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Here's the short version; Today I was given an opportunity to become a 50/50 partner in an auto repair shop. My dream has always been to have my own shop, but now that I have the chance I'm not sure about leaving the security of a steady job. I'm looking for advice on this situation because I know a lot of you have been in my position before.

The long version; I have a steady job working at the welding shop in town building utility trailers. The pay isn't too amazing, but the work is easy and my employers are really good people. My wife has a stable corporate job and is our "primary bread winner" which has allowed me the flexibility to pick a job that I enjoy at the expense of making more money doing something else. Today a friend of mine whom I have done some work on the side with before came to me today with an interesting proposition: go into business with him and open our own repair shop. He has been working in this field for a while and built up a really impressive list of contacts. He has a business model drawn up and it looks pretty good. Between the two of us, we have all the tools and knowledge we should need. The only thing we are lacking is the shop itself, but there are a few old garages in the area for lease. My dream has always been to have my own shop, but leaving the security of a steady job is intimidating to say the least. However, I'm not yet 30 and I have no children or mortgage to worry about so there really isn't anything holding me back.

What are some pro's and con's of this sort of thing that I am missing?
Words of both caution and encouragement are welcome.
Thanks in advance for your insight!
 

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I did it at age 46,,, it was the best move of my life.
The absolute,, NUMBER ONE rule I can tell you that you must follow,,,
NEVER have a partner!!
Do it yourself, or do not do it.
Everyone is your friend,,, unless there is :gizmo: on the table.

When you are ready,,, the other rule to follow is the Paypal co-founders concept.

Zero to One,,, start a business that does not exist, be the only ONE in that business.
that is the only way to make money.

If there are 50 car repair shops in the neighborhood,,, why should a customer come to you?
If they do come to you, 49 other guys will reduce their price, so they can put shoes on THEIR baby.

Offer a new concept,,, or stay working for "The Man",,, :dunno:
 

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Here are a few thoughts to consider:
1. I don't know about having a partner, I consulted for a few years, so it was just me. But a partner, if the right partner, can be a good thing.
2. Get your agreements in writing, put down EVERYTHING, get it notarized. You never know when you'll need to fall back on the original agreement, and it can be updated whenever necessary. If you ever have to say "you remember when you promised to do this or that..." to your partner, and he doesn't remember ever saying it, it can ruin the partnership. Think of this like a prenup, but I don't think this is optional in a business relationship.
3. Look at your capital, have enough AFTER business starting and running expenses to sustain yourself and family for at least 1 year. This may include contingency plans if you don't have the cash in the bank. When I took a business course, new businesses usually don't have positive income for at least a few months. If you do go into the black sooner, then all will be good, if not, and you don't have capital to live, the business will fail because you will have to find other income.
4. Here is an opportunity to do "what you always wanted", I'd say go for it, but be prepared before you start the business, and have a contingency plan in case of failure ... just in case.
5. Think it through, don't rush into it.
6. Your own business is hard work, and can be lots of hours, especially in the beginning. If it were easy, then everyone would be doing it. Don't let your business ruin your family life.

Just a few of my 2 cents. I'll post more if something comes to mind. Good Luck on whatever you decide.
 

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A question for you to ponder - Will you ever look back on this opportunity and say "I wish I had...."

While I don't start things thinking about failure, it is always a possibility. You are young and even if this hits the crapper, you still have a lot of bounce back. The flip side to that is you have the same energy to make this dream come true. If you choose to do it, put your energy there and let failure be someone else's worry.

To me it is like classic investment advice - young = aggressive, old = conservative.

Only you can judge the integrity of your partner. I would agree with putting it in writing as suggested.

You never know how far you can go unless you dare to try.

After giving it a good hard look and it seems right and if your gut is telling you to do this then I would say go for it and never look back.
 

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"The only ship that won't sail is a partnership."

I'll echo the others, I don't do partnerships. Period. While they work okay when everything works, when things go wrong they really go wrong. You're not just partnering with your buddy, but with his spouse, his kids, his bill collectors, etc. When one of you leaves the partnership, and you will, what happens? And how do I know someone will leave? As Hank Williams said, "Though I may struggle and strive, I'll never get out of this world alive." While it's a bit dramatic, he could be in an auto accident and killed. Now you own a business with his spouse, or whomever he left his share to in the will. What if he gets arrested and goes to jail? What if he gets sued and the plaintiff gets all his assets? Now you have no idea who you're in business with. What if he becomes disabled and can't work anymore? While it's easy to sit back and say "That won't happen to us", it happens to people every day. We don't have to be so dramatic though, say 5 years from now he gets tired of being a mechanic, or your wife gets offered a salary doubling position of a lifetime...three states away. There needs to be an extremely clear, written plan for how to dissolve the partnership in the event of every awful thing you can imagine, and even then you need to be prepared for trouble when that day comes.

As Cad mentioned, why does he need a partner? Sounds as though he has the tools and contacts, so does he need you for funding or just think it would be fun to own a shop with his friend? If it's funding, do you have it or would you have to go into debt for it? I think they say something like 90% of small businesses fail, so there's no chance I would borrow money for such a thing. Having a 'pretty good' business plan is a start, but I'm not about to put all my eggs in someone else's 'pretty good' basket. Most small businesses that fail are because the owner may be really great at doing the work whether it's fixing cars or programming computers, but because they're not very good at or have any business education. If he has this idea, let him get it all set up and hire you as shop manager or something. That way if it tanks, you haven't lost a big pile of money on someone else's dream. You want to own your own shop, then you go own your own shop. Work out of your garage until you build a customer base on nights and weekends, then maybe expand into a mobile guy working out of a van or into a small shop that you rent/ lease/ whatever and build it slowly.

As for the idea of leaving a 'secure' job...you're not. You don't have a 'secure' job, none of us do. Every bad situation I mentioned in the paragraph about partners could happen to the folks that own the company you work for. You could show up tomorrow and find the doors locked. A big customer could switch suppliers or go out of business themselves. Folks who work for big companies are at risk as well, departments downsize and even corporations can close. Anyone apply to Enron lately? I watched businesses that were customers of my employer in TN close one after the other back around 2008, and am seeing it again here with the downturn in the energy industry. Halliburton, a huge oil company has laid off something like 50% of their workforce in this area. The only stable/ steady/ secure job is your ability to go earn an income. We're all self employed, but a lot of us only have one customer we sell our time to. We call them 'full time employers'. The more customers you have, the less you're impacted if one stops using you for whatever reason. Working for yourself with 6 or 7 different people bringing you their car every day is actually more secure than what you're doing now, it just doesn't seem like it because it isn't wrapped up all pretty. You get to see the side that your boss sees now.

All that said, if you want to go work for him after he gets things set up then go for it. If you want to own your own deal, then go for that.

Short version? I don't do partnerships or borrow money. I wouldn't touch the deal as it's described, but if there were a few tweaks where you weren't financially in bed with this guy then it might be worth a shot. :good2:
 

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My dream has always been to have my own shop, but leaving the security of a steady job is intimidating to say the least. However, I'm not yet 30 and I have no children or mortgage to worry about so there really isn't anything holding me back.
You will probably never be in a BETTER position to absorb the risk than you are right now. If it fails it is likely to do so fairly quickly (within the first 3 years). So what are you out if that happens? At 33-34 you can find another job. Try that at 53-54 (or 63-64) and you'll likely find yourself out of luck. This is something you've always wanted to do and there may not be another opportunity. There will ALWAYS be "something" that you'll have as an excuse not to do it down the road.

Get yourself a good lawyer and make sure your bases are covered just in case there is a falling out. Then, go for it!
 

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Lots of good advice, but one more thought.

Don't burn your bridges, you never know when you'll need to cross it again.

And the old but true saying, "you'll never get rich working for someone else". Follow your dream, but do it right and think it through.

There are some free services for starting small business. One that comes to mind is the Small Business Administration (www.sbs.gov). They can be a lot of help for a newcomer. IIRC they have a lot of volunteer businessmen who may have gone through what your thinking of doing. They can give you a lot of real world experience and knowledge.

2 cents.
 

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Discussion Starter #9
Lots of good advice so far. :bigbeer: "consult with lawyer" is now at the top of my to-do list.

I particularly like the point that was made that no job is actually secure. Way too true. I have overheard my current employer's discussing the future of the company and lately it has taken a bit of a sour note. From what I can gather, their main customer (who buys 750 to 1000 trailers a year) might be looking elsewhere. That will be more than 60% of their sales volume gone... So why would they need me anymore? Much like the rest of the country, the manufacturing sector in this area is a roller coaster.

My potential partner needs me because we have known each other for a long time and he knows that I'm both driven and a good mechanic. He wants to expand beyond working out of a garage in a one-horse town and that means having a second set of hands. He is a pretty good painter and upholsterer, but he needs someone who can weld and do fiberglass. I also have the all important mechanics certificate from the state which will give the whole place some legitimacy. The idea of a partnership vs him hiring me was actually mine. If I'm going to roll the dice on this one, not only do I want some skin in the game, I want to be able to have some control as well. I have been self-employed before, but never anything more than seasonal work and never as my primary job. However, each time I tried it, I was fairly successful.

Not to divulge our whole idea onto the Internet, but here is the basic plan: We would be the only customization shop in at least a tri-county area as well as the only shop within a two hour radius which specializes in working on European cars (Audi and VW primarily).

Again, thanks for your insights!
 

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The toughest ship to sail is a partnership, but they do sail if the navigators are committed and the voyage is well charted.
 

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Yes, there is a lot to consider, but for me in the end there is only one question in making a decision like this, "will I regret my decision?". But, in making the decision you have to consider all the possible out comes good or bad and then living with them in the end. Good luck on your decision, it is not an easy one.
 

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I would not do a partnership but that is me. I did the partnership it started out great but ended so wrong. like some stated what if the partner dies and one of my partners did. She got a lawyer she was money hungry and it got ugly real fast. Once that was over with it the other partner was hit very hard (they were very close friends). He just did not have his heart in the business but still wanted a paycheck on Friday. No work no pay you can not fire a partner very easy. Also as others have said get papers from a good lawyer the one that you may have to go back to.

Doug
 

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The idea of a partnership vs him hiring me was actually mine. If I'm going to roll the dice on this one, not only do I want some skin in the game, I want to be able to have some control as well.
Unless you have 51% of the business, you don't have control in a partnership. If you split it 50/50, all you have is a system that allows you to argue with your friend. You could have the same control with the title shop manager instead of the legal and financial risk of being a partner.

Skin in the game is easy. At the most basic level, if the business doesn't do well then the business doesn't have the money to pay you, so you want things to be profitable. You could always work out a system where instead of being salary/ hourly rate, you get paid a percentage of what the shop brings in. Obviously it wouldn't be as large a percentage as it would if you were a partner instead of a manager, but I think that's a worthwhile trade off considering the risk you avoid.
 

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I did a couple of minor partnership deals in small businesses. You really find out things about people you never knew or thought.

If you decide to do it, do not spend money you don't have. Do not invest your retirement savings into it, it's like getting pennies on the dollar. Follow your heart using your head.
 

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I did a partnership with a friend / co-worker, we went out and started our own business 28 years ago. It didn't last.

Here is what I learned: Someone has to be in charge, because there will be things that come up, that you do not agree on.
  • If its a big item involving $$$ and you don't agree, you're in immediate trouble.
  • If its a small thing, it will turn into a big thing, because some how that will be the reason you're not making enough money.
50/50 doesn't work. Even with a successful marriage of 33 years, me and the wide have a 50.1% / 49.9% partnership so that someone is in charge.
She agrees with this premise, we just disagree on who has the majority vote :)

Good luck with your decision.
 

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I put some thought into this while I was eating breakfast. I could go on and on but I'll try to be brief and not go off on a tangent. Just a couple things of food for thought for you from my perspective -

You are in a great position being your spouse is the primary bread winner. For me it was the opposite - when my daughter was young my wife stayed home with her - I don't believe in other people (day care/babysitters) raising my child. So I was the sole bread winner for many years. Later my wife did get a job locally - but got hurt after 4.5 years and couldn't work anymore - and no disability benefits. Back to me being the sole bread winner.

When I was 30 years old the last thing on my mind was retirement. I didn't have anyone to teach me anything financially related so had no clue. And if course when you are 30 years old you think you are invincible.

More to the point - what is your plan if your wife looses her job or gets sick or injured? Don't think it can't happen. Anyone who works for any company is indispensable no matter how much they think they aren't. Then there is getting sick. Being I have literally never been sick in my life it never entered my mind - that was until I was 54 years old and got hit broadside by a crippling disease. So here I am the sole bread winner and then suddenly nothing.

My point is to think about your future and use that as part of your decision making process. I am guessing that your spouse has a decent retirement plan if she works for a corporation. Do you have a plan where you are working like a 401k? If you would leave that job will you still be able to keep up with feeding that?

As far as a partnership - no way for me. If you want to start something up do it on your own on the side - evenings and weekends. I did that for 25+ years with my mowing business. No partners, no employees - just me. Because of living in a very rural area there just wasn't enough business to support my household. Had that been different I could have made a go at it - but that was after years of doing it part time and getting to know the business and how to make a profit.

This is a cross roads of sorts for you - put a lot of serious thought into it. Yeah, there are a whole lot of "what ifs" but you have to go through the paces and think of every scenario.
 

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I did a couple of minor partnership deals in small businesses. You really find out things about people you never knew or thought.

If you decide to do it, do not spend money you don't have. Do not invest your retirement savings into it, it's like getting pennies on the dollar. Follow your heart using your head.
:good2: VERY well said MDrew!

Some do well in partnerships, others don't. As a sole owner unless it is a single person outfit, you'll have employees. Both take business skills.

I think it depends on you and your buddy. Can you and he work together like businessmen and leave the friendship for "after work".
 

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@Evergreen,
Appears to me that you are already doing the right thing by asking for some advice. Most go into business ventures thinking they already understand everything there is to know. The fact that you are open to others advice and experience is an excellent sign of forethought and wisdom.

From what you have posted I think you are in a great position to take on a venture like this, have put some really hard thought to it and looks like the business could be a great success. Its all about the customers and you must make sure the services you plan on providing match your customer base.

Here is where I am at odds with some of the advice. Partnerships can be risky but the entire point is that they can reduce the risk of starting a new business significantly IF you go into them with your eyes open. Sure, many partnerships fail but all of those are linked to business that likely failed as well. I must have had a very unique situation when going into a partnership situation because it worked amazingly well. We also knew each others strengths and weaknesses and were able to work together prior to signing any contractual obligations related to our business venture.

If you get everything on paper, including all expectations of each other, partnerships can be very successful. Most that are not did not take this basic step, can easily be dissected, and the root cause of the problems that led to failure can easily be avoided if some time is spent on laying all the cards on the table up front. Second. Limit your liability by forming an LLC at the beginning. This completely secures each owner of the business and avoids the "additional unwanted family partners" situation. You can also take out insurance policies that cover each owner in case of death so that the business becomes the sole property of the surviving partner. Again, simple situation that can easily be avoided with a little up front planning.

You are young, seem to have a good head on your shoulders and will probably never be in a better situation to take advantage of an opportunity like this. I say go for it but cover all your bases up front and get everything in writing. You should be able to reach out to available resources in your state for additional details on starting a small business, limiting liability and avoiding common pitfalls - before you light up the "Open for business" sign.......

Good luck with your venture and wish you much success,

JD
 
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