I'm trying to break down a game plan for a new business.
I have the company, license and insurance.
Another electrician has the cleints and leads. We are trying to create a mutually benifitual relationship.
The 2 problems I am having issues with are...
This company is new so we need to put money into the company for trucks, tools, rentals, eventually buying lifts trenchers, etc.
The other is Sales commission, he has most the leads and sales.
Sales commission I was thinking 20% of profit.
Money back into the company I was thinking 30% until the yearly estimated overhead is met, then 10% thereafter.
So what do you guys think of those percentages?
Then I have the total profit after taxes. I need ideas on what to do with this.
First let me say I was thinking, we would pay ourselfs a specific hourly rate. So me and this guy would be paid hourly. If we do the work, we may have employees do the work.
So back to the total profit after taxes, payroll and expenses. I wouldn't mind sharing this with the guy, but I need to take out for me being the master, and company owner. Which I have not taken into account, besides moneys put back into the company.
Do you think I should share this money with the guy?
What percentage would be fair for me holding the license and company.
Like I said I wouldn't mind sharing with this guy, he is getting the leads.
Yaaaa, sooo... any opinions on this. Hope what I wrote is making sense., thanks.
"Another electrician has the cleints and leads"
How does he have cleints, if he is not licensed to conduct business?
Leads are not signed contracts, their dollar value is hard to figure.
All i can see comming from this arrangnent is big troblems down the road.
This is why I would like ideas on a plan.
I think problems could be eliminated with a plan. Basically he will be doing sales. Along with the electrical work.
He has clients from working with another company, which is not working out. I'm not sure if he does what he does now without permits or off the previous company.
I'm thinking the bottom line profits should be mine, the sales commision should be larger than 20%.
Ya thats gotta be the way.... I was making it to complicated. Basically theres an hourly rate, and commision on the profit of sales.
If he is going to provide the leads and do some of the electrical work then wouldn't he be entitled to some of the profit ?
You are laying claim to the profits because (I assume) you will be performing the actual work along with your partner. If so, he should be entitled to some of the profit.
My suggestion (if you insist on having a partnership) is that you both do your respective jobs (him sales, you installation) and at years end see how the company is performing. You may be surprised at year's end. At this point if you want to take a draw from the company it should be equal.
When I went out on my own I had a previous coworker just chomping at the bit to become partners with me. I decided I valued our friendship more. It's been 3 years and I am VERY glad I stayed single.
Just my two cents......
Well after crunching some more number this is what I came up with.
If I pay him 30% commision of the actual profit (after all expenses), then I will make 36% of the actual profit (after all expenses). So I would make 36% for doing nothing but owning the business. Sounds like it could be a bit too much. What do you think? What % do you think would be fair in this situation.
This is bottom line every expense paid, employees, insurance, stc. the company needing to make 50,000a yr. minimum. Any profit over $50k, there will be an extra 10%.. which can be turned into a bonus, or whatever.
Well after crunching some more number this is what I came up with.
If I pay him 30% commision of the actual profit, then I will make 36% of the actual profit. So I would make 36% for doing nothing but owning the business. Sounds like it could be a bit too much. What do you think? What % do you think would be fair in this situation.
This is bottom line every expense paid, the company needing to make 50,000a yr. minimum. Any profit over $50k, there will be an extra 10%.. which can be turned into a bonus, or whatever.
I am a one man operation I work from home and my overhead is 4000/mo.
What is your overhead per month.
btw that 4000/month is only my Indirect costs.
overhead... Not much, a van, gas, insurance, maintenence and my garage.
Any chance you want to email me a quick draft of your expenses? Trick440@comcast.net.
He has clients from working with another company, which is not working out. I'm not sure if he does what he does now without permits or off the previous company.
No business but he has clients, (FROM WORKING WITH ANOTHER COMPANY) Now there is a real liability issue, that can cost you plenty in legal fees, does this guy understand, that he can not just, steel someones accounts, without legal problems.
His proposal sounds almost criminal, You may just be better off offering a job to an employee and giving the employee a bonus on jobs brought in.
He was doing jobs without permits, so he already creates libalities, that you will be burdened with, he is a nightmare waiting to happen.
Well heres one month from last spring .
auto insurance 159.89
auto operating 585.32
auto repairs tires or even auto payment 583.17
bank charges for account 71.00
business development 164.67
liability insurance 82.40
licenses and bonding 39.00
book keeping 200.00
INTERNET 49.00
office maintenance 68.68
office insurance 20.59
postage 41.42
printing and reproduction 25.00
office supplies 162.14
employee benefits 95.94
office rent 350.00
shop supplies 282.00
telephone and yellow pages cel phone and 650.00 includes an ad in other book
electric and gas 140.00
workers comp 145.00
that is almost 3600.00
and theres a few things i have missed like lost tools. theft , damage,tool wear and tear ladder replacement etc
LK I think you are getting a little riled up.
There is no liability, in taking work from another company. They like this guys work and if hes going else where then so are they. (I don't know if this is the case.) But I don't see any legal issues in taking work from a former employee unless that is in the company handbook. Am I missing something.
I know I have builders that only will have me wire their homes. Reguardless of who I work for.
And honestly I have no clue if this guy is doing work without a permit right now. If he is, oh well, we know everyone on this board has done work without a permit at one time or another.
I think your making extreme judgements to quickly. With all do respect, lets just keep on topic.
And please for the record, this guy in my mind is an electrician, who wants to better himself, he also is interested in more than just the labor, he wants to get his suit on, and go out and get some business. I ain't gonna hate on anybody who wants bigger and better things. ... Especially if he needs my help and I could use his to get there.
I have seen no indication of wrong doing, nor am I going to make any jumps to conclusions.
Thank you Doug for that list. Theres a few things on there I did not consider. Like advertising... not sure how I missed that little one.
LK has reason to be a bit paranoid. While it certainly is possible for an electrician to have a "following" .... there are also less ethical things pulled by vindictive or overly ambitious employees.
"Land Mine #1" is the former employee who takes the customer list with him ... then approaches the customers with his offer. He's actively trying to undermine his former employer, and that isn't right. Indeed, this can lead to a very messy lawsuit - with you named as a party. Even if you end up in the clear ... it'll cost you.
"Land Mine #2" is the current employee who has been performing work for the employers' customers as "side jobs." Many would consider this simple theft - even if it is NOT done on company time, or with company materials and tools. Such an arrangement is generally both dishonest and illegal.
Otherwise, your idea has merit. The guy who brings in the work deserves a slice of the pie. You are not, however, running a charity. Figure your cost ... then ADD his commission to the total to get the price.
Anyhow on the topic of overhead its so easy not to have it all in perceptive. I second Macmikemans response in this thread "how much I should charge"
https://www.electrical-contractor.n...showflat/Number/169058/page/1#Post169058
LK I think you are getting a little riled up.
With apologies, please allow me to stand up for LK here, he has been in business for a long time, and therefore has seen many things. Some of those things may not happen all the time, but over the course of a career you do get to see most of them one time or another. You are just starting up. Young Padawan, listen and learn.....
I know who LK is I have been on these boards for a few years. I'm not meaning to disrespect, just want to focus more on the topic. Sorry if it came off that way.
Which at this point is the Sales commission percentage. Right now I'm leaning towards 30% with a bonus if a goal is reached.
I thought industry standard for sales commission was 10%.
I have wrestled in the past trying to make something work with another guy. We hemmed and hawed and couldn't come up with anything that appealed to us both. Then a year later he closed up and came to work for me, which was the best possible scenario, and it still was a huge headache until I finally let him go.
I wouldn't look at it as a partnership. I'd look at it as he can be your top man with profit sharing and incentives. I wouldn't give up control over decisions that affect the direction I want to steer my company, such as where to invest profits, etc.
So if he is really going to be just a salesman, I don't know what percentage to use, 30% of net profit sounds fine to me. But one rule of negotiation I've heard before is first one to name a price (or term) loses. Ask him what he thinks is a good arrangement. He might say 20%.
Also don’t forget that job costing is one of the biggest headaches of contracting. Getting good numbers and tracking them, especially when the schedule gets really busy. Who is going to track all this info to decide who gets how much? Just make sure that expense gets thrown in before you start calling things profit.
I'd be weary of anybody bringing clients from his current employer. Someday, he'll have enough hours to be his own master, and take 'your' clients with him for his new business.
I was a juror in a Federal Court where something very similar happened. Two guys formed a business, one knoew the work the other was the salesman. The salesman learned the trade tricks and started his 'own' business. He grew very quickly in two years. (Commercial swimming pool builder.)
He did advertise across state lines, thus making it a federal offense. They did no work out of state but since they used the US Post Office to send out flyers, it was considered a federal offense. He'd claimed to do all the work in the flyers when in fact they were pictures of the work he did while partnered up.
He's in federal prison now on several counts.
I read up on partnerships alot before jumping in. I'm sure there are some good references that will spell out most of the pitfalls and how to avoid them.
The guys are trying to give you good advice.
Quote: " Also don’t forget that job costing is one of the biggest headaches of contracting. Getting good numbers and tracking them, especially when the schedule gets really busy. Who is going to track all this info to decide who gets how much? Just make sure that expense gets thrown in before you start calling things profit."
If you have employees don't forget their libalties have to be paid out, and workers comp can become one big expense, as work picks up.
I never worked without premits, and I din't know anyone other electricians that did either, I did not work, illeg side side work,I waited until, I had all my licenses, and insurances, there must be real don't give a hoot guys your looking at. Not getting permits for jobs, when and where required, shows a lack of good judgement. Not the type of people you would want to think of partening with.
I think that I'd want to know a good deal more about your partner. You don't seem to know much about him at all.
Did he sign a non-competition agreement with his employer?
A lawsuit is going to be quite a blemish on you, as the license holder.
You came here looking for advice. Too bad if it isn't what you want to hear, but these posts have not been off topic at all.
I have the EC's come here, after they get themself in deep, then, want want to know how to get out of trouble, had they taken caution in the beginning, they could of saved time and money, along with all the damages.
The guys are just trying to help, you before you jump in.
Just my experience on this, but the only time a contractor should ever partner up is if they need the financing; if they want a piece of the pie they had better bring more to the table than leads and some existing clients.
Every estimator I hire has existing clients and leads, and can even estimate to some degree. For this I pay a fair wage, and they don't get a cut of the business. Sure some salesmen want a commission but estimators don’t typically get one.
"We are trying to create a mutually benifitual relationship.
Yeah me too, I have a mutually beneficial relationship with everyone that works for me. When its stops being so mutual, they either quit or I fire them.
Let me tell you something about estimators and salesmen, they are not as important as they like to tell everyone. Sure your estimates need to be good guesses, and if you don’t sell work you wont do work, but it's your PMs that will make or break you.
You can take the best estimate in the world and poorly manage the job to the point you lose money, or you can take a stinker of and estimate and aggressively manage it out of the hole. Sure even best PM cant save a bomb estimate but they can manage the loss.
Estimators are a dime a dozen, it’s the good Project Managers and Foremen that are hard to find. It also sounds like this salesman buddy of yours sold you on something.
Just my experience on this, but the only time a contractor should ever partner up is if they need the financing; if they want a piece of the pie they had better bring more to the table than leads and some existing clients.
Every estimator I hire has existing clients and leads, and can even estimate to some degree. For this I pay a fair wage, and they don't get a cut of the business. Sure some salesmen want a commission but estimators don’t typically get one.
"We are trying to create a mutually benifitual relationship.
Yeah me too, I have a mutually beneficial relationship with everyone that works for me. When its stops being so mutual, they either quit or I fire them.
Let me tell you something about estimators and salesmen, they are not as important as they like to tell everyone. Sure your estimates need to be good guesses, and if you don’t sell work you wont do work, but it's your PMs that will make or break you.
You can take the best estimate in the world and poorly manage the job to the point you lose money, or you can take a stinker of and estimate and aggressively manage it out of the hole. Sure even best PM cant save a bomb estimate but they can manage the loss.
Estimators are a dime a dozen, it’s the good Project Managers and Foremen that are hard to find. It also sounds like this salesman buddy of yours sold you on something.
Funny you mentioned this, one of our church members just retired after 30 years as estimator for a local EC's company, over those 30 years he estimated, and as you said he also was the company salesman, he worked for a pay check, no % monkey business.
Hell I learned something thanks guys.