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Discussion Starter · #1 ·
Just throwing this out there for opinions, insights, overall wisdom. Having grown a business to the point of needing to either hire employees and worry about the quality of work/headaches, or team up with an equally skilled fellow contractor on larger jobs, I chose the latter.

I run as a one man band most of the time and do just fine at it. Larger jobs come around and I team up with the aforementioned contractor. Quality of work, production rate, overall experience great. The arrangement I originally proposed and practice is that when on a larger project, both businesses are equally tied up, equally invested, thus the profit is equally shared. i.e. if I expect fellow contractor to pull onto my job and put his projects on hold, then we split the job. Keeps it simple, we both show up and leave at the same time, etc.

Like any such arrangement we have had a few hiccups trying to establish an objective method of determining when a job is big enough to share vs. come bail me out for a couple of days at an hourly rate. The hiccup results when I typically end up working hourly on his projects and I tending to profit share on the bulk of my projects-About100k to him and about 40k back to me-meaning over the years he has made bout 100k from my business and I about 40k from his. With that said, I have made more money with him than without, so those numbers are a bit irrelevant.

The real question is whether or not I am out of line in the current situation. We both own dumptrucks, but on a recent project I won the bid on, I decided to sub out all the trucking so that we could focus on the actual project. Trucking just becomes an expense at that point that gets pulled out of the overall profit. I have the trucks lined up, easy peasy, make some money and go home. Now a friend of a friend who is a truck driver quits his job and the contractor I am teaming up with proposes said friend drive his truck and not use one of the previously hired trucks. His logic is that he might as well get the money vs. giving it to someone else.

Beyond the distraction of dealing with his new driver, I objected based upon the fact that my truck is still sitting while the job is paying him a profit above expense on his truck. I say the only way it would work in a profit sharing scenario is that after all his expenses are covered (i.e. fuel, wages, insurance, wear and tear) that we would split the remaining profit........which in my opinion is way too complicated especially considering the truck could break, get in a wreck, etc. and then what? He feels that sharing the profit is not fair, to which I say leave your truck home and we keep on the original plan of just hiring trucks until we can throw drivers in both our trucks. Am I out of line here?

The principle is the fact that we both own a lot of other pieces of equipment etc. and if one of us starts hiring operators and running more equipment on a job and pocketing the profit, the end result is one company could eat up all the profit on another companies project. Technically we are still competitors and not in a formal partnership, so I feel professional boundaries would dictate maintaining principle. Furthermore, I don't need him to complete the job, I am simply honoring the fact that we share larger projects and I just came from a larger project of his that we shared. We are still on great terms and the discussion was polite and professional. It just seems to be an obvious deviation from good business and he sees as an opportunity to employ his friend and make some more money. What say you?
 

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You are subbing the trucking out, presumably to several independents.

So long as you are paying your "partner" the same rate for his truck as the others who cares.

You don't know a driver who could run your truck?

Maybe I have over simplified the situation. But it seems like you have some heartache about the other guy making money with his truck while you aren't.
 

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Discussion Starter · #3 · (Edited)
You are subbing the trucking out, presumably to several independents.

So long as you are paying your "partner" the same rate for his truck as the others who cares.

You don't know a driver who could run your truck?

Maybe I have over simplified the situation. But it seems like you have some heartache about the other guy making money with his truck while you aren't.
Thanks Griz, and yes I definitely see how it comes across as heartache upon initial review and you may well be right. It is good to have perspective, which is why I posted.

Let me put in terms of carpentry. All things the same, you and a fellow carpenter go to work for one of your clients. You determine it best to leave all your tile equipment at home and sub out the tile work as it streamlines the project. Fellow contractor hires a mutual friend to put all of his tile equipment to work on your project while you leave your stuff at home. He wants you to fire the guy you originally hired. He is fine sharing the profit of your labor and keeping all the money he is making on the side as your new tile sub. U split your profit and he keeps his. Where does it go from there once you opened the door. Pretty soon you are renting his tools on your own job while you leave yours in the workshop. This leads to you becoming his employee in an extreme version of the principle I am explaining...at least from my perspective. On the surface it seems fine, but take it further and it seems like a future train wreck if not addressed right away.
 

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Capra Aegagrus
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So long as you are paying your "partner" the same rate for his truck as the others who cares.
I have to agree with this. You already decided to forgo making any money off the trucking. All else being equal, you're just quibbling about who else should profit.

Another aspect is that this "sub" will be more directly controlled by the partnership than someone else would be.
 

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Profit sharing sounds like a can of worms...
 

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Discussion Starter · #6 ·
I have to agree with this. You already decided to forgo making any money off the trucking. All else being equal, you're just quibbling about who else should profit.

Another aspect is that this "sub" will be more directly controlled by the partnership than someone else would be.
What's strange is that when you say it that way, my brain agrees entirely. The money was going elsewhere so why not give it to him.

I think where it doesn't sit right is in the overall premise of profit sharing. The phrase equal sacrifice, equal reward sums up the relationship. Finding ways to put more of one business into the project than the other is not equal sacrifice, if one business is creating more revenue streams from the same overhead and pocketing 100% of the profit. I own three dump trucks and choose to leave them in the shop in order to honor the premise of the arrangement. I could insist that he leave his truck home on all jobs and I run all three of mine everytime. I would not do that because I see it as exploiting the situation. Neither of us had drivers up to this point so it was never an issue. If I could throw a driver in my truck last minute and we each run a truck, then it is once again a non-issue as everything balances out per the original arrangement.

Human nature is to compete. Good business is to stay within the confines of an agreement. I see this as a breach of the original agreement, as I am smart enough to create multiple streams of revenue on all jobs past and future, but choose not to in order to keep the balance. The idea is to not compete and grow each business equally on shared projects with the possibilty of merging the two at some point in the future. Maybe I am quibbling, but my gut still says I am right based on the original premise of profit sharing.
 

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Discussion Starter · #7 ·
Profit sharing sounds like a can of worms...
I think you are right. What I am finding is that it ends up getting lopsided based on simple human nature, and without a written contract spelling everything out, there isn't a baseline to keep the situation in check.
 

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I think you are right. What I am finding is that it ends up getting lopsided based on simple human nature, and without a written contract spelling everything out, there isn't a baseline to keep the situation in check.
The problem is it causes people to think the other one is getting a better deal.

Something as simple as a tray of coffee that he didn't add to his expense list could make one partner think they were getting screwed.

Don't split the pot, sub work out and maintain control and good working relationships.
 

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Sounds like your ego is hurt more than anything because in the beginning of the thread you talk about how at this size job you can't make any money trucking. If that's true than it sounds like your friend is willing to take that risk in helping his friend.

Where he would be wrong is if he lost money trucking after the job was completed and demanded that you share that hit in the overall job. Otherwise he's a sub in the trucking end and a partner in the overall job. If it helps think of it as subbing to his buddy, not him.
 

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If I understand what you are saying it woukd be like me subbing framing instead of using my guys. I now am just making my GC mark up, not a profit from the actuall work. That belongs to the framer.

What is the issue, is my question?
 

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Discussion Starter · #11 ·
Sounds like your ego is hurt more than anything because in the beginning of the thread you talk about how at this size job you can't make any money trucking. If that's true than it sounds like your friend is willing to take that risk in helping his friend.

Where he would be wrong is if he lost money trucking after the job was completed and demanded that you share that hit in the overall job. Otherwise he's a sub in the trucking end and a partner in the overall job. If it helps think of it as subbing to his buddy, not him.
I agree with you about my ego. I was not prepared to deal with the situation at the time and answered primarily from the hip.

I did not say there was not money to be made, but that by the time you pencil out the cost, replacement value, damage, etc. it just becomes complicated to determine the true profit on any given day. At the end of the day you do make money, else I would not own trucks, however, equipment makes more money hands down, and the arrangement we had prior was to leave trucks at home and sub it all out.

Thanks for your input. I do appreciate it.
 

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Discussion Starter · #12 ·
The problem is it causes people to think the other one is getting a better deal.

Something as simple as a tray of coffee that he didn't add to his expense list could make one partner think they were getting screwed.

Don't split the pot, sub work out and maintain control and good working relationships.
I agree 100%. My question is how do some people make it work? Obviously a full partnership is harnessed by a clear contract for communication purposes. When you make it up as you go, one person remembers the whole conversation while the other may only remember half. Typically, we all remember the half that benefits us the most.....I am just as guilty as the next guy of this.:laughing:
 

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Discussion Starter · #13 · (Edited)
If I understand what you are saying it woukd be like me subbing framing instead of using my guys. I now am just making my GC mark up, not a profit from the actuall work. That belongs to the framer.

What is the issue, is my question?
To answer your question, I will use your example. From previous posts, I seem to remember that you are in an official partnership with your business. If you and your partner agree that it makes more sense for your business plan to sub all your framing out and just split the GC mark up, then that is the agreement. You don't go out and recruit your own separate framing crew and neither does he.

Then one day you get a job and per usual sub out the framing. Your partner has a friend (whom you also know) who quit working for the framing crew you typically sub. Your partner gets the guy geared up with tools and wants to fire your usual sub and put his newly created framing crew to work on your job. You don't get any GC markup, your partner's attention is divided between your business and his new framing crew. Furthermore, you just heard about it the day before the job starts. Would that be an issue for you?

It was for me primarily due to the short notice, thus I professionally responded that we should just keep it the way it's been at least for this job until we figure out how to handle it. The issue was pressed a couple times more to which I replied the same. Eventually, I said that the only way it might make sense would be if we split the profit beyond whatever costs he would incur, but that didn't really seem fair either. Then I came on here and realized I was likely wrong to respond that way, which is what it so awesome about forums like this. It is really hard to describe, but the analogy given is identical to my situation. Thanks for your response, and I would appreciate any advice on how you might handle it:thumbsup:
 

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Discussion Starter · #14 ·
As an update, I took all the comments seriously and determined that everyone looks at things differently and in this situation I am definately the odd man out. While convinced my position was right in principle, I understand where my fellow contractor was coming from. His intention was not to take advantage and I am certain that he would be fine if I threw my truck on without his on future jobs. I encouraged him to get our mutual friend set up to drive and if it works out we need him on this job we'll throw him on. I did not send the previously hired trucks home as I did not feel right about that no matter how you look at it, and his truck is now an alternate for the time being. I plan on recruiting a driver in the coming months for one of my trucks and the quandry is solved. Everybody is happy, business is good, and thank you all for your comments. I see this as an opportunity, and just needed to hear objective opinions. I honestly thought everyone would immediately agree with me, yet am glad to learn I not always correct in my perspectives. Thanks again.
 

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To answer your question, I will use your example. From previous posts, I seem to remember that you are in an official partnership with your business. If you and your partner agree that it makes more sense for your business plan to sub all your framing out and just split the GC mark up, then that is the agreement. You don't go out and recruit your own separate framing crew and neither does he.

Then one day you get a job and per usual sub out the framing. Your partner has a friend (whom you also know) who quit working for the framing crew you typically sub. Your partner gets the guy geared up with tools and wants to fire your usual sub and put his newly created framing crew to work on your job. You don't get any GC markup, your partner's attention is divided between your business and his new framing crew. Furthermore, you just heard about it the day before the job starts. Would that be an issue for you?

It was for me primarily due to the short notice, thus I professionally responded that we should just keep it the way it's been at least for this job until we figure out how to handle it. The issue was pressed a couple times more to which I replied the same. Eventually, I said that the only way it might make sense would be if we split the profit beyond whatever costs he would incur, but that didn't really seem fair either. Then I came on here and realized I was likely wrong to respond that way, which is what it so awesome about forums like this. It is really hard to describe, but the analogy given is identical to my situation. Thanks for your response, and I would appreciate any advice on how you might handle it:thumbsup:
Why would I not get my GC mark up on a trade of which I am directing and responsible for on one of my pronects? I guess I didnt read tbat in your OP.
 

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Actually the way I read it, your partner is putting his equipment in use on the project, in addition to what was originally agreed upon.

You mentioned my partnership, it is a partnership in a corporation. All profits are split according to those shares.

I dont do design work, my partner does. If we were independent contractors, and partnered on a project to pool resources, if he did the design, I would fully expect that to be seperate from our agreement. If , say, I owned a welder and he didnt, I would rent that welder to the project and I would keep all of the proceeds from that rental.

My logic, anyway.
 

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Discussion Starter · #17 · (Edited)
Actually the way I read it, your partner is putting his equipment in use on the project, in addition to what was originally agreed upon.

You mentioned my partnership, it is a partnership in a corporation. All profits are split according to those shares.

I dont do design work, my partner does. If we were independent contractors, and partnered on a project to pool resources, if he did the design, I would fully expect that to be seperate from our agreement. If , say, I owned a welder and he didnt, I would rent that welder to the project and I would keep all of the proceeds from that rental.

My logic, anyway.
I agree entirely with that logic and so what I am pointing out is losing out on the potential to make money on the design, or the rental, etc. and the fact that opportunity for profit would be unevenly shared. It really is a minor amount of markup on trucking if any in the current situation, but I was more looking at the principle as it might relate to future "changes" to the partnership. i.e. Hey Jaws, lets (one of your partners speaking) move our office from our current location and put it at my house so I can get the rent money we were paying out, since we might as well give it to me instead of the landlord. You might then say "well why not rent a room at my house instead" Sord of an awkward conversation that you wish you did not have to have. Unless you both rent out rooms, then it seems best to just keep paying the landlord until you figure out a better scenario, but I may likely be the odd man out on that opinion.

Overall, I agree with almost everything entirely that everyone has said, so I have to decide whether or not to dig my heels in over a small deviation from the previous arrangement, or seize the opportunity as permission to throw my own trucks into the mix and make more than just a minimal markup. I choose the latter, but still feel a boundary was stretched a bit in order to get there. The communication could have been better, but that is typically the case with communication, so I am good now. The intent is what matters, and I don't believe he intended to ace me out of the trucking, he just didn't carry the principle over to other things like my brain seems to do almost immediately everytime a boundary is pushed. Thanks for your input and sound boarding.

P.S. I should note that in your example, consider the fact that you both do design work as a side profession, but agree to hire that out and split whatever margin. Without warning he is able to get paid for it due to a last minute change in the arrangement and you lose out on your markup as well as the opportunity to make a profit from your same skill. That may be the difference of my situation in a nutshell. I wasn't aware that I could put my trucks on the job until the day before the job started.......at least according to past performance. Due to short notice I would not be able to throw a driver in there overnight....he had one lined up and somewhat insisted on throwing him on the job. Again, I don't believe it was intentional, but I was pointing out the principle of the matter more than the money.
 

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As an update, I took all the comments seriously and determined that everyone looks at things differently and in this situation I am definately the odd man out. While convinced my position was right in principle, I understand where my fellow contractor was coming from. His intention was not to take advantage and I am certain that he would be fine if I threw my truck on without his on future jobs. I encouraged him to get our mutual friend set up to drive and if it works out we need him on this job we'll throw him on. I did not send the previously hired trucks home as I did not feel right about that no matter how you look at it, and his truck is now an alternate for the time being. I plan on recruiting a driver in the coming months for one of my trucks and the quandry is solved. Everybody is happy, business is good, and thank you all for your comments. I see this as an opportunity, and just needed to hear objective opinions. I honestly thought everyone would immediately agree with me, yet am glad to learn I not always correct in my perspectives. Thanks again.
Clearly you understand how business works:thumbup:. Good to see the alternative to "My business sucks and I'm not at fault" attitude.

Hardest thing to do is put your pride in your back pocket so you can fill your front one with money.
 

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Seems like this could get to be a pissing match at some point. Sharing profit equally would almost be impossible in my mind. Do both companies have the same expenses? Do you have higher insurance, is your exposure higher because you are the "gc"? We all know that there is a big difference in the cost of equipment, how much ins. Cost, maint etc.

Seems like you or your partner should make a little more on your own jobs. You guys found the work, built the relationship with repeat customers, etc. why not just bid the work as subs? Just my two cents, good luck!
 

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... My question is how do some people make it work? ...
Most people don't make it work.

The 100K v 40K isn't irrelevant, or you wouldn't have mentioned it. Uneven benefit, real or perceived, is why many partnerships fail.

You're not getting competitive-enough bids from your subs, if your partner considers being the trucking sub to be low-hanging fruit. And you're right not to fire your already-hired sub, if the partner wants to do that part of the business as a sub. You already have a deal with someone else.

Don't let this incident become the seed of the destruction of your partnership. One deal isn't that important. But don't ignore it, either. As long as your partnership is informal, you're entitled to your opinion of its purpose and how it should work, and if it starts to deviate from that, then treat the question seriously.

I've been in partnerships - formal and informal. They worked just fine, until they didn't. Now when I work with friends, one of us is the general and the other is a sub. The sub may have some preferred status, but that's it.
 
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