What Would You Do?

Posted on 13. Dec, 2010 by in Atm Deals, Joint Ventures

So I’m in the midst of a little situation that to put it really gently is pissing me off :-)

Kathy and I started in the ATM business partnering on 2 ATMs with a guy who has been in the ATM biz for a while. We partnered with him to learn the ATM business. So in a nutshell we gave up 50% of our profits on our 1st 2 machines in order to a) learn the ATM business from someone who is experienced and b) get into our first 2 ATMs for less money then it would have cost if we were doing it on our own (because the partner pays more up front for the ATMs.)

Now, I want to apologize up front because this may be a long post but I need to vent and I would like your honest opinion. This guy I knew from real estate. He was heavily involved in the investors group that I use to belong to, as a matter of fact he was the past president of the group. So it was a guy I trusted (btw, I use his leases for my rental properties.)

Notice, I’m not mentioning his name but I’m sure you can figure it out.

Anywho, we decided to partner with him. He told us in the beginning that it’d be a 60/40 split for the machine (we pay the 40 because we’ll be filling with our cash and we pay the monthly phone fee.) No problem. We are learning the business and it’s the cost of business I am OK with this type of partnership and I offer this partnership agreement with other folks that want to learn the business.

Big difference though between he and I? I have INTEGRITY!

You see he said the price of the machine is $3,000 so our 40% is $1200. Ok no problem. Turns out the machines were USED, not NEW. The NEW price was $3,000. Turns out, he had the machine in a bar for a while then took it out and had it in his garage and then decides to partner with us on it.

Yes, you are right, if you are thinking that I should have done more due diligence up front. Yes I should have…and I’m not disputing that fact.

Anyway, we’ve lived with it for a while but now we decided that we wanted to buy him out of 1 of the machines. So we went back to the contract and contacted him. Wellll Mr. Integrity quotes us a price of a buy out that is 11+ times what it should be based on the contract.

He said “Oh I forgot to add this in the contract, so this is how we figure it out.” lol Of course, I explained to him, VERY NICELY mind you that that is not how contracts work, you don’t try to add shit to them after the fact because you screwed up.

I told him that I understand he won’t accept the buy out price that is calculated based on the contract so let’s figure out a mutually agreeable price. Truth is, I just want to be done with this jerk!

Of course, we’ve been going back and forth for a week now because people with no integrity have no idea that what they are doing is wrong and they think they are 100% right and within their right to think so.

Btw, I even told him that we know it was a used machine and he was basing our partnership off of new pricing….he admitted to all of that, but still…doesn’t think he did anything wrong. He wants to keep telling me what he paid for the machine.

So I told Mr. Real Estate/ATM expert that just like in Real Estate…where a buyer doesn’t care what you paid for the house, I don’t care what you paid for the ATM when it was new. It’s not new anymore and it certainly wasn’t new when we bought it.

I could go on and on and I have to tell you, for any of you that know me well……I have been VERY good in my emails back and forth to him. Very respectful and professional, but that’s about to end very soon.

Sooo n ow I ask..what would you do?

Would you continue to try to negotiate with this clown knowing that you are ultimately losing money on this deal because you overpaid for the machine in the first place? This option at least ends 1 partnership with him.

or

Would you keep the machine and the partnership knowing that a) he’s getting paid 50% every month and b) knowing that it doesn’t make good money and we really want to put it somewhere else….we’ve left it there this long because we knew we wanted to try to buy him out. And the buy out calculations are based on # of transactions the ATM does at a location.

or

Do you……(fill in the blank.)

Sorry for the rant…I generally try to be pretty positive and I’m very grateful that I learned the ATM business because of these 2 partnerships but I have a limit with people who lack integrity and I’ve pretty much reached my limit with this guy.

Big lesson here folks: BE CAREFUL WHO YOU PARTNER WITH ON ALL OF YOUR DEALS!! ALWAYS DO YOUR DUE DILGENCE NO MATTER HOW WELL YOU THINK YOU KNOW SOMEONE!

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6 Responses to “What Would You Do?”

  1. Name (required)

    13. Dec, 2010

    you review your contract. or for future partnerships you know you would like out of you add the clause.

    “at any time xxx may buy out xxx at this buyout rate (enter buyout equation)”. Then when they won’t do so, you sue for breach.

  2. Carey

    13. Dec, 2010

    Well it does have an equation of how either party can buy out either party. I did review that beforehand and was fine with it. And I’m still fine with it…I think the question becomes ok what if I want to buy you out, but you don’t want to? Or what if he wants to buy me out because it’s a successful location but I don’t want to allow that?

    That’s the problem I think with his contract….I am having an attorney whose been involved in the ATM business for well over 10 yrs. (and has even litigated contracts for such business) draw up the contracts for my course. I’m going to speak with him tomorrow so I’m really interested in how he handles the “buyout” part of the contract for partners.

    I guess you can’t sue for breach of contract if the contract says that either party can buy either party out, right? Thoughts?

  3. Steve @ Build Bankroll

    14. Dec, 2010

    Maybe think about proposing a “shotgun agreement.” Party A names the price, Party B chooses if they want to be a buyer or seller at that price. It is the same theory as making one kid cut the cakes slices and let the other pick which one they want.

    This agreement should be fair for both parties. If you could get him to agree you could say, I would be willing to be a buyer or seller at $x,xxx dollars. He can pick what he wants to do and you part ways.

    Good luck.
    .-= Steve @ Build Bankroll´s last blog ..Rental Phone Calls – Toktumi – The Service I picked =-.

  4. Scott Costello

    14. Dec, 2010

    You are right in wanting to get out of this contract with the guy. Is it so bad that you’d just cut your losses (for a small price) and just move on? Maybe have him buy you out
    .-= Scott Costello´s last blog ..Probate Monday- What to do with all those business cards =-.

  5. Carey

    14. Dec, 2010

    Steve,

    That is a great idea for a future agreement I believe! I will find out next week what the attorney I’m using for the course contracts puts in them for partnerships. This is probably the single most thing that I am curious about in regards to him working up the new contracts.

    I’m not going to have to do the shotgun thang as we finally agreed on a price this morning. So that’s good news….1 less deal I have to be involved in with this guy. Thanks so much for your post and input Steve. Appreciate it!

  6. Carey

    14. Dec, 2010

    Scott,

    We actually were going to have him buy us out and be willing to lose $400 upfront (from the original price we paid him) and then we’d STILL have to buy another ATM because he obviously would be keeping the one he’s buying. So that would mean we’re out an additional let’s say $1600…….and you know what we were ok with that to be done with him, buttttt I figured I’d give it one more shot.

    I emailed him last night told him that I wasn’t even going to justify his last response with an answer and that he either wants x amount of dollars or he doesn’t. THat’s it….which do you want. I will give you until tomorrow to decide as I’m done being reasonable with you.

    He emailed me this morning talking in circles and then finally agreed to the price. So, we’re drawing up some paperwork to get this partnership with this ATM severed.

    But to answer the question as far as is it SO bad that we’d be willing to take a lose? I wouldn’t say that it’s bad at all because we don’t actually have to deal with him ever….he just made 50% of the profits on the machine. And we were ok with that from day 1….it’s not until we learned the ATM business ourselves and learned how shady he was that we decided we wanted to see how we could severe our ties with him.

    Unfortunately, the other machine that we have with him makes so much money it would not make sense for us to buy him out or for him to buy us out…so we’ll probably be in that deal together until we die :-) I said unfortunately lol but it’s very fortunate that they machine makes so much money it’s just unfortunate that we can’t get out of the partnership with this scumbag. So, I just say to myself “thank you for teaching me the ATM business” lol when I think about that partnership agreement. ;-)

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