B&M Buy In Offered

[Luke1213]

I am a contractor by trade who is in the process of transitioning from this type of business model for more of a fastlane business model. But today, I had a quick impromptu meeting with a gentleman who I have teamed up with to use my license to pull permits. Anyway, about 5 months ago when I first met this man, he got me up to speed on his business and what he sells and how it all works. During this 5 month tenure, he has offered me several chances to buy in with him and become a partner. In the beginning, I wasn't much for it since I was still trying to keep my company moving forward and was already vested in other investments and didn't want to take on the extra work. But now, after seeing how his product sales and knowing his profit margin, I am beginning to reconsider. Since our partnership, I have only pulled 3 permits for him. That is not many permits in 5 months but the kicker is that these 3 jobs that I have pulled permits for will gross nearly $300,000.00. As of now, he has 3 more projects in the works and these 3 could top $750,000.00

For a guy who really just started this business no more than 6 months ago will have turned this into a million dollar business in under a year with a growth potential of 2 times each year. His goal for 2014 was to break 1 million in sales which he will. 2015 he wants to break 2 million in sales and continue to at least double it until he retires in 8 years. So by the year 2022, he wants to be doing over 50 million in sales and I think it is doable.

This system he offers, no one else offers it within a 250 mile radius. He is the sole rep/contractor for some of the richest areas in the state. The overhead is minimal on this type of business. The installers of this product are all sub contractors and he doesn't need to have his own crews, trucks, tools, ect. He does however have the option to have his own crews and even grow his revenue this way.

So where do I come in? Today, I met with him to sign the papers for another project he just sold. We began talking about jobs and what not. I confided in him that things aren't going to smooth for me at the present time and told him I am thinking about liquidating everything and doing something else but keeping my license so to not put him in a bind. He offers it to me again. He wants me to buy in and become partners with him. Other people have offered to buy in with him for $50k and he has turned it down because we have built a trust with one another. So, he offers me a buy in for $25k. Basically a bottom floor opportunity with a really good chance for exponential growth. I would like to do this but right now I'm cash poor. I do have some assets that I can liquidate to get me to that number but this is a large investment for me right now and currently I am vested in other operations that aren't yielding great results and dropping 25k on another investment opportunity could put me in a bad position financially.

Any advice?

 

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[tafy]

It sounds weird to me that if hes making so much money that he needs 25k? What is the real deal?

 

[Luke1213]

I'm not questioning this man's motives or why he needs the 25k. Personally, I don't think he needs the 25k. He is set financially but he is a business man and entrepreneur. It's just a cost to be a partner in his company. I think the 25k is more of a "lets see if your serious about this business". If you invested 25k of your money into a business, you would want to make sure that you at least get your ROI? It's no different than investing into a restaurant franchise. No franchise will let you start for free.

Currently, I am vested in a mining operation in South America. We began this venture over 2 years ago. Myself and 2 other gentlemen have invested nearly 1 million dollars into this operation and we just broke ground last month. We are running well into the red and don't expect to break even anytime soon. We have people who want to partner with us but don't want to buy in. They want all the rewards without the risk. Anybody can be a partner for free, but why would we allow someone to partner with us for free? So they can make money off our investment and hard work? When we tell them that a buy in is xxx,xxx of dollars, it weeds out the ones who are just blowing smoke or looking for a free ride. This scenario is no different than my current scenario except the roles are reversed.

I am not concerned with him or his company. My concern is more of finding a way to buy in without having to come out of pocket with 25k right now. I was wanting to see if maybe someone has dealt with a situation in the past and knows a good way to approach it.

 

[jon.a]

I'm not questioning this man's motives or why he needs the 25k. Personally, I don't think he needs the 25k. He is set financially but he is a business man and entrepreneur. It's just a cost to be a partner in his company. I think the 25k is more of a "lets see if your serious about this business". If you invested 25k of your money into a business, you would want to make sure that you at least get your ROI? It's no different than investing into a restaurant franchise. No franchise will let you start for free.

Currently, I am vested in a mining operation in South America. We began this venture over 2 years ago. Myself and 2 other gentlemen have invested nearly 1 million dollars into this operation and we just broke ground last month. We are running well into the red and don't expect to break even anytime soon. We have people who want to partner with us but don't want to buy in. They want all the rewards without the risk. Anybody can be a partner for free, but why would we allow someone to partner with us for free? So they can make money off our investment and hard work? When we tell them that a buy in is xxx,xxx of dollars, it weeds out the ones who are just blowing smoke or looking for a free ride. This scenario is no different than my current scenario except the roles are reversed.

I am not concerned with him or his company. My concern is more of finding a way to buy in without having to come out of pocket with 25k right now. I was wanting to see if maybe someone has dealt with a situation in the past and knows a good way to approach it.

One thing that I'm learning here is. Often the amount of money that an investor brings to the deal is the least important item.

He has made you an offer at less than half of what he has refused from others, or so he claims. Ask him why.
Maybe he sees value in you beyond money.

You might be right, or wrong. Talk to him about it. Explain your position honestly and listen to his.

If you can provide one another value, there may be something to work on there.

 

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[MJ DeMarco]

Why doesn't he have his own license? Why does he need you, besides the license? Can convicted felons hold licenses? Sorry but something smells of subterfuge.

 

[Luke1213]

Why doesn't he have his own license? Why does he need you, besides the license? Can convicted felons hold licenses? Sorry but something smells of subterfuge.

Leasing out licensing to pull permits is part of construction and it's not any type of underhanded, back alley deal. Some people and companies don't want to hassle with the classroom and all the paper work bs that is involved in the licensing process. Many multi million dollar construction companies don't have their own certified licenses. They simply hire a person who can qualify the company with a license. I know of 100's of companies that do this rather than hold their own license.

He is 55 years old and doesn't want to take the time to go to school and take the exams. It's much simpler to just use another contractor for the permits. It gets a business up and running a lot sooner than taking the time to obtain the license yourself. When I applied for my license, it took me no less than 6 months until they were activated, and I passed my exams the first go around. Sometimes the licensing process can take up to a year or longer, depending on how many times a person needs to take the exams to pass.

I never really questioned why he needs me. Maybe he made an offer to me because I was there from the beginning or that I have 20+ years in the construction industry and I can help benefit him in other ways.

From what I remember, convicted felons can't hold a license at the state or local level and I think this even includes local registered licenses and even a business license or business tax receipt. He does have all his other licensing other than CGC license needed to perform the work.

Before any investment or buy in is considered, I will get a look at all his financials as well as he will have a look at mine. Hate to say it but if looks at my financials, he might retract the offer! LOL