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Air conditioning business???

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cypressfarms

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A good friend of mine had an a/c business with a partner. The partner and him split; the partner supplied the working capital but was embezzling. My buddy has the experience and is liscenced and has over 25 years of a/c experience. Problem is that he's broke. He's asking me if I would want to go in with him and provide the capital (read cash) - and he provide the experience/ work. On the surface it seem like a good idea; a/c men are in high demand here and there is a short supply of them. Problem is that I have no experience with a/c businesses, although I'm a manager by profession. He wants me to set up an account where he can use a debit card to purchase the supplies he needs, and then deposit the invoices upon completion. LIke I said, he's flat broke and can't even go out any buy the units to install right now. I would get a percentage of the profit, calculated monthly. My wife is anal about money and could monitor the account on-line to make sure everything was on the up and up. (She's also been a purchasing agent)

Anyone have any knowledge of this type of field? Although the initial investment isn't that much (less than 10 bred cows would cost), I'm always leery of pulling money out of savings. Any input would be appreciated. You can pm me if you'd rather.

Thanks in advance!
 

HerefordSire

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I wouldn't take a chance in ruining your friendship. However, if you want to help him get on his feet is another matter.
 

dun

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HerefordSire":2q57p2o5 said:
I wouldn't take a chance in ruining your friendship. However, if you want to help him get on his feet is another matter.

Rather then a partnership, why not loan him X dollars on a note?
 

HerefordSire

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dun":30g0iav8 said:
HerefordSire":30g0iav8 said:
I wouldn't take a chance in ruining your friendship. However, if you want to help him get on his feet is another matter.

Rather then a partnership, why not loan him X dollars on a note?

That is what I am thinking. Not literally a loan though. It could take the form of buying AC units in cypress' name so he gets his cash before anyone else.
 

cypressfarms

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He's coming over Sunday to talk to me and the wife. I talked to him a while again this evening. He doesn't want a loan, he wants a partner - even if a silent one. I also have a lot of connections in the area, and he doesn't. I told him Sunday to bring their invoices for the last month and come with a plan of what he wants to do. The previous partner he had was a 50/50 deal - with the partner doing the books, which is how the embezzling came in. He a darned good a/c guy, but his mgt. skills aren't the best - that's why he got took. He trusts me and I'm assuming that he wants someone responsible that he can trust to handle the finances (that would be my wife :lol2: ) I'm guessing we'll put some cash in a business account, and get him a debit card to purchase equipment. The wife and I would have to review the business account frequently online to make sure everything is going o.k. We would have to start some type of LLC, I'm assuming, to protect all parties. We would also have to get our attorney to set up everything as well. I'm guessing a fair split would be 30 to 35% of net profit should be ours, the rest his. I don't care to work on a/c's but it may be a way to help a friend and make a little money on the side.
 

kscowboy

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I'd be quite leery of this. I'm a small contractor and there is no reason i need capital. I require deposits from customer to purchase materials and collect on the labor immediately on job completion . Any contractor who finances his/her business on Visa is just setting themselves up for a big surprise when they find out , oops , I spent more than I earned. Run away very fast. Sounds like a big hooey story to me.
 

Fred

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I would be bothered that he has 25 years experience and is flat broke. Sounds like a risky deal.
 

Ryder

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cypressfarms":2c0bk2gd said:
I'm guessing a fair split would be 30 to 35% of net profit should be ours, the rest his. I don't care to work on a/c's but it may be a way to help a friend and make a little money on the side.
NO!
That is a way to ruin a friendship and get yourself in a bigger mess than you ever dreamed possible. Listen to what I am telling you.
It is business. Period.
When money comes into the picture it becomes a whole new ball game.

If you want to help your friend, then give him the money. I would say loan him the money, but if you do this you have to do it assuming you will never see it again.

Maybe you could be an investor for a percent of the profits. Not a partner. But if the business works, at some point in the future he is going to want to buy you out. Be willing.
 

Running Arrow Bill

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Fred":3q0lbf5m said:
I would be bothered that he has 25 years experience and is flat broke. Sounds like a risky deal.

I agree, Fred. After that many years "experience" he obviously has little if any business management skills. Historically, one of the top reasons businesses fail is due to poor management. The experts say that if any business person doesn't have "all" the necessary skills (technical, accounting, financial, advertising, etc.), then they should hire someone who can fill in the gaps.

I also suspect that this guy also has poor estimating and bidding skills (possibly also bidding low to get a job without a clue as to his "actual" costs are...overhead + operating); and, he probably doesn't keep good records or properly invoice customers, etc., etc., to provide an accurate accounting trail.

People like this are like the "famous entertainers" who are so wrapped up in their stage act that they either aren't interested in (or) haven't a clue about the balance of income vs. expenses; and, after earning millions of dollars from their performances, they end up broke, or liabilities seriously exceed their assets.
 

kerley

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If your friend has been in business for twenty five years he should have a good work vehicle and his own tools of the trade. He should also have a line of credit at a supply house for all his material needs. If he owes his suppliers past due bills then that would be the problem. If you have always paid your suppliers then they will supply your business needs. Does he owe back state and fed taxes. [partner]. You are in a bad spot, could be a looser ether way. Good luck.
Tom
 

backhoeboogie

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Cypress, He doesn't sound like a very good businessman to me.

He's flat broke? You know that type. Something is wrong when someone that old is flat broke and can't raise capital. Banks practically beg me to take out loans for equipment.

IF his partner was taking him, he wasn't keeping a close eye on things. This was a "silent" partner with access to accounts that weren't being monitored? Not a good watch on the bottom line for sure and there's more to note along this subject.

If he is installing a brand new unit, he's not out all that much capital in the first place. Put in a unit, collect on the installation from the contractor or customer. Then go on to the next.

Is he bonded? If he's in this bad of a mess, you don't want to put your name on the law suit list.

This probably sounds pretty harsh but I have little sympathy for anyone who is this old and flat broke. You can wind up the same way if you enter this venture Cypress.

If I were this guy entering a business, I wouldn't want to share profits for my labor.

None of my business in any way. Just looks strange and really fishy from the outside looking in. Logic doesn't match the scenario you're describing.
 

cypressfarms

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Backhoe, your dead on right. He doesn't have any "management" common sense. His partner was apparently using company money to pay his personal bills (vehicle notes, Florida vacations, etc) and he didn't realize it. He came over a couple of days ago to talk to me and the wife. He seemed surprised when I brought up an attorney, forming an LLC, wanting to look at the past several month's invoices, his customer base list, etc. Although I never had asked him too many personal questions about his financial life (because it wasn't my business before), it appears that he's living paycheck to paycheck and doesn't really have a grasp on "inputs and outputs". He is a good friend, though, so I feel obligated to at least give his offer some considerable thought. :? Looks like a no win so far...
 

Lammie

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My BIL was the same way. He's an electrician, or was, and had worked several good jobs. Then he went to work for a local AC guy and they had a falling out, so old Dave decided to form his own company. Trouble was that he was not willing to respond to people when they really needed him. When your AC goes out here in the middle of the night or on a weekend you want someome to come fix it NOW. It gets pretty freaking hot here in summer. He wanted to work Monday through Friday, 9 - 5. That and he's an idiot who has gone bankrupt twice.

Can my sister pick them or what?
 

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