Screwed Up A Good Friendship?

[911Rob]

I think I might've just screwed up a good friendship?

I'm always giving people advise here and there, so I thought I'd humble myself to the PPOT Brain trust and see if it helps?

Good buddy of mine, going on 9 years now; hubby & wife friends; Dinner, Drinks, Good Times People. Kids hang together too. Lots of fun, Lots of laughs.

He's an accountant for a large developer; one of the biggest in BC. He works as the right hand guy for the owner and as the right hand guy for the companies main CA. He knows construction, development and accounting; all good attributes. From time to time he'll get some input from me to help him negotiate his day job better.

Introduce the boom and he gets gifted a lot from developer boss, "pay me when you sell it, make some money" So I help him organize a spec home, he builds it by hiring a builder and I sell it for zippo for him. Poof, he made some good dough; like $75K.

He does it again, same results; I make a little commish on the 2nd home. Nice. Then I help him get his own New Home Warranty Program and become his own builder. I go onto the company officers to do this; grats. He builds his first house, no different than hiring a builder, only he's the builder. Does well, we sell it. I give him a good deal selling it; poof he make's $100G's. My friend starts paying for the odd dinner now (true).

So I decide to bring him into a development I'm doing and together we'll build a few homes; say 10. We do. First couple come in on budget, but I can't stand his accounting/control practices (and he's the accountant/job cost control) My wife and dev partner tell me, relax; we're on budget. OK, I do. Couple more houses come in on budget, but its just. Then all of a sudden in January one came way over and we were in the throws of building the last 5 all at once; this being the first of the five.

We take some immediate corrective action. We redo the CTCs (cost to complete) and reconcile all the accounts; profits are adjusted but everyone can live with it. February statements come in on budget.........

All of a sudden March comes in, (thus my note tonight) and we're way out of whack! Big Problem. We also just turned over the last of the 5 homes, with the completion of these 10 homes now; 3 were sold specs and 7 were custom builds under performance contracts. The custom builds gave him the challenges.

So we're deciding what to do with the crap and buddy says things like, "I'll get my lawyer to call you tomorrow" and "I want a contingency for the future warranties too" and "I want my fees paid regardless of the profits". Keep in mind he is being paid very well (he made the mistake of telling me how much his salary at work was....$60K/yr); we're paying him much better. Of course the LIEN word comes up.

Well this got me all pissed off and I went off on him; pretty much pounded him into the dirt and there's no chance he's coming out for awhile. My big challenge is the 9 years of friendship......... man, I don't want to throw that away and I need some suggestions?

I've worked hard at keeping the friendship, but he's become more about business than anything. He's never been a businessman before and he's gotten a rep for being a miserable prick. Your thoughts guys? I appreciate it, thanks.

[dewolf]

it's the age old adage..friends,business and money..you know the rest..

[Chocaholic]

Rob...it's times like this that you find out who your friends are. Seems you took a friend and created a monster...but you're not off the hook. You made him a bucket of money and he forgot that, or at least he see's it differently than you. Two sides to every story.

Suggest you save your family (and his) the trauma of a battle. Sounds like you each cashed in on the partnership many times. Finish off this project, even at a loss and consider it a lesson learned. Friends are friends, but business is business. One of you (or both) is struggling to understand that.

You entered into a partnership of convenience, not one that was carefully thought out with a business plan and a defined strategy to carry things forward. The opposite of what I've seen you preach here. A business partnership isn't much different than a marriage. Again...lesson learned. And remember, he doesn't see it the same way you do. Probably posting the other side of this story on some other forum right now. Respect that and move on.

In time, if there's any "real" friendship there, it should heal. If not, so be it.

[RoninLB]

you probably spotted his nuances earlier as a social friend ?

[Seahawk]

I am in business with a very good friend of mine. He is right out of central casting: Notre Dame, F-14 guy, Top Gun instructor, blah, blah.

We both insisted from the start that everything was in writing, to include roles and responsibilities, accounting practices, management tools, employee processes, how to dissolve the company and a firm grievance resolution process.

There is much more, but you get the picture: We want to remain friends so we were brutally honest at the start so we could be attentive to each others expectations, both from a financial standpoint and personal perspective.

[gruppe75]

I just went through this myself. It appears that your friendship for him is stronger than his friendship for you. He has just set up new parameters for your friendship, it is time for you to adjust to them.

[KFC911]

Now that you've both had a chance to cool off, if you think you overreacted when you "went off on him", you might want to have a "face to face" over beers and mend the fences without discussing business. You've recieved some excellent advice regarding the business aspects going forward imo. Good luck!

[onewhippedpuppy]

Paul did it the right way. When you mix money in with friendship, the results are often not good. ESPECIALLY if the boundaries and responsibilities are not well defined.

Rob, sounds like it's time to cut ties from a business sense. Your friend has become a business associate who is now only looking out for his own best interests. Not only a business associate, but a poor business associate. You should sit down with your friend, define how you will sort out the remainder of the mess (on paper), then cease to do business with him. Buy him a beer, tell him that you value his friendship more than money. If he can't get past that then he's not the friend you thought he was. Sometimes money does funny things to people, and rarely are they good.

[kaisen]

Originally Posted by onewhippedpuppy

When you mix money in with friendship, the results are often not good. ESPECIALLY if the boundaries and responsibilities are not well defined.

Rob, sounds like it's time to cut ties from a business sense. Your friend has become a business associate who is now only looking out for his own best interests. Not only a business associate, but a poor business associate. You should sit down with your friend, define how you will sort out the remainder of the mess (on paper), then cease to do business with him. Buy him a beer, tell him that you value his friendship more than money. If he can't get past that then he's not the friend you thought he was. Sometimes money does funny things to people, and rarely are they good.

+1

Re-read this several times

[masraum]

Well, it sounds like based on what you've posted that someone screwed up the friendship, but I don't think it was you. I guess you could count you thinking going into business with your buddy as the beginning if you really want to take the blame.

Sounds like he's been a dick.

[sammyg2]

You don't need friends like him.

[Superman]

Originally Posted by sammyg2

You don't need friends like him.

A rare occasion on which I agree with one of Sammy's remarks.

[Dueller]

Let me play devil's advocate for a moment.

You help a friend out showing him the ropes on the first home and he makes a sweet windfall. His appetite is whetted and you help him with the second home, he makes a windfall and you get a few crumbs (commish). So he's made $175K and you've made what...$10-25K?

This is where it goes off in the ditch I think...you decide to bring him in and give a fair amount of control in your 10 home development project. Exactly what was he bringing to the table? Must have been money or raw land or asssumption of some potential liability. You certainly did not expect he was a wunderkind with a midas touch based on his limited experience of flipping two homes with your assistance, did you?

His appetite was whetted with the first two deals. Did he not realize potential problems in trying to go from turning one house to a 10 house development? Was it communicated to him? Doesn't sound like it to me. BUT, given his limited experience and overwhelming success on the first two you helped him with he thinks he has the midas touch.

Money is a funny thing as someone previously stated. People who make sudden financial windfalls after having observed/worked for others who routinely make windfalls makes a person think they now are a lot smarter than everybody else. Hence, when CTC are out of control and the profits aren't there and potetial losses/liabilities are looming, it could NOT possibly be MY fault. After all look at how succesful I was on the first two houses I did by myself. The only thing that has changed in his mind is that McKibbon is now his partner...SO IT HAS TO BE MCKIBBON'S FAULT!!!!!

Not saying the above scenario is your fault...just looking at his possible perspective. Withiout knowing the contractual arrangements and delegation of responsibilities in ya'lls deal, including negative contingencies, I really can't lay blame. Did you have everything laid out on paper? Did your written contract say his fees were to be paid regardless of profits? (Here he is slinking back to the role of employee rather than neophyte businessman/developer). Is he wanting to abide by the original terms of the contract and you want to change the deal because of setbacks for mistakes made by him? Did you give him too much control for an inexperienced developer?

DISCLAIMER: The above analysis was pulled out of my left butt cheek, so proceed accordingly.

[vash]

what's easier to make? friends or money?

my two friends asked me to develope a condo in san francisco. i declined and they went forward with a few people. it got ugly in the end, and they just barely made their money back. one guy is a super cool, laid back dude...and zero feelings got hurt. we are all still buddies. i dont have the same personality, and i am glad i sat on the sidelines.

[nostatic]

So what exactly were you pissed off about? That he didn't pay you enough money? From a dispassionate 3rd party, it sounds like that ($$$) is the root of the problem. That rubbed you the wrong way and from that point he "owed" you. Doomed from there.

[911Rob]

O.K., I started to read the replys and was going to post some thank-you's and responses, but at this point I can only say "THANK-YOU" to everyone that posted here; I really appreciate this in more ways than you could know.

Every post has it's values and merits; I've been dealing with this issue all morning again and the crap is gonna hit the fan. Some really, really good insight here that will help me with the situation. Man, I should take down my barriers and put more trust in the PPOT brain trust MORE OFTEN!

Couple things;
I own the development, lock, stock and barrell. So there is no involvment there. Market value for the lots is very apparant and we have been very fair with the lot values in the formulas.

My "friend" has a huge development background and is no fool. He knows the lien act inside/out; he knows the building regulations inside/out; he is a good builder, but he's always done it as an EMPLOYEE before hooking up with me.

We have a JV agreement, in writing. We have (had) a business plan, in writing. Etc. That's all good. I ammended the JV agreement the last set back to take less profit on MY end and keep his end higher, as he is doing the day to day work. This new CTC, I can still live with it.

Due's "devils advocate" post has some good points. duh? Crap! How did I miss that?

I am moving forward today to salvage the friendship and end the business relationship. This has been a struggle for me since the first round of cost reporting; the builder couldn't give me a CTC report and I freaked at that point. He lacks some skills in this department.

Once again, I appreciate your reply's; I'll be back later tonight... got a full day planned.
Cheers boys

[Dueller]

Well, Rob, you often suggest various self-help resources, books etc. May I suggest the most valuable resource when it comes to analyzing business relationships?

Ready? Don't laugh....






Godfather and Godfather II.

Seriously.


EVERYTHING a person needs to know about business dealings and most any type of relationship can be found in these two films. I'm not suggesting you go out and whack associates who cross you. The murders in GF1 2 are metaphors.

I've held this belief for sometime, but recently I read an old interview with Puzzo and the film's director and confitrmed that the book/movies were intended to be about American capitalism and that the organized crime theme was really secondary. Interesting, huh?

GF3 sucks.

[berettafan]

Originally Posted by 911Rob

"I want my fees paid regardless of the profits".

This is not an accidental, 'oh by the way' demand. The earlier in this process that this guy came up with this (or was told about it by his atty) the more of a 'people user' he is.

This concept is the cornerstone of many a shifty investment scam.

And it most certainly is not in good faith. In fact it demonstrates the lack of such.

[MRM]

EDIT: What Dueller said.

[Zeke]

Excuse me for not feeling sorry for either of you. Dueller owns this thread.