Canadian Contractor

John Bleasby   

ENTER OUR CONTEST! How does Dave’s business grow from here?

Canadian Contractor

Handing the business to son Billy comes with son's ambitions to grow through real estate speculation

Dave Ullman is progressively turning his eight-man renovation contracting business over to his 24 year old son Billy as part of a five-year exit plan. Dave thinks Billy’s ready, but figures he’ll be back now and again to help Billy with the transition.

Billy enjoys the business and is skilled at pretty much every aspect on a work site. He’s ambitious too, and would like to grow the business, not just maintain the status quo.

That has led the father and son duo to a crossroad. Dave and Billy have completed a major renovation for a wealthy client, Ken Morgan.  Morgan really liked the Ullmans’ work and has a business proposition for them. “I’ll finance the purchase of run-down houses; you and Billy will fix them up. We’ll split the profit after resale in proportion to our respective investments.” Morgan explains to the Ullmans that they have the potential to make a lot more than their usual profit for just contracting.

Billy is excited, and sees it as a way to expand his dad’s company under his leadership. Dave is hesitant, however, and worries about the risks of having to front all the labour and material costs, then wait for the resale before seeing any cash and potential profit. On the other hand, Dave wants his son to be happy. What should Dave do?

  1. Stay cautious, and explain to Billy that there are other ways to grow the business than to partner with a wealthy man in real estate speculation.
  2. Go ahead with one project with Morgan, and see how it works while hoping for the best.
  3. Set up a separate company with Billy to handle the house renovation flipping projects to mitigate any potential financial problems.
  4. Loan Billy money to front the required costs and let him go out on his own with Morgan, keeping himself and the contracting company at arm’s length.
  5. Some other idea.

dcl070t1_k1Your suggested solution can be any combination of these ideas, and should be accompanied by a brief but clear explanation. There is no absolute right or wrong answer!

The response chosen as the winner will receive a
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7 Comments » for ENTER OUR CONTEST! How does Dave’s business grow from here?
  1. Murray Bell says:

    #4 This is the smartest option. Dave does not want to risk using cash from other jobs on the flips if they go over budget on time and materials. By separating the two, the flip must use its own funds, just like any start up business. This will teach Billy about staying on budget, and getting the projects done on time. If the flip does not go well, the main business will not be put at risk.
    The other advantage of this arrangement is they Billy will get a glimpse at what his father had to go through to build his business up over the years. Billy would have to get quotes from sub trades, do a budget, manage the trades, and make a lot of decisions on how to get the best bang for his buck. This is great experience for Billy learning the managerial side of his dad’s contracting business.

  2. Bob Wishart says:

    Dave should make sure his financial partner has BUYERS for the homes that Billy will be renovating before he ever swings a hammer.
    Caution is golden here!

  3. Bill McCance says:

    It might work out if both parties are honest and true to the concept
    Hard to finance from the unweathy persons perspective though
    I might try one and hope I can trust the wealthy man

  4. Nick Vriend says:

    This New business venture will work providing both parties agree on the houses purchased, expected cost to renovate and the potential selling price. There is always hurdles to cross in every rebuild so Communication is Key, the wealthy investor must be involved in every step of the way to fully understand the process. A business agreement must also be written up to protect both parties. Give Billy the Lead on this, great learning tool for him. After the first house is completed and sold, calculate the total cost. Is there a profit? both parties satisfied? Can we improve?
    If so Great! move on to the next!!!

  5. I would say #3 or not at all at this time – while propositions like this seem lucrative, it could backfire – the investor and Billy may clash over profit, design, quality, etc – or take advantage of Billy being ‘green’…. I’d suggest Billy take the reins of Dave’s current business model and focus on his project management and marketing skills; once he has a few successful jobs under his belt, then consider entering the flipping game.

  6. I would stay cautious, and explain to Billy that there are other ways to grow the business than to partner with a wealthy man in real estate speculation.

  7. harry says:

    try one or two and keep it simple and make sure very one is on the same page keep records of everything you do
    it can work out
    I would not set up a separate company at this point as that all cost money

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