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HELP! I Had To Takeover My Fathers Company,financial Problems.

 
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Old 06-20-2015, 07:11 PM   #1
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HELP! I Had To Takeover My Fathers Company,financial Problems.


Good Evening Contractor Talk,

As of today I have been forced to takeover my fathers residential homebuilding company because of multiple financial problems involving personal and business accounts.

Long story short my dad is loosing his eyesight due to health problems and allowed his business to reach the tipping point of failure. To keep it afloat my mother has had to put a substantial amount of her IRA into the business to pay sub-contractors and expenses to keep construction funds coming and the business afloat.

Currently we use a private lender to fund our projects(currently 2-4 homes) but the relationship is strained right now because of slowed progress of construction(father not handling the business correctly) and cost ballooning out of control. My father is a great builder but not an accountant. He basically keep track of payments to subs in his head and hoped they wouldn't take advantage of him. Also up until around 1 year ago my mother was doing the accounting work(had prior experience as an accountant) but can no longer take the stress of it and is taking a toll on the marriage.

To keep it brief I have listed the current problems we are facing in hopes of some guidance.
1. Private lender is extremely reluctant to continue with releases because of slow construction progress. This is due in part to a horrendous Mass. winter and an insulation sub botching 2 houses and having to pay for it to be fixed and wait for insurance reimbursement.

2. Insurance company us dragging their feet paying valid claim for improper insulation costs. Currently we are owed $230,000 from the insurance company

3. Very little money in the business account, we barely have enough to continue building and move on with the project until releases happen.

4. No system for for keeping track of payments to subcontractors or keeping costs in line with agreed scopes of work and PO's with suppliers.

I'm an only 24 years old and have very little experience in construction(sales rep for modular building company and former enterprise sales rep for Proj. Mgt. software company.)

My plans so far are as follows
1. Gather as much information about each lot/project and make a "punch list" about what is stopping progress to get a sense of the overall phase of construction for each.

2. Somehow negotiate with lender to even do partial releases to keep sub contractors paid and progress moving forward.

3. Once release happen(hopefully) hire a CPA/Accountant to take a look at the financials to get a grasp of his bad the situation is and help with future projects.

4. Hold subcontractors to a signed scope of work signed and agreed upon by both parties with quote numbers as well. No more on the fly change orders and double pays.

I know i am providing this forum with very basic information but it is all i have right now. I need to at least take a shot at turning this company around to keep my parents from going company broke and bankrupt.

Any insight is greatly appreciated. Thanks
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Old 06-20-2015, 07:15 PM   #2
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Re: HELP! I Had To Takeover My Fathers Company,financial Problems.


Run!

I'll come back later with a proper reply but you don't have the wherewithal to fix this.

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Old 06-20-2015, 08:35 PM   #3
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Re: HELP! I Had To Takeover My Fathers Company,financial Problems.


I would suggest on Monday morning hiring a CPA at 8 am and give him what you have to determine if the company is solvent.
If it isn't then BK may have to take place.
Like the other poster said, we do not think you have the experience or background at your age to turn it around.
Now it it is solvent then you may be able to continue and try to sell the business.
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Old 06-20-2015, 08:55 PM   #4
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Re: HELP! I Had To Takeover My Fathers Company,financial Problems.


In line with leaving no stone unturned,
http://www.google.com/search?client=...UTF-8&oe=UTF-8
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Old 06-20-2015, 08:57 PM   #5
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Re: HELP! I Had To Takeover My Fathers Company,financial Problems.


With the grammar and the way he wrote the post I am guessing that he has the brains to pull his family out of this problem. He appears to be intelligent, determined and that is a plus.

I would not waste money on an accountant or CPA at this time. Calculating your financial condition and knowing whether or not you can pull yourself out depends totally on you. Your father should be able to assist you. Figure out your father's strength, the strength of each employee and sub and learn to utilize each person to their fullest.

Have a meeting with your subs, customers and bank and get everyone hyped to work as a team.

Look at the book keeping and the software in the links below for some ideas. You don't need fancy spread sheets nor fancy accounting systems. Make a list with money due for each job, money you need to spend to finish the jobs and calculate the profit or loss.

Let your customers, bankers, subs and workers know that you are trying hard to put things back together

Lots of Luck!!!
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Old 06-20-2015, 09:45 PM   #6
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Re: HELP! I Had To Takeover My Fathers Company,financial Problems.


Thank you for the replies everyone, I appreciate the confidence some of you have in me and the honesty others are replying with.

I had an extremely frank conversation with my father today for him to gather a much information as possible about the business and his projects so we can develop an aggressive plan moving forward and he seemed on board.

Some of you suggested having a meeting with the subcontractors and that is an excellent idea. I would DEMAND from the subs proper documentation like W-9's, Quotes, Invoices etc. If they cannot provide that information or refuse to provide it they will be terminated.

Currently my dad has a real estate broker who has been helping him with the day to day tasks and a subcontractor who has been helping with the foreman responsibilities. So there are some trustworthy people he is working with, but i have no problem sacrificing a "scared cow" for the sake of my parents/business well being.

I would like to avoid BK at all costs, the business only took a down turn in the past year or so and before that was fairly profitable and producing very high quality homes on the high end market(600k-1.4 million range).

One of my biggest plans once the business got some cash flow was to bring it into the 21st century in terms of booking and PM software. I was a sales rep for Newforma realize the effectiveness of software in the construction management field.

It seems the idea of hiring an accountant or CPA is debatable. I will most likely at least get in contact a few and explain the situation and see if they can of service at least for the time being.

I will update this thread as I get more information(most likely tomorrow or monday morning) and hopefully make progress in turning this business around. Any advice good,bad or indifferent is still appreciated and can most likely help anyone else in a similar situation.

Thank you Contractor Talk
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Old 06-20-2015, 10:12 PM   #7
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Re: HELP! I Had To Takeover My Fathers Company,financial Problems.


Send a registered letter to the insurance company stating their failure to pay the claims has created a financial hardship a.d further delays will result in business failure. Get a lawyer to draft the exact la.guage.
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Old 06-20-2015, 10:37 PM   #8
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Re: HELP! I Had To Takeover My Fathers Company,financial Problems.


Key Question. Are the homes sold? Can you sell one with the sheathing, windows, doors and roof on? A dry build out to a homeowner or another contractor? You only need you, not a cpa. get him when you have money in the bank. Stay completely focused. No personal time, just work. You need cash....Don't let your ego get in the way, try to find a buyer. Number one, top of the to-do list.... if the guy holding the money can stop you or take something back from you which in turn will keep you from completion, you need to meet with him two to three times a week. You need to show him every time you move forward. Also, cut you subs in on the deal. Give them a bonus. A small percentage in addition to the money you owe them. They will do this in excahnge for billing you labor only until sold. These ideas may not be the answer for you, but I want you to realize that you make the rules and learn to think outside the box. You need to be on those jobs EVERYDAY. You will be fine if you stay in the game to win.

One more thing. Fire that real estate agent Monday and you are now the foreman. You need new subs on the next one.

Last edited by trussme; 06-20-2015 at 10:41 PM.
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Old 06-21-2015, 12:21 AM   #9
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Re: HELP! I Had To Takeover My Fathers Company,financial Problems.


what if the new guys gets hard with the current subs (if they are good) and they walk. same goes for firing them all. Will the new guy have the resources/connections to bring in new subs? If they're honest and can be redirected, this may be the better choice.
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Old 06-21-2015, 02:14 AM   #10
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Re: HELP! I Had To Takeover My Fathers Company,financial Problems.


Find out the status of your parents' taxes - both personal and business. Troubled businesses often have large tax delinquencies.
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Old 06-21-2015, 02:40 AM   #11
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Re: HELP! I Had To Takeover My Fathers Company,financial Problems.


....
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Last edited by CarpenterSFO; 06-21-2015 at 02:42 AM. Reason: Double post
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Old 06-21-2015, 03:42 AM   #12
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Re: HELP! I Had To Takeover My Fathers Company,financial Problems.


I agree, your in analyzing and stabilization mode. You don't yet have all the information.

The situation is affecting many lives, family input is a priority, know who is onboard with your plans to turn the ship around. I wish you well.
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Old 06-21-2015, 08:46 AM   #13
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Re: HELP! I Had To Takeover My Fathers Company,financial Problems.


Business basic - there is only one cardinal sin in business - running out of money, whether it's from cash on hand, assets you can sell, lines of credit,...

1) Take control of the finances.

2) Be a tightwad about committing to future expenditures.

3) Aggressively pursue collecting any money you're owed.

4) Get some free help from a place like this:

https://www.score.org/chapters-map

5) Someone has to dig through the books and figure out assets, liabilities, tax exposure, licensing status, etc.

6) Get your financial systems in place.

The biggest problem is all this needs to happen ASAP - it isn't a one or two person job. You can use all the free help you can get your hands on, but paying for help has to be very closely controlled. Paying for a lawyer to draft a letter to get the insurance payout faster is money well spent - it's intended to set the insurance company up for punitive damages in the event they oay slow and the company goes under.
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Old 06-21-2015, 11:31 AM   #14
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Re: HELP! I Had To Takeover My Fathers Company,financial Problems.


If the insurance is in fact going to pay out to you, and you have a letter stating such, bring that letter to the bank, borrow against it. Then get an accountant.......you need money first.
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Old 06-21-2015, 01:57 PM   #15
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Re: HELP! I Had To Takeover My Fathers Company,financial Problems.


What part of mass?

Is there profit in the completed houses?

If yes then you should look for a builder/gc in your area to partner with you, or take over the project.
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Old 06-21-2015, 05:56 PM   #16
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Re: HELP! I Had To Takeover My Fathers Company,financial Problems.


interesting to say the least

I got a couple thoughts and questions

why? whats in it for you, why not walk away and consider it a loss, happens all the time in business of all types

this is what happens when you do things the old school way, as awesome and good ole boy as it sounds a handshake, scrap paper, and being buddys with everyone gets you no where and this is the worst case end result

there is no quickbooks?

this sounds very october 2008 to me, endless people went down this way

I have x amount due to me right now, but that doesn't mean jack, you either have money or not

good for you for stepping up, anyone can step up and there is a 50% chance you can right the ship, failure is big in this business, success is not, the list of speculators where I live is huge and most of them have failed and packed up and left town, some new to start building again in 2010 and 2011 people thought they were crazy but that was a smart decision
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Old 06-21-2015, 08:44 PM   #17
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Re: HELP! I Had To Takeover My Fathers Company,financial Problems.


Good for you for "manning up" in your parent's situation, 24 is WAY too young to have to deal with this. Yet to hear a better Father's Day gift than pulling the 'ol man's feet out of the fire in his dire time of need...you're obviously a good son. Best of luck!
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Old 06-21-2015, 10:00 PM   #18
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Re: HELP! I Had To Takeover My Fathers Company,financial Problems.


24-years old is not too young. The younger you are the better. It is the old fools who you can't teach a damn thing to.

I started my first business (technically) when I was about 11 years old. I joined the Air Force in 1968 when I was 18, started a house painting business when I was in the Air Force and had 8 painters working for me.

I started my current business when I was 22 year old. Every time I talked to someone about starting my business every person told me I was too young, the market was too saturated, the economy was bad and I would never make it. I blew everyone's mind when I was making $15,000 per week only a few months after starting my business. During my 2nd year in business I purchased 6 homes and paid cash. Of course, homes were only about $47,000 back then.


If you listen to people who tell you that you can't do something then you can't. The way the mind works is very strange. I believe there are followers, leaders and people who figure out how to get the job done regardless of the hurdles. There are workers you give tasks to and they never get the tasks done and there are people who are truly amazing. You give these amazing people tasks that you think are impossible to get done within a time limit and these people blow your mind every time.

One of the most important characteristics a person needs is 'focus'. Too many people are surrounded by so much negativity and interference they can't focus. For myself, focus means seeing the path you need to take very clearly. Many people know what they have to do to get to their destination and when they lose focus is when they allow negativity and interference to stop them from doing what they have to do. When a person knows what they have to do and they are focused then they become like a bulldozer running over cars to get to its destination and nothing stops the bulldozer until it gets there. I am a bulldozer!

Put another way. Weenies give you millions of varying reasons why 'they' could not and cannot accomplish tasks while people who are focused are succeeding with accomplishing those same tasks.

I don't know the situation in this thread. There is possibly many problems that can't be fixed, but even if you don't fix the problems and go bankrupt the worse thing you can do to yourself is to be a quitter before you know whether or not you can fix it and if you think you cannot fix it before you start then you cannot fix it.

In the Star Wars movie the parts about 'focus' have a lot of true meaning.
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Old 06-22-2015, 07:02 AM   #19
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Re: HELP! I Had To Takeover My Fathers Company,financial Problems.


Quote:
Originally Posted by CarpenterSFO View Post
Find out the status of your parents' taxes - both personal and business. Troubled businesses often have large tax delinquencies.
That's typically the bullet that forces them into receivership.
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Old 06-22-2015, 08:06 AM   #20
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Re: HELP! I Had To Takeover My Fathers Company,financial Problems.


Someone once told me that the difference between rich people in business and poor people in business is that the poor business man believes in doing everything he can to bail out his failing business before going down with the ship. The rich business man gets off of the ship the moment that he knows that it's failing. He saves himself and starts another business before the ship sinks.

It may not sound like the most noble thing to do or the most responsible way to handle your situation but people do it so they can live to fight another day. As someone stated earlier, you have to determine how and if there is any solvency in your situation. Unless you have an investor with deep pockets who sees the the potential in your family's business, then maybe it can be saved. But overall I think you are likely to do more damage attempting to right a upside down ship that's sinking.

So at this point, knowing now what I wish I had known 10 years ago when I was in a similar situation, I'd make sure that the subs that are still owed get paid, the projects that are incomplete get completed, and then I would start liquidating the assets, closing out the books and shutting down the operation.

You can always rebuild another business. But it's much harder to rebuild your life and personal relationships if a failing business is taking a toll on your family.

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