (after the fight to get the detailed cost records), it became clear that Co. #2 had loaded every possible cost into the project (including much of their company overhead, new tools & equipment, etc.).

It was a major mud wrestling contest, but a settlement was finally negotiated just before the lawsuit was actually filed.

When it was all said and done, it took more work for Co. #1 to analyze and settle the contract than it would have taken to actually perform the work itself. Co. #1 barely recovered enough $ to pay for the work it took to settle. They said they wouldn't make that mistake again. They also lost a fairly good friend (company #2) during the process.

HWS - Could you be headed into a similar situation? CYA! YMMV

edited to add: by the way, a JV is just as bad as any other form of "partnership". There were plenty of problems that came from that, too, but I won't go into them now as they don't seem relevant to your situation. Suffice it to say that both companies ended up wishing that they had (together) formed a seperate corporation just to do this project under.

[ September 22, 2005, 11:45 AM: Message edited by: tx2step ]
 
Re: Business certification question

HWS - Good luck and good fortune with this, whatever you decide. :)

If you decide to do it, try to keep the deck stacked in your favor.

I've seen too many instances where greed and opportunity cross paths and the "Good Guy" (you) get's taken advantage of.

I've seen too many good friendships and good business relationships go south when one party takes advantage of the Good Guy's trust. It amazes me how some people are able to warp their ethics and justify (rationalize) their actions when they see the opportunity to make some cash off of another's trust. It just seems to overcome their good judgement.

As usual, an ounce of prevention is worth many pounds of cure.
 
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