Electrician Talk banner
1 - 11 of 11 Posts

·
Registered
Joined
·
197 Posts
Discussion Starter · #1 ·
Anybody have any experience becoming part owner of a small electrical company? I've had offers in the past with other companies and have turned them down. This time it feels right. I am the guys only employee and rake in a lot of the jobs and have more experience in more facets of the trade than him. Any experiences/advice- please share.
 

·
Registered
Joined
·
1,212 Posts
TreeBaron said:
Anybody have any experience becoming part owner of a small electrical company? I've had offers in the past with other companies and have turned them down. This time it feels right. I am the guys only employee and rake in a lot of the jobs and have more experience in more facets of the trade than him. Any experiences/advice- please share.
Are you friends?
If so don't do it.
It's hard to have a partner in any business .
If you work well together it may work .
Money always becomes a factor . If you each pull a wage weekly with no extras and divide year end bonus if there is any .
Somebody always figures they are doing more or worth more and creates problems.
Just my opinion .. I have seen a couple good little companies go for crap because of silly things ,
Like wives doing the books so figure they should get a bigger share . Stuff like that.
 

·
Premium Member
Joined
·
20,109 Posts
Anybody have any experience becoming part owner of a small electrical company? I've had offers in the past with other companies and have turned them down. This time it feels right. I am the guys only employee and rake in a lot of the jobs and have more experience in more facets of the trade than him. Any experiences/advice- please share.
Big mistake.
Open your own shop, have him sub work to you.:thumbsup:
 

·
Premium Member
Joined
·
20,981 Posts
First things first... have an accountant do a "business valuation". It's like a real-estate appraisal, but for the worth of a business. You'll be surprised and shocked at how little any business is actually worth. The money spent having this valuation done will save you a ton on the business merger or purchase.

Oh... hot tip... a clientele, customer list, or whatever you want to call it is worth exactly zero! Unless these people have service contracts sold to them, past customers are never worth one red cent in business valuation. Most electrical contracting businesses are worth exactly as much as their physical assets. Add up the value of the trucks, real estate, and inventory, and that's pretty much what most are worth. No joking. The sale price will normally be 50-90 percent of that number.

If you, in your situation, buy into this, I see it as you just bought yourself a job!
 

·
Small Potatoes
Joined
·
5,516 Posts
First things first... have an accountant do a "business valuation". It's like a real-estate appraisal, but for the worth of a business. You'll be surprised and shocked at how little any business is actually worth. The money spent having this valuation done will save you a ton on the business merger or purchase.

Oh... hot tip... a clientele, customer list, or whatever you want to call it is worth exactly zero! Unless these people have service contracts sold to them, past customers are never worth one red cent in business valuation. Most electrical contracting businesses are worth exactly as much as their physical assets. Add up the value of the trucks, real estate, and inventory, and that's pretty much what most are worth. No joking. The sale price will normally be 50-90 percent of that number.

If you, in your situation, buy into this, I see it as you just bought yourself a job!
There it is, the cold hard facts on what you may be getting (or not getting) in the way of value as a partner in this business. Be sure you (or the accountant) drill down into the numbers to insure there aren't any long term liabilities (debt) you don't want to inherit.

Assuming you both agree on the well advised valuation; and your both still interested in going forward, you'll find you both still have lots of work ahead of you if you really want the partnership to work.

You'll need a partnership agreement (contract). I suggest you start out here: http://www.sba.gov/community/blogs/six-elements-every-partnership-agreement-needs

Six Elements Every Partnership Agreement Needs.
by Solovic, Former Guest Blogger

"So you want to go into business with someone. Good for you. Maybe your potential partner is a family member, long-time friend, investor or business associate. Whatever the relationship, the start of a partnership is much like the beginning of a romantic relationship. The parties are euphoric and it may seem as though nothing could go amiss. Time for a strong dose of reality.

Just like every personal relationship has its ups and downs, so do business partnerships. So before you tie the knot (so to speak), you need to enter into what is known as a partnership agreement to protect yourself and your business. Here are some of the common elements that you should include in a partnership agreement, which by the way, must be in writing and signed by all partners. This is not meant to be an all-inclusive list, so consult with your professional advisor.

* Percentage of Ownership. You should have a record of how much each partner is contributing to the partnership prior to its opening. (People have short memories.) Typically, these contributions are used as the basis for the ownership percentage, but this is not a cut and dry formula. For example, one partner may put in a considerable amount of cash, with no plans to work in the business, and a second partner may not invest cash, but will provide the sweat equity to make the business a success. As such, the partner who works the business full-time may get a larger percentage or vice versa. That’s up to you.

* Allocation of Profits and Losses. You must decide if the profits and losses will be allocated in proportion to a partner’s ownership interest, which is the way it is handled unless otherwise indicated. Also, will partners be permitted to take draws? (A draw is an allocation of profits from the business prior to the actual distribution among all partners.) Because money is the root of all evil, as they say, you and your partner(s) need to make these decisions in advance.

* Who Can Bind the Partnership? Generally speaking, any partner can bind the partnership without consent from the others partners. Imagine if your partner, without your knowledge, signed a contract for a private jet timeshare. (Sounds cool, but not practical.) That’s certainly something most small businesses can’t afford and such a liability could be a significant risk to the financial stability of your business. So you must clarify what type of consent a partner must obtain before he/she can obligate your company.

* Making Decisions. Making decisions in a business is often like trying to make decisions in a committee- nothing gets done. In fact, it can often come to a company stalemate a company and result in business failure. Therefore, you need to establish a decision-making process in advance so your business operations can move along smoothly.

* The Death of a Partner. What happens if one partner is deceased or wants to leave the partnership? To manage these situations, you need a buy/sell agreement. This establishes a method by which the partnership interest can be valued and the interest purchased either by the partnership or individual partners.

* Resolving Disputes. What happens if you and your partners reach a point where you can’t agree? Do you head to court? Well, only if you want to spend a lot of time and money. My recommendation is to include a mediation clause in your partnership agreement to provide a procedure by which you can resolve major conflicts.
As I noted earlier, these are some of the key elements that a partnership agreement should include. You and your partner(s) should schedule time to talk about these issues, but it is best to go to a legal professional who can draft the agreement for you. An attorney can help advise you and make sure you have thought about and covered all the necessary elements so you can manage, protect and grow your business venture."

If you Google business partnerships you find tons of examples of partnership agreements.

You might also want to watch "The Profit" on MSNBC. The final episode is tonight at 10:00pm EST. Watch the series if you get a chance. It's a real eye opener on how to not run a business and how an experienced business partner can turn it around. Good stuff!

Good Luck!
 

·
Registered
Joined
·
197 Posts
Discussion Starter · #7 ·
Well we are just your run of the mill small comp.i get a very good wage for the state I live in. Part owner is not necessarily worth it then? The owner has no plans on hiring anyone else. How would I go about asking for profit share? If I was just an average helper i wouldn't be asking but he admits I'm not a helper. I run half the biz already.
 

·
Small Potatoes
Joined
·
5,516 Posts
Well we are just your run of the mill small comp.i get a very good wage for the state I live in. Part owner is not necessarily worth it then?
Not necessarily. It depends on what you negotiate and agree upon. Did you read my post?

The owner has no plans on hiring anyone else.
That would be a deal breaker for me as a partner. Where's the growth opportunity?

How would I go about asking for profit share? If I was just an average helper i wouldn't be asking but he admits I'm not a helper. I run half the biz already.
If that's true then your entitled to almost 1/2 of the company. Maybe 49%. Or maybe 51% if you both decide your the one in charge and making the decisions. Or at least the one with the right to veto.

Did you read my post? A lot of the answers are in the link I provided from the SBA.
 

·
:-)
Joined
·
3,670 Posts
He may be concerned you might venture out on your own. Having you as a partner keeps things more or less as they are, in his comfort zone.

Good people are hard to find. I worked for a larger (+40 construction, 6 service trucks) firm for 8 years. One day the 3 estimators walked out and started their own company. The owner and maybe even the 3 estimators would have been better off had the owner offered them 1/2 the company.

The company eventually did die. Not sure on the 3 guys and their company as I haven't kept track of it.
 

·
Moderator
Estwing magic
Joined
·
27,563 Posts
Have an accountant do a very thorough investigation. Don't do what I did. The guy refused to open the books so they had a chat instead. The accountant came back and told me he seemed legit. A week later Cutler phoned me with a very lucrative offer and I turned them down. Three months later the so- called partnership went down the crapper. The guy was hiding things.
 
1 - 11 of 11 Posts
This is an older thread, you may not receive a response, and could be reviving an old thread. Please consider creating a new thread.
Top