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  1. #1
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    Default Startup & New Business Growth Questions

    I just got a CNC Plasma to start up my small shop with a business partner. We have a contract stating you leave with the machinery you came in with etc.. I'm fixing to officially open up shop in the next few weeks to general public. I have some materials on hand that I think will be more widely used at first. Then any big job I will setup as half up front to cover materials and rest at finish of job. I put a feeler out before even getting the machine and had tremendous feedback and even at 50% of said people actually do business with me I'm not losing out on startup cost. The Shop is behind my house so no rent just electric and time.

    So are there any pointers of do's and don'ts. I know they are all different for sure. I grew up with a family business that flourished into 5 business until 9/11 took out a lot of the stability in the companies we did work for. As far as the Machining side I have been a Job Shop and Tool & Die Machinist for 10 years. Going to use this little machine to build Capitol to buy my 1st CNC Mill and start making better money. I have contacts in the machining community that will give me work if I ever bought a machine. So obviously that Phase 2 of this venture.

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    Sounds like a good plan. Just don’t be surprised when 0% of those potential customers come through.

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    Sounds good!
    Except the business partner bit...

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    Quote Originally Posted by barbter View Post
    Sounds good!
    Except the business partner bit...
    You can't say this enough times. A lot of good friendships were ruined by partnering in business deals. It is very rare that two people can agree on everything and put in equal time, effort and money into a project. I was fortunate to have my bad partner experience in my early 20's and the only thing it cost me was wasted time and the little money to quickly dissolve the partnership and close the business. It was a side venture and my partner let a very needy female sink her teeth into him and turn him into a lap dog. She moved in and made him her personal slave, even though she had no job and just went to community college a couple hours a week. She didn't lift a finger, my friend became unavailable to put in the hours needed to get the business going.

    P.S. Maybe Bob W. will chime in, he has plenty of partner horror stories to tell.

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    If your partner gets married and later divorced, you now have a 3rd partner.

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    There are three posts that you really need to think long and hard about.

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    Agreed with the above, what do you need the partner for at this point? Great that you're starting in your own building and can hopefully get work with just a plasma table, that's nice and low risk. A partner however is another story! I was told never to go into business with a partner back in my 20's and having done it twice I can tell you that was good advice! Not to say it can't work out but spend some time thinking about the infinite possible scenarios where it doesn't.

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    I'm not banking on any of the customers until invoiced that I have their business and I have been continuously reaching out to the business venues that I want to hit. Plus I have some connections on that fore front also that I have talked to and are going to feed me some work.

    I know I have read on the whole business partner issues. That is why I went for a contract through a lawyer to hopefully save some of my rear. i don't have the money to go out and buy a machine with having my kids they do take a lot of money. I grew up working in a family business, and I see daily how much money I make my company. Plus I know without a doubt that I can do this in my own shop.

    So our contract states roughly. We equally put in a certain amount, his being machinery, consumables, and mine being my shop, electrical, and my experience in machining. If you want out you have to give a 6 month notice, and you leave with only what you brought into the business. So if I bought a CNC Mill then its mine not anyone else's to leave with. So if the company buys any machines that would be the 50/50 either buy the other guy out or sell and split proceeds. We both have the same goals set for this company and that #1 to go self employed in a certain amount of time long as the company has X amount of Capitol that will cover your salary needs without straining the company financially.

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    Quote Originally Posted by DieselMater86 View Post
    We have a contract stating you leave with the machinery you came in with etc..
    There is already potential trouble right there. What are the rules going to be regarding maintenance and repair of personally owned equipment? You say the plasma is yours. Of course there is no way it will be in the condition it is today when the time comes for you and your partner to go separate ways. There are all kinds of routes you can take regarding maintenance and repair of machines from hiring an outside tech using factory parts to doing it yourself using second hand parts sourced from E-bay. What happens if one of your machines needs some bearings replaced and you upgrade the Chinese ones that came out as they don't last with high end German ones that are 20x the price, your partner sees the bill and has a fit.

    Let us say you and your partner both have manual lathes of similar size. Your partner sees his lathe as pristine and yours as a beater, so every time he has a dirty job like working on a rusty drive shaft he uses your lathe when you aren't around. Anything other than personal hand tools and measuring equipment needs to be company property to head off trouble. You can assign a value and whoever brings the most the company pays him back until both are equally vested.

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    Quote Originally Posted by sheys View Post
    Agreed with the above, what do you need the partner for at this point? Great that you're starting in your own building and can hopefully get work with just a plasma table, that's nice and low risk. A partner however is another story! I was told never to go into business with a partner back in my 20's and having done it twice I can tell you that was good advice! Not to say it can't work out but spend some time thinking about the infinite possible scenarios where it doesn't.
    I spent the time with my wife, one on one with my partner, and both of our families also sit down. We ran over everything, and voice concerns in any areas that we felt needed address, or wanted more information.

    I'm still being stand offish on all aspects on my knowledge and contacts until things get rolling. So i can see where his head is in the game for certain.

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    Quote Originally Posted by Dualkit View Post
    There is already potential trouble right there. What are the rules going to be regarding maintenance and repair of personally owned equipment? You say the plasma is yours. Of course there is no way it will be in the condition it is today when the time comes for you and your partner to go separate ways. There are all kinds of routes you can take regarding maintenance and repair of machines from hiring an outside tech using factory parts to doing it yourself using second hand parts sourced from E-bay. What happens if one of your machines needs some bearings replaced and you upgrade the Chinese ones that came out as they don't last with high end German ones that are 20x the price, your partner sees the bill and has a fit.

    Let us say you and your partner both have manual lathes of similar size. Your partner sees his lathe as pristine and yours as a beater, so every time he has a dirty job like working on a rusty drive shaft he uses your lathe when you aren't around. Anything other than personal hand tools and measuring equipment needs to be company property to head off trouble. You can assign a value and whoever brings the most the company pays him back until both are equally vested.
    Now i like this point and see exactly what you mean too. Now I'm the only machinist and being able to run the machines will be me. He was my money man lol sounds weird to say. Anyways I will bring this up and have a sit down with him about these types of situations that will arise in the machine maintenance part.

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    You're both doing this part time? What work is he contributing? Or he brought all the capital, you do all the work?

    The problem with partnerships is that it's rare that both partners really have the same plan. Discussed or not. And plans change. At least you don't require the work to live for now, so you can learn some hard lessons without doing any permanent damage.

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    What else does the partner bring besides money? Maybe if you gave more background we could bring up potential discussion points. I have a friend back in Cali I have known for 35 years. He always has a project going on and he stayed with me a couple times. He has been restoring a 70's Corvette for a dozen years, and I think he added converting a used ambulance into a motor home to his list of projects a half dozen years ago. He does some of the work himself, but hires a lot out. I would consider him a hack at best as a handyman and mechanic. I have bought quality hand and power tools ever since I worked on my first $300 beater car over 40 years ago. My friend prides himself on his collection of Harbor Freight junk tools. When he was around he would pick up a tool of mine and say "How much did this cost?" When I said "That impact wrench is probably was around $250 now." He would then tell me he got his for only $29.95 at Harbor Freight. I told him mine was over 30 years old, how long was his going to last and what is the max torque rating? He then boasted about HF having a liberal return policy if something wasn't any good. The strange thing when he stayed at my place he was always borrowing my tools.

    Moral of the story, some people don't understand the value of paying more for quality even people that use such items. People that don't use them rarely understand. Hopefully your money man isn't a full blown bean counter that won't listen to reason.

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    Quote Originally Posted by Pariel View Post
    You're both doing this part time? What work is he contributing? Or he brought all the capital, you do all the work?

    The problem with partnerships is that it's rare that both partners really have the same plan. Discussed or not. And plans change. At least you don't require the work to live for now, so you can learn some hard lessons without doing any permanent damage.
    1-Right now this is a part time venture yes.
    2-He was the up front money to get things moving, goes out for sales for new customers, and will be my shop helper
    3-I do the designing, programming, run the shop daily. (He will talk with potential customer about designs but we agree on what we can do with what we have)
    4-We sit down daily as needed and do quoting.
    5-When marketing, sales, or new part comes to attention we sit down together,and discuss the ins and outs. Cost time mark up and profit also how big the market is or will last.
    6-The Company account is set up in both our names, everything expense wise is accounted for in separate spread sheets.
    7- We have a weekly Business Meeting going over any new ideas, concerns, growth, new markets again, and anything that needs attention.
    8- Every move is agreed upon or we don't act upon it. Every things is planned out to the best knowledge and research. We take our time in making moves because we are small, and it cost money to try new things.
    9- Capitol from the Company will make all the growth happen. If it cost 10k and we have 15k we won't make that move unless we have contracts that customers are ready to commit with us. Which is still a huge move that we will sit down and cover our butts the best we can so we don't bankrupt our company. Most likely wouldn't think about the move until we had at least double the Capitol to make the move comfortably and not hold the company by the throat.

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    Something to be cautious of (sounds like you are considering this already): if your partner is sales and you do the work, keep him in check! Don't let him over-promise to customers to make sales so that he can feel like he is contributing, while you get buried in work you're not well-equipped to do.

    Another thing to think about that I don't see addressed yet is how do deal with defective parts and/or customer complaints. Somehow, somewhen, somewhere, a bogus part WILL leave your shop and end up in a customer's hands. Might not even be your fault. Who takes point on that type of situation?

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    His background is being in manufacturing for almost 25 years from roll forming, now he is Quality Manager over or day job facility. He has a successful real estate company buying and reselling through its own investors.

    My background is Machinist Programmer, grew up in a shop working on anything that had wheels, building offroad trucks, hot rods, rat rods, racing antyhing that has wheels. Working in job Shop and now Tool & Die for 10 years reverse engineering parts, prototypes, one offs, anything that came through the door. I went to college for electronics and computers.

    I learned the hard way in my 20s about money and drinking. After busting my rear learning this trade and still not done. I had coworkers, friends, business friends that wanted to give me 40-100K to start my own shop. After knowing me for a short time and seeing what I could do with machines and my knowledge they seen that I wasn't some button pusher. if i have to work my butt off and buy him out of his share in 5 years I will do that if I see it needs to be done.

    After working with me and checking my fixtures, gauges, part nesting, and everything I have made here. We got to talking and joking about it. Then one day he came to my house said what could we do with this, and i told him it could be the start of a shop to get us a mill and lathe (used) at least. So before we bought one tool we sit down and drew out a plan and we haven't steered away from it yet. I have random emails from people wanting things made, and even people I know wanting me to make things for them. We will be offering a better quality product at a great turnaround time and at the best price possible. I have thing programmed before hand and ready to go for the next day because he gets off before I do. He goes to the shop runs while I'm not there, and when I get there we nail it together and then I work a few hour after he leaves. We keep looking at ways of being more efficient and have the shop set up to flow in one way and out another so we utilize ever inch we can.

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    Quote Originally Posted by BoxcarPete View Post
    Something to be cautious of (sounds like you are considering this already): if your partner is sales and you do the work, keep him in check! Don't let him over-promise to customers to make sales so that he can feel like he is contributing, while you get buried in work you're not well-equipped to do.

    Another thing to think about that I don't see addressed yet is how do deal with defective parts and/or customer complaints. Somehow, somewhen, somewhere, a bogus part WILL leave your shop and end up in a customer's hands. Might not even be your fault. Who takes point on that type of situation?
    Yes we have talked about this a few times he doesn't make any promise or if it a big order I go with on the Sales meeting. We make the quote together after looking at the designs, and time needed for getting job complete. I hold him to his word and he hold me to mine. If i say it takes X amount of time and I'm at double that then hes on my butt wanting to know why or where we screwed up.

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    Do you have any idea how many guys have a plasma table in their garage?

    I have a 20K lb laser in my barn and there's no way in hell I will do cutting for the public.

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    Sounds like you have thought things through pretty well. Good luck, keep us posted on how things go. We will always be here to say "I told you so, partners can be trouble."

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    I don't take financial advice from the guy at the freeway off ramp with the "will work for food" sign. Likewise, be careful of advice from those who've failed at partnerships.

    My big concern for the business is the 50% up front. I don't deal with vendors who have those terms. If after I give them financial references they can't front the material costs I go elsewhere. And, do you expect to take a markup on the material the customer is paying for? What if you screw up his paid for material, how will you repay him?

    As someone else mentioned, there are a lot of plasmas in garages. What will make your services special? Is there really enough profit in plasma to fund a CNC mill purchase?

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