Gordio Posted January 15, 2009 Share Posted January 15, 2009 I have been thinking about this for awhile. But with the current jobn market the way it is, I think now might be the right time to take a chance. First I should tell you that, I have pretty good white collar job right now. I make close to 6 figures,full benefits, 401K package, retirement/pension etc... This last year our company has really taken it on the chin(I am in the banking industry) & I am constantly stressing over my job security. I guess I am runned down by it. You may ask why the roofing business. Well, one of my best friends is a roofer. He works for someone else but does these side jobs on the weekends & makes a ton of money. We have talked about this before where we would open our own roofing business I would handle the books/marketing/business side of things & he would handle all the roofing. I have know this guy since I was 4 so I do trust him. We stood up in each others wedding. The one problem is, since he just went thru a messy divorce I would probably have to put in all the capital. I work for a bank so I am pretty certain right now no bank would lend to a startup roofing contractor in this climate. So I would probably have to dip into my savings. I have about $80K secured in CDS/Money Market accounts that I would be willing to use. I would not be able to use all of it since I would want a little cushion in case it failed/living expenses while I do not have a steady paycheck coming in every week, but from the research I have done it looks like with the downpayment on workers comp/liability insurance/tools etc.. I think I would initially get by with about a $30-$35K equity injection for startup costs. My friend thru the years has made alot of contacts with suppliers & such & says we would not hurt for business. My wife of course is dead set against the idea which kinda complicates matters. Does anybody have any advice/experience of being in a similar situation? Link to comment Share on other sites More sharing options...
BuffaloBill Posted January 15, 2009 Share Posted January 15, 2009 I have been thinking about this for awhile. But with the current jobn market the way it is, I think now might be the right time to take a chance. First I should tell you that, I have pretty good white collar job right now. I make close to 6 figures,full benefits, 401K package, retirement/pension etc... This last year our company has really taken it on the chin(I am in the banking industry) & I am constantly stressing over my job security. I guess I am runned down by it. You may ask why the roofing business. Well, one of my best friends is a roofer. He works for someone else but does these side jobs on the weekends & makes a ton of money. We have talked about this before where we would open our own roofing business I would handle the books/marketing/business side of things & he would handle all the roofing. I have know this guy since I was 4 so I do trust him. We stood up in each others wedding. The one problem is, since he just went thru a messy divorce I would probably have to put in all the capital. I work for a bank so I am pretty certain right now no bank would lend to a startup roofing contractor in this climate. So I would probably have to dip into my savings. I have about $80K secured in CDS/Money Market accounts that I would be willing to use. I would not be able to use all of it since I would want a little cushion in case it failed/living expenses while I do not have a steady paycheck coming in every week, but from the research I have done it looks like with the downpayment on workers comp/liability insurance/tools etc.. I think I would initially get by with about a $30-$35K equity injection for startup costs. My friend thru the years has made alot of contacts with suppliers & such & says we would not hurt for business. My wife of course is dead set against the idea which kinda complicates matters. Does anybody have any advice/experience of being in a similar situation? I would proceed with caution and a good lawyer. Unfortunately, I am aware of several good friendships that have gone very much the opposite direction over money and business. The lawyer should help you think through legal sides of both the best and worst case scenarios. Put an honest business plan together. Your job has likely taught you the importance of cash flow. Also think in the current environment about the fact that banks are going to be very reticent to extend you lines of credit. Think through any risks - what if your buddy gets sick - can you manage the business alone? What if you get sick - I assume you will go without benefits in the short term. Unfortunately, in our country this is very risky. What if your customers do not pay? etc. etc - this should be a part of your business plan. Speaking of which, before you put your capital in go over your business plan with a general contractor that you might do business with, a bank manager that you might want to work with and one other astute business person you trust. Ask them their honest opinions. In all ways approach the situation with your "business" hat on and not your "friendship" hat. Try to sit down and think through - if I just met XXX (your friend) on the street and he proposed this arrangement … would I do it - why or why not? Your buddy should do the same. While this may also sound harsh I would check references on your buddy … has he done quality work? Does he have a solid reputation among general contractors in the community? Does he pay his bills on time etc. You are not doing this to pry, you just need to be astute as this is your money and your livelihood that is in play. I know it is different but I took my current job because a good buddy of mine is the CEO of the company. Six years into it everything is going well but at the same time there are risks. Through all of this I am not suggesting in any way that you do not do this rather I am saying approach it in the way that you would if you were entering into a business arrangement with a person you do not know. Good luck and I hope it works out. Link to comment Share on other sites More sharing options...
KD in CA Posted January 15, 2009 Share Posted January 15, 2009 $80k doesn't seem like a lot of money to 1) launch the business and 2) pay all your living expenses in lieu of a job. Obviously that depends on your expenses, wife's income, etc. You might want to consider starting this while you still keep your job; ie., do it on weekends and nights. Link to comment Share on other sites More sharing options...
kegtapr Posted January 15, 2009 Share Posted January 15, 2009 My wife's cousin started a roofing business a few years ago. The biggest hurdle was name recognition. There are a lot of shady roofers out there and it takes time to develop a reputation. You'll be building your business from referrals so I hope you have a large network to start out with. Link to comment Share on other sites More sharing options...
Gordio Posted January 15, 2009 Author Share Posted January 15, 2009 $80k doesn't seem like a lot of money to 1) launch the business and 2) pay all your living expenses in lieu of a job. Obviously that depends on your expenses, wife's income, etc. You might want to consider starting this while you still keep your job; ie., do it on weekends and nights. My wife works part time. She is 4 months pregnant so I really do not think having her work full time is an option. I firgured I could throw $40K into the business to get start it up & then use the other $40K for living expenses & such. I thought about starting this while keeping my other job for awhile, but if I do this I want fully commit to it. Link to comment Share on other sites More sharing options...
Gordio Posted January 15, 2009 Author Share Posted January 15, 2009 My wife's cousin started a roofing business a few years ago. The biggest hurdle was name recognition. There are a lot of shady roofers out there and it takes time to develop a reputation. You'll be building your business from referrals so I hope you have a large network to start out with. The sub division I live in just so happens to be about 15yrs old. Believe it or not most houses in the neighborhood got new roofs done last year or are going to need them this year. I just got mine done last year. I think I could at least get started with some business right in my own neighborhood. Link to comment Share on other sites More sharing options...
Gordio Posted January 15, 2009 Author Share Posted January 15, 2009 I would proceed with caution and a good lawyer. Unfortunately, I am aware of several good friendships that have gone very much the opposite direction over money and business. The lawyer should help you think through legal sides of both the best and worst case scenarios. Put an honest business plan together. Your job has likely taught you the importance of cash flow. Also think in the current environment about the fact that banks are going to be very reticent to extend you lines of credit. Think through any risks - what if your buddy gets sick - can you manage the business alone? What if you get sick - I assume you will go without benefits in the short term. Unfortunately, in our country this is very risky. What if your customers do not pay? etc. etc - this should be a part of your business plan. Speaking of which, before you put your capital in go over your business plan with a general contractor that you might do business with, a bank manager that you might want to work with and one other astute business person you trust. Ask them their honest opinions. In all ways approach the situation with your "business" hat on and not your "friendship" hat. Try to sit down and think through - if I just met XXX (your friend) on the street and he proposed this arrangement … would I do it - why or why not? Your buddy should do the same. While this may also sound harsh I would check references on your buddy … has he done quality work? Does he have a solid reputation among general contractors in the community? Does he pay his bills on time etc. You are not doing this to pry, you just need to be astute as this is your money and your livelihood that is in play. I know it is different but I took my current job because a good buddy of mine is the CEO of the company. Six years into it everything is going well but at the same time there are risks. Through all of this I am not suggesting in any way that you do not do this rather I am saying approach it in the way that you would if you were entering into a business arrangement with a person you do not know. Think through any risks - what if your buddy gets sick - can you manage the business alone? What if you get sick - I assume you will go without benefits in the short term. Unfortunately, in our country this is very risky. What if your customers do not pay? etc. etc - this should be a part of your business plan. Good luck and I hope it works out. Thanks for the advice. Link to comment Share on other sites More sharing options...
Fan in San Diego Posted January 15, 2009 Share Posted January 15, 2009 Why don't you do it on the side and keep your current job. Have the phone number go to voice mail, you can pick it up when able too. This way you can see how busy you are before you quit your job. Or have your buddy answer the phone since he has to quote the jobs anyways. Link to comment Share on other sites More sharing options...
Dante Posted January 15, 2009 Share Posted January 15, 2009 I have been thinking about this for awhile. But with the current jobn market the way it is, I think now might be the right time to take a chance. First I should tell you that, I have pretty good white collar job right now. I make close to 6 figures,full benefits, 401K package, retirement/pension etc... This last year our company has really taken it on the chin(I am in the banking industry) & I am constantly stressing over my job security. I guess I am runned down by it. You may ask why the roofing business. Well, one of my best friends is a roofer. He works for someone else but does these side jobs on the weekends & makes a ton of money. We have talked about this before where we would open our own roofing business I would handle the books/marketing/business side of things & he would handle all the roofing. I have know this guy since I was 4 so I do trust him. We stood up in each others wedding. The one problem is, since he just went thru a messy divorce I would probably have to put in all the capital. I work for a bank so I am pretty certain right now no bank would lend to a startup roofing contractor in this climate. So I would probably have to dip into my savings. I have about $80K secured in CDS/Money Market accounts that I would be willing to use. I would not be able to use all of it since I would want a little cushion in case it failed/living expenses while I do not have a steady paycheck coming in every week, but from the research I have done it looks like with the downpayment on workers comp/liability insurance/tools etc.. I think I would initially get by with about a $30-$35K equity injection for startup costs. My friend thru the years has made alot of contacts with suppliers & such & says we would not hurt for business. My wife of course is dead set against the idea which kinda complicates matters. Does anybody have any advice/experience of being in a similar situation? This is a bit of a red flag to me. Sounds like it could lead to resentment. It's supposed to be a partnership but your taking all the risk. Unless you get more of the equity of the business it doesn't seem like a wise move to me. I know you trust your friend but business is business. Like in marriage, which i'm sure your buddy can attest to, everything starts out great. You never think anything can go wrong. Partnerships, to me anyway, are a iffy proposition to begin with. I think you have to be a bit lucky for it to work out. I grew up in a family business that was a three way partnership. Two uncles and my father. It was stressful to say the least. Anyway, its always very easy to comment on someone elses life from the outside. But sometimes, objectivity is better and not clouded by emotion. Better you go solo and hire someone to help you if you can afford it. A guy with some experience that can help you. jmho Link to comment Share on other sites More sharing options...
Gordio Posted January 15, 2009 Author Share Posted January 15, 2009 Why don't you do it on the side and keep your current job. Have the phone number go to voice mail, you can pick it up when able too. This way you can see how busy you are before you quit your job. Or have your buddy answer the phone since he has to quote the jobs anyways. I was thinking about that. I just do not know how busy i will be with this thing although I do have alot of down time in my current job right now. If anything, at least I get to keep my benefits. I do not mind not having health ins for myself, but I have a 4yr old & another little one on the way in June. I would have a very tough time sleeping at night not having benefits for them. Link to comment Share on other sites More sharing options...
Gordio Posted January 15, 2009 Author Share Posted January 15, 2009 This is a bit of a red flag to me. Sounds like it could lead to resentment. It's supposed to be a partnership but your taking all the risk. Unless you get more of the equity of the business it doesn't seem like a wise move to me. I know you trust your friend but business is business. Like in marriage, which i'm sure your buddy can attest to, everything starts out great. You never think anything can go wrong. Partnerships, to me anyway, are a iffy proposition to begin with. I think you have to be a bit lucky for it to work out. I grew up in a family business that was a three way partnership. Two uncles and my father. It was stressful to say the least. Anyway, its always very easy to comment on someone elses life from the outside. But sometimes, objectivity is better and not clouded by emotion. Better you go solo and hire someone to help you if you can afford it. A guy with some experience that can help you. jmho I have thought about this. But the thing is, I really have no idea how to roof. He is going to be bringing all the expertise to the business. My thought was I was going to work with an attorney to write the partnership agreement where I get paid back the equity I put in under a % each year of the profits. I know this is a cliche to say this but this guy really is like a brother to me. Trust is the least of my concerns right now. Link to comment Share on other sites More sharing options...
JoeFerguson Posted January 15, 2009 Share Posted January 15, 2009 This is a bit of a red flag to me. Sounds like it could lead to resentment. It's supposed to be a partnership but your taking all the risk. Unless you get more of the equity of the business it doesn't seem like a wise move to me. I know you trust your friend but business is business. Like in marriage, which i'm sure your buddy can attest to, everything starts out great. You never think anything can go wrong. Partnerships, to me anyway, are a iffy proposition to begin with. I think you have to be a bit lucky for it to work out. I grew up in a family business that was a three way partnership. Two uncles and my father. It was stressful to say the least. Anyway, its always very easy to comment on someone elses life from the outside. But sometimes, objectivity is better and not clouded by emotion. Better you go solo and hire someone to help you if you can afford it. A guy with some experience that can help you. jmho I agree. Your friend is already in a desperate situation, then you go and offer him $80k of your savings to start a business. You're all in and he's got nothing to lose. In my experience, it's bad to mix business with pleasure. If you want to lose your friendship and your $80k, this seems like a good way to do it. Link to comment Share on other sites More sharing options...
BillsObserver Posted January 15, 2009 Share Posted January 15, 2009 First I should tell you that, I have pretty good white collar job right now. I make close to 6 figures,full benefits, 401K package, retirement/pension etc... This last year our company has really taken it on the chin(I am in the banking industry) & I am constantly stressing over my job security. I guess I am runned down by it. If you make close to 6 figures (I doubt many people on this board make half that amount, I know I don't), full benefits, retirement and an established 401k, and you're thinking about starting up a business because your buddy makes a ton of money on the weekends and you're concerned with your job security? Dude, people would kill to be in your position right now with the economy the way it is even if there is some concern about your job security. Everybody has questions about their job security. Just appreciate what you have, be thankful you can make a salary like that and do the right thing for your family. It seems like you're doing this because your buddy is pushing the idea on you. Think of it this way, you admitted you don't know how to do any roofing so the burden would be on your buddy at first to carry the entire load and he could only do so much. In order to hire help, you'd have to guarantee a lot of business coming in. It's possible, but isn't that too big of a risk considering you have a kid on the way? I'm all in favor of dreaming big but perhaps you should wait on this idea. Seems incredibly risky. Just my opinion... Link to comment Share on other sites More sharing options...
KD in CA Posted January 15, 2009 Share Posted January 15, 2009 My wife works part time. She is 4 months pregnant so I really do not think having her work full time is an option. I firgured I could throw $40K into the business to get start it up & then use the other $40K for living expenses & such. I thought about starting this while keeping my other job for awhile, but if I do this I want fully commit to it. Might not be the best time for it with a pregnant wife. Health insurance alone will cost you well over $1000/month once the baby arrives. Link to comment Share on other sites More sharing options...
BuffaloBud Posted January 15, 2009 Share Posted January 15, 2009 My 2 cents. I would re-think the market. Rather than residential roofing, what about commercial? When $ are tight most homeowners are going to defer the expense (Honey, we need to put off the new roof so that we can get the kids braces.). However, when a commercial building needs a new roof - if needs a new roof. Link to comment Share on other sites More sharing options...
erynthered Posted January 15, 2009 Share Posted January 15, 2009 I have been thinking about this for awhile. But with the current jobn market the way it is, I think now might be the right time to take a chance. First I should tell you that, I have pretty good white collar job right now. I make close to 6 figures,full benefits, 401K package, retirement/pension etc... This last year our company has really taken it on the chin(I am in the banking industry) & I am constantly stressing over my job security. I guess I am runned down by it. You may ask why the roofing business. Well, one of my best friends is a roofer. He works for someone else but does these side jobs on the weekends & makes a ton of money. We have talked about this before where we would open our own roofing business I would handle the books/marketing/business side of things & he would handle all the roofing. I have know this guy since I was 4 so I do trust him. We stood up in each others wedding. The one problem is, since he just went thru a messy divorce I would probably have to put in all the capital. I work for a bank so I am pretty certain right now no bank would lend to a startup roofing contractor in this climate. So I would probably have to dip into my savings. I have about $80K secured in CDS/Money Market accounts that I would be willing to use. I would not be able to use all of it since I would want a little cushion in case it failed/living expenses while I do not have a steady paycheck coming in every week, but from the research I have done it looks like with the downpayment on workers comp/liability insurance/tools etc.. I think I would initially get by with about a $30-$35K equity injection for startup costs. My friend thru the years has made alot of contacts with suppliers & such & says we would not hurt for business. My wife of course is dead set against the idea which kinda complicates matters. Does anybody have any advice/experience of being in a similar situation? Your wife is right. Link to comment Share on other sites More sharing options...
Gordio Posted January 15, 2009 Author Share Posted January 15, 2009 If you make close to 6 figures (I doubt many people on this board make half that amount, I know I don't), full benefits, retirement and an established 401k, and you're thinking about starting up a business because your buddy makes a ton of money on the weekends and you're concerned with your job security? Dude, people would kill to be in your position right now with the economy the way it is even if there is some concern about your job security. Everybody has questions about their job security. Just appreciate what you have, be thankful you can make a salary like that and do the right thing for your family. It seems like you're doing this because your buddy is pushing the idea on you. Think of it this way, you admitted you don't know how to do any roofing so the burden would be on your buddy at first to carry the entire load and he could only do so much. In order to hire help, you'd have to guarantee a lot of business coming in. It's possible, but isn't that too big of a risk considering you have a kid on the way? I'm all in favor of dreaming big but perhaps you should wait on this idea. Seems incredibly risky. Just my opinion... I should of also pointed out that I think sh*t is going to really hit the fan at my work sometime in this first quarter & there is a decent chance that I will be out of a job sometime this year. Link to comment Share on other sites More sharing options...
ricojes Posted January 15, 2009 Share Posted January 15, 2009 I don't see how it's a partnership if you're putting in all the initial capital. I understand that he has all the roofing experience, but there is zero risk for your friend and I would not be comfortable with that. If I were you, I would make myself the primary owner and give my friend a fancy title like executive vp of sales and operations or some bs. You'd have to work out a base salary, but most of his money would be made on commission per job and also some sort of commission for sales leads. There could be a clause added to the contact that once the company is established, your buddy would have an option to buy into the company for half the amount you put in to start or something. A partnership with 0 investment is a no lose situation for anybody and that really could put a strain on the relationship... Link to comment Share on other sites More sharing options...
Kevbeau Posted January 15, 2009 Share Posted January 15, 2009 I have thought about this. But the thing is, I really have no idea how to roof. "If you don't understand a company's product or how it makes money, avoid it. " - Warren Buffet I know it doesn't completely apply. You know how roofing makes money. To me it seems there is a lot of ticks that add up to too much risk, not to mention the strain it may cause with your wife. As others said, is there any way to "ease" into the business instead of jumping in the deep end? Link to comment Share on other sites More sharing options...
Gordio Posted January 15, 2009 Author Share Posted January 15, 2009 I don't see how it's a partnership if you're putting in all the initial capital. I understand that he has all the roofing experience, but there is zero risk for your friend and I would not be comfortable with that. If I were you, I would make myself the primary owner and give my friend a fancy title like executive vp of sales and operations or some bs. You'd have to work out a base salary, but most of his money would be made on commission per job and also some sort of commission for sales leads. There could be a clause added to the contact that once the company is established, your buddy would have an option to buy into the company for half the amount you put in to start or something. A partnership with 0 investment is a no lose situation for anybody and that really could put a strain on the relationship... I understand your concern of risk/reward & I have wrestled with this issue. This is kind of a unique situation. It might not be a bad idea giving him the option to buy in later like you suggested. That way if it works out, I will be able to recoup some of my initiat capital that I invested but with that being said, I really do not see how that protects me anymore in case of failure. Link to comment Share on other sites More sharing options...
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