Screwed Up A Good Friendship?

[schamp]

Yep, you got it. Kinda like watching a train wreck.

[Zeke]

I've had 2 business partners and we had a lot of fun on and off the job. I lost the first one to his marriage. In fact, I lost all of my friends when we were young to marriage. I basically couldn't stand any of the women, but when they got pregnant, it was definitely game over. I mean they wanted to live normal lives!

The 2nd partner went away when I thought I was smarter then he and suggested that I be the the "CEO" while he became the "COO." We were painters and there was not even a corporation, so it's just an example of relativity. Well, he is the one that became very successful. No, he's not very bright to this day, but he knew how to stay with the game and not out think himself, something I've done all along.

[ruf-porsche]

Also don't sell or buy a car from a friend.

[Zeke]

Originally Posted by ruf-porsche

Also don't sell or buy a car from a friend.

Amen. And I haven't.

[911Rob]

Originally Posted by 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.

Jim,
I'm now planning on how to go forward.
This was very, very helpful. Thank-you.

[911Rob]

Originally Posted by RoninLB

you probably spotted his nuances earlier as a social friend ?

Ronin,
Probably the shortest post yet wisest.
spot on pal, my bad.

My challenge is that I love the guy, he's fun to be with and I get his personality and I'm OK with it.

I think Dueller's post was onto something there.
my bad again.

Thanks Ronin, I appreciated your post.

[911Rob]

Originally Posted by Seahawk

......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.

Guys?
Of course everything was in writing; to the "T".
I'd be happy to email the JV Agreement to anyone that wanted to look it over.
I did it personally, and if anything, it clearly spells out my expectations of the partnership.
Challenge is when it's not followed.
How hard do you kick your buddies butt?

[911Rob]

Originally Posted by onewhippedpuppy

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.

Hey Matt,
This is now my new challenge.
How do I go about desolving the JV?
We've pretty much gotten the past business resolved; He's pulling up his socks now too and performing alot better.

But I think I want to end it.
I'm thinking he thinks we're all gonna chock it up to "learn from our mistakes" and move forward. He tried to discuss some of the future with me the previous evening and I told him I wasn't prepared to discuss it at this time. It was like telling your high school GF that you're busy tonight. Gosh, it's hard.
I'm pretty sure he wants to go forward, but under a new agreement?

I'm thinking this one through carefully, I don't want to make any mistakes this time?

I invited him out tonight with our wives, but he declined. I thought if we could get out as friends I could highlite that the friendship was the most important thing to me; the business should be set aside to salvage the friendship.

This is my new challenge?
I'm about 99% content with just paying him out his fees on the past contracts, at my loss and no loss to his fees. (We're talking six digits guys).
OK, I can get over that, I've had 7 digit losses in the past, I can get over that easily enough.

So now to move on.......
What do I do?

I've got 12 more homes to build; probably 6 this year and 6 next.

[911Rob]

Originally Posted by vash

what's easier to make? friends or money?

Funny, the very best friends I have today in my life are the ones that could give two shyts about money.

[911Rob]

Originally Posted by sammyg2

You don't need friends like him.

Hey Sam,
with all due respect; this guy is a very good friend. When it comes to money, maybe not. For the first several years of our friendship, my wife and I paid for most things. We did not care and we explained that to them.

My buddy & I would do development business as a "Hobby" together; that is we'd go off looking through showhomes on weekends and scoping out what the regional developers were doing? We'd go to Town meetings and we'd watch the RE markets very closely. Before I became a Realtor, this buddy of mine new more about the local RE than anyone I knew.

When we got together we always enjoyed ourselves. Our wives got along famously and our kids too. His daughters are like my daughters to me.

I'm not prepared to throw all that away, at any cost; I've got to keep the friendship as my priority. Wife thinks so too.

Thanks though,

[911Rob]

Originally Posted by milt

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

Sorry Milt, this one went over my head?
I do respect your wisdom in your posts, so I'll take it for what it says.
With that, my bad then.

[911Rob]

Originally Posted by 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.

Great question. Thanks Todd.

It was a growing anger; pent up over a year of doing business together. I thought that this guy would supcede to my experience and expertise; since I had alot more experience than him; However, he has been doing accounting for one of the largest development companies in BC, so he had his ways. I didn't agree with his ways.

As a construction engineer I stongly believe that people hire me to be the expert in the project; which means in planning, budgeting and scheduling. If I fail at any of those things, then I don't feel I've earned my fees.

I got pissed off the first time when the job cost reports were all screwed up. The bottom line "out of pocket" expenses were OK and we were on budget. My business partners didn't want me spending too much time on the house building end of things, so they incouraged me to be happy and stay out of it. But I wasn't happy.

Things got progressively worse. I got more and more angry. The bottom line is that it's turning out to be my nickel because I'm the guy with the nickels; that pisses me off. Cost to complete reports are screwed up and schedules are delayed because of my buddies management styles. He is very reactive and not proactive.

Last January, his screw ups cost me six figures. It was the first time the screw ups showed up in the reports. I said, OK, lets regroup and here's how we do it. This involved me slashing my profits by six figures and the builders by half of what I had done. Negotiations pretty much took up all of January, so February reports were pretty much on the new track.

Now comes the end of March and we're looking at more errors in the reporting systems. Cost over runs to mid five figures. It's due to the poor control on the spending, labor and material purchases. He continually fails to ignore the budget when he does his purchasing and often hasn't got a clue what is spent until the invoice shows up? I guess he's worked for too many rich guys before, I dunno.

Keep in mind, there are 3 of us in this venture. My other partner just trusts me to do the right thing and backs whatever I say or do; but he's pissed about the entire situation too; especially since we put so much effort into the planning of the cash flows, budgets, sales, etc and then to see them go to pot.

I'm pissed because Dueller is right in his devils advocate post, my friggin bad.
thanks Todd

[911Rob]

Originally Posted by dtw

I think you should sock him one square in the eye. That's how men settle things.

Originally Posted by RoninLB

some people need a beating once a year to keep a good head in place.

I had those comments coming, didn't I.

berettafan;the cynical outlook is that you temporarily fixed his cash flow problem and he'll be back when that runs out.

You're already right and it hasn't been but a couple days.
He opens the mail on Friday and low and behold, an invoice that he forgot to account for in the CTC's. The one's that he guaranteed would be it, final, complete, no mistakes, etc.

If it were me I'd have paid the darn invoice from my own account for want of saving face; not him, he just picks up the phone and says, "we have to add $5800 to this job/code" I couldn't belive it! The guys picking up six figures of profit from me and after all this I get a call like that? I dunno; I think you're right beretta. Thanks.

[911Rob]

Sorry for all the posts above guys, I just hope that you all realize how much I appreciate your input. Thanks again.