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How to value build-time in a partnership

BobbyLucas

Well Known Member
I'm looking to take on a partner in my on-going RV-12iS build and we're looking for some advice about putting a dollar amount, or equity percentage, on build-time spent...

I know when selling an experimental you may not get much if anything for the time you've put in building it, but what about when building with a partner where the work-split is far from 50/50? I've already got 280 hours into my build and have someone looking to partner with me who probably won't have much time to help, so I will be doing the majority, if not all, of the work. We both agree that my time is worth something to the partnership; we just need to agree on a value.

How have other's handled this? An hourly "wage?" A certain % equity credit per hour? Or no value at all?
 
Good one!

Never heard this question before but I’ll throw a thought out there.

Since labor is never really counted in terms of aircraft value, one would have to put a low value in it in your case. What about $10 an hour for your 280 hours?

I agree, it should be worth something to your would be partner.

You would feel that you are being compensated fur your time. He would feel that he had ownership of what you have done.

Not necessarily saying he should pay you the$2800, but perhaps it would be taken into account when one, or both, decide to sell.
 
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Never heard this question before but I’ll throw a thought out there.

Since labor is never really counted in terms of aircraft value, one would have to put a low value in it in your case. What about $10 an hour for your 280 hours?

I agree, it should be worth something to your would be partner.

You would feel that you are being compensated fur your time. He would feel that he had ownership of what you have done.

Not necessarily saying he should pay you the$2800, but perhaps it would be taken into account when one, or both, decide to sell.

Yup, exactly. I assume we'll form an LLC that will own the plane... The value we agree on for labor would feed into the equation for percent ownership in the LLC. $10/hr was kicking around my head too, but nice to get other opinions. Just want to make sure no one gets the short end of the deal.

(EDIT: Percent ownership would still be equal, but I would pay for a small portion of mine in labor, while any non-builder partner would have slightly more out-of-pocket.)
 
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The potential problem with these "one on one" relationships is the ability not only to track hours, but the equivalent value of the work performed by your partner.

With my background (and equipment), I can probably construct parts and assemblies 2-3x faster than a novice and overall planning & work-flow skills virtually guarantee unequal contribution.

It takes mature personalities and objective thinking skills to maintain a strong, positive relationship.

Repeating my opening comment of "potential", I wish you the best!
 
The potential problem with these "one on one" relationships is the ability not only to track hours, but the equivalent value of the work performed by your partner.

With my background (and equipment), I can probably construct parts and assemblies 2-3x faster than a novice and overall planning & work-flow skills virtually guarantee unequal contribution.

It takes mature personalities and objective thinking skills to maintain a strong, positive relationship.

Repeating my opening comment of "potential", I wish you the best!

Yeah, neither of us is looking to split hairs; just want to put some kind of build equity into the equation. Whatever rate we decide on will be a drop in the bucket of the total project cost. Who knows, if he does help build, it could even slow the process down (I don't know his skill level), but I would still have no problem crediting him the same hourly rate. I enjoy teaching and it's more fun to have someone to build with anyway. As an engineer, I've got the objective thinking skills down and, as a psychologist, he's got relationship skills... Heck, one of us may even have a mature personality! He's also got experience with fractional plane ownership. But I digress...

P.S. I track my time using an app called HoursTracker to clock in and out, pause for breaks, etc. Enginerding.
 
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A few years back, we bought into a project where the airframe structure was primarily complete, but systems install and firewall forward were left to be done. Teh honest truth was that the original builder was stalled - he never would have finished without our joining in. We paid for half the materials cost to that point, and along the way, each of us contributed as more things were bought, traded, sold, etc....it became almost impossible to account for everything. In the end, the airplane was finished and flew, and our partner - now a good friend - found that he really didn’t;t have the skills necessary to fly the airplane, and asked us to buy his half, which we did.

At no time did we try to account for fractional labor on anyone’s part, because we all brought different skills to the equation, and in the end, no one felt cheated because of it. He might have put in more time, but I brought more knowledge. We’Re no longer partners, but are still friends - an important thing to me.

Personally, I think that going in to a partnership trying to account for every dollar and hour is sort of like going into a marriage making sure the pre-nup is perfect...it sort of implies that there is a divorce planned for the future. Yeah, I get the rationale behind it, but trying to account for very penny can sort of suck the fun out of the whole process.

When we first started thinking about a partnership on that project I first mentioned, I told our future partner that we’d work together with him for a month to see if we were compatible as workers and potential partners. If, at the end of the month, we were having a good time, we’d buy in. If not, then the month of work we’d put in would be our gift to him to help him get moving on his project. I think that sot of set the tone for a friendship which has lasted beyond the partnership.

Just one perspective for you - it worked for us, but it might not work for everyone....

Paul
 
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From personal experience: An airplane partnership destroyed a friendship amongst two friends, and my relationship with my brother-in-law that is irreparable. YMMV based on the personalities, dedication, and cooperation of all parties involved.
 
Insurance

Just another thought. I vaguely remember a conversation about my time with Gallagher. Seems like they would reimburse some hourly rate. Might be worth a call. Not that a claim would ever be filed but it wohld be another data point.
 
Just another thought. I vaguely remember a conversation about my time with Gallagher. Seems like they would reimburse some hourly rate. Might be worth a call. Not that a claim would ever be filed but it wohld be another data point.

Not Gallagher-they are a broker, not the insurer- but one of the companies they represent, did state in the policy a (low) hourly rate they would pay if you chose to do a covered repair yourself. I seem to recall $10/hr.(?).
 
I agree with Paul

If you are set on getting something for your time, agree IN WRITING what the process and value will be.

Money changes things and relationships destroyed because of it are irreparable...
 
Since you're asking for opinions....

I would look at it this way. If you built the plane all by yourself and owned it all by yourself, at time of sale, you'd get approximately zero value for your time building. You'd most likely get your "hard costs" back, but no real value for your time building. As experimental builders, we usually go into these projects knowing we'll most likely never get "paid" for our time. We do it for the love of building!

So, if one enters into a project knowing their time has no real economic value to a "stranger" that might buy the plane at some point in the distant future, why would it be important to now get value from a partner who's going to share in the hard costs as well as the ongoing cost of ownership?

When I started my build, my intent when done was to sale 1/2 interest to my then Mooney partner. We agreed his 1/2 interest would cost him 1/2 of my hard costs, but nothing for my time (even though he would not have helped any with the build). I knew my time was going to be for my "entertainment", not something to profit from. Ultimately, I decided to keep 100% of the ownership to myself, but IF I had a partner, they would not have paid me for my time.

Is that fair? Maybe not. But the way I see it, if the used airplane market will not pay you for your time, why should your future partner? Partnerships are a little like marriage, if you always expect it to be 100% fair and equal, you'll probably end up divorced.

Build for the love of building and enjoy the time you spend creating something special! The joy and pride you'll experience in the end will be priceless!
 
To add another perspective to the many very well-considered ones already posted: I always considered the time I spent building as having value to me as opposed to the project or the product: in a sense, build time is a selfish indulgence. I wasn't in a partnership, but if I had sought a partner I would have considered the value of "hardware" only, with agreement going forward as to how costs and effort were to be shared. But as many have pointed out it's impossible to assign value to time/effort in a way that will satisfy everyone and many if not most discussions where two or more people try to place value on their contribution to a project will end with no one happy or convinced.

I like Paul's approach - work together in a non-binding way for a while and then decide whether you have the type of relationship that would work as a partnership. Another piece of advice I'd offer based on my own experiences in partnerships: put a much higher value on the relationship with your partner(s) than on getting "made whole" when you exit or the partnership dissolves. Life's too short to have grudges, resentment, and regrets - particularly over money. I've been in a few partnerships in certified airplanes, and in a couple of cases I lost some potential dollars - but in each case the partner(s) and I had other reasons for the change, agreed on terms, and parted friends.

All that said, the more detail you can decide going into a partnership about how you'll split future costs, maintain the aircraft, operate it etc and commit to paper, the less potential trouble down the road. But again, far more important in my opinion to be aligned in principle and know you'll be able to amicably resolve the inevitable unforeseen issues that will arise.
 
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Partnerships

I was in a long term partnership in a C182
I can tell you it’s much more important to find a compatible partner rather than
Worry about being compensated for your labor involved in your build. As others have said you rarely get compensated for your time when you sell a home built.
There are so many horror stories about partnerships that you would do yourself a favor by concentrating on what’s truly important.
It’s like a marriage.
I had a great partner in my C182, not so great in my two marriages.
 
Is this where yoour site name originated?

I had a great partner in my C182, not so great in my two marriages.
 
Is this where your site name originated?

I had a great partner in my C182, not so great in my two marriages.
 
Personally I agree with the others that build labour has little to no monetary value. It does, however, offer much personal satisfaction.

A few months ago a friend at our field and I purchased a partially completed 4 (at the 80% completed 100% to go stage) with the intention to complete it and then sell it. The arrangement has been strictly verbal. We both know each other quite well, are easy going and have similar principals. He is single and has more time available to spend working on the plane. We split the costs as equitably as we can. He enjoys the electrical and fiberglass work while I prefer the mechanical stuff which works out quite well. He does not fly tailwheel so I will be doing the required 25hr flyoff. We will split the money from the sale 50/50 and settle any hard cost differential with no concern regarding the time spent differential.

A number of years back when I bought a 172 with a partner, who I did not know previously, we drew up an agreement on how we would split costs, what would happen if the plane was damaged, engine hours, selling our share etc. Worked great for 5 yrs at which time I sold my share.

Non-aircraft related, but I will get to my point...When I first moved into this house, I bought a snowblower in partnership with 5 other neighbours. None of us knew each other well so we drew up a contract that we all signed. All is good after 21 years so far. Last man standing owns the blower.

My point is that what you do and how you handle the situation depends on how well you know who you are partnering with and your own personality. I look at each joint ownership situation and decide on whether it requires a contract or if verbal is ok. It is a partnership and requires compromise and cooperation by all parties.

For me, I would not consider having someone pay for my time already in the project as it has been for my enjoyment and satisfaction and will not add anything to the selling price at the end. If it bothers you to have more time and effort in the build than your partner then you better have a well thought out signed agreement.

Good luck in your build!
 
Yes, but............

I understand most that responded would not expect or want anything for their time and labor, and that is generous and admirable. But............, if I was coming in as a partner, I would want to somehow compensate my new partner for his efforts. Now weather that is with money, extra labor, or just keeping the fridge stocked with beer, perhaps doesn’t matter. At the end of the project, I would just want to feel like I carried my own weight. Good luck and have fun!
 
Great discussion and feedback from all. :)

I'm leaning towards no "compensation" for labor... As others have mentioned, I'm doing it because I enjoy it and get satisfaction from it. I was never "worried" about getting something for my efforts... it just seemed like an obvious thing to factor in at the time.

Now if I can just get my potential partner to actually commit to the project! :D

One counterpoint, for others that may consider this same thing in the future... You may not get paid for your time when you sell a completed plane, but a completed plane will likely sell for more than a box of parts. Point being - labor does add 'some' value during the build, just not a ton.

Okay, second counterpoint: A non-builder partner may want labor factored in so that the building partner is motivated to keep the project moving! :p (I do not need such motivation)
 
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Yup, exactly. I assume we'll form an LLC that will own the plane... The value we agree on for labor would feed into the equation for percent ownership in the LLC. $10/hr was kicking around my head too, but nice to get other opinions. Just want to make sure no one gets the short end of the deal.

I think this approach will put you in dangerous territory. Having a minority owner in a partnership dramatically changes the relationship of a partnership. I've read through the whole thread and I know you're considering dropping the hourly rate. But I also recognize the idea that a partner would want to compensate you for the differential in work rates going forward.

If you do work out a plan with your partner for a labor differential, I'd recommend you do that by setting up a differential contribution of purchases rather than a differential of ownership. For example, maybe all costs are shared 60/40, but you each maintain 50/50 ownership of the LLC. Or perhaps that differential contribution is limited in some fashion? For example, what if you decided to wait until the end of the project, and split the paint job by the percentage of work done by each owner? If your paint job is $10K and you have done 80% of the work, then you pay $2000 and he pays $8000.

In the end, whatever the two of you think is fair will work for you. Just be sure to cover all the exit scenarios ahead of time. What happens if someone gets divorced -- do you want to have that person's ex own 25% of your plane? What if they become disinterested? What if they just need their cash out, but you don't. What if they loose their medical, move away, etc., etc., etc. Can they force the sale of your plane, and if so, under what conditions? Good partnerships think through all of these scenarios and put them in writing long before they ever occur.

The best advice I ever had on partnerships is to only take on the minimum number of partners. If you don't need a partner's cash, time, skills, etc. then leave them out. I'm in a partnership in an older expensive airplane that I couldn't operate myself, and the partnership has been great. We each bring different skills and cash to the partnership. In contrast, 25 yrs ago, my first plane was a Grumman Yankee that my wife and I paid cash for and flew for $20/hr all in. There was no reason to take on a partner in that plane.
 
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I think this approach will put you in dangerous territory. Having a minority owner in a partnership dramatically changes the relationship of a partnership. I've read through the whole thread and I know you're considering dropping the hourly rate. But I also recognize the idea that a partner would want to compensate you for the differential in work rates going forward.

If you do work out a plan with your partner for a labor differential, I'd recommend you do that by setting up a differential contribution of purchases rather than a differential of ownership. For example, maybe all costs are shared 60/40, but you each maintain 50/50 ownership of the LLC. Or perhaps that differential contribution is limited in some fashion? For example, what if you decided to wait until the end of the project, and split the paint job by the percentage of work done by each owner? If your paint job is $10K and you have done 80% of the work, then you pay $2000 and he pays $8000.

In the end, whatever the two of you think is fair will work for you. Just be sure to cover all the exit scenarios ahead of time. What happens if someone gets divorced -- do you want to have that person's ex own 25% of your plane? What if they become disinterested? What if they just need their cash out, but you don't. What if they loose their medical, move away, etc., etc., etc. Can they force the sale of your plane, and if so, under what conditions? Good partnerships think through all of these scenarios and put them in writing long before they ever occur.

Yes, I didn't state that properly... I meant that part of my ownership would be paid for in labor. We would still each have an equal share in the LLC/plane, he would just have a little more out of pocket if I was credited for my labor.

And I wholeheartedly agree: "Good partnerships think through all of these scenarios and put them in writing long before they ever occur."

Great feedback!
 
A few years back I considered building a plane with a friend. One of us had ample funds but very little free time, the other vice-versa.

So the money guy would fund most of it, but the free-time guy would probably do 80% of the work, at least initially.

For purposes of building equity in the plane, we agreed on a labor rate of $35/hr. We estimated the free-time guy would end up owning 1/4 to 1/3 of the finished plane.

We never moved forward, but not because of ownership or money issues.
 
I have had and still have airplane partnerships.

My first was a 50/50 with my neighbor on his V35 Bonanza. He would think about selling every time the stock market went dow, so we waited and bought 1/2 share on a three year no interest payment plan. I am an A&P, so did a major panel upgrade and engine top. All expenses 50/50. He always helped where able, disassembled for annual, let me go crazy on the panel, was kept in his personal hangar. Never felt unfair. Owned a great airplane for 1/2 price.

He had health issues, so sold his 1/2 to another neighbor. A good friend too. It is now in my hangar, still own for 50% of what it would normally take to maintain, I still have yet to tear out the interior for annual. I bought any special tools, bought nice jacks and nitrogen regulator. He is a little more hands off. Still a great partnership. I would not own the plane without of having a partner.

I allowed a friend/employee buy in a 1/4 share in my PA12 Super Cruiser while getting his license. Between his CFI instruction I taught him how to fly a tail dragged. While, I put the **** thing on its nose and payed back his entire investment. We then bought is back from the insurance company 50/50. Still working on it. Total rebuild.

The same Pa12 partner, me, and 2 other neighbors bought another PA12. It floats around in different hangars. One partner got out and we payed him off. I am now an IA and so is one other partner. We all work on it and pay all repairs 1/3 share. My employee now has his license and signed got his tail dragged rating in the 12. He flys it more than us, but we all have another fun and cheap plane to fly.

I have a lot of great friends and planes to fly. We all keep it simple and do not expect perfect time equity.
 
Partnership with Unequal Work Time

I entered a partnership on the plane I built. It had been built from the start by the original builder. He did excellent work, and got it to the stage of looking like an airplane. But it had all of the systems as well as the spend for avionics and engine to go. We wrote up an agreement, which I am happy to share, that worked for both of us. Effectively we agreed on the value of the project up to the point that I was joining. I never bothered to figure out the cost of materials that he'd put in, or if the agreed value was crediting him for work time. It was a number that I was comfortable with that if I was to buy the project outright that I would pay for the quality of work he had done.

We continued working for many years, and we both contributed as many hours as we were happy and able to spend. We never accounted for hours in any case. We kept track of money spent. In the end his health was not letting him work on it much at all anymore, and I had an opportunity to move the project closer to me to finish it. We executed the buy out provision in the agreement, I paid him what he was owed, and I completed the plane.

We're still friends, and he's been able to see and fly in the plane he built.

If I were you, I'd give up any effort to account for time, just keep track of the dollars spent, and go from there. If that doesn't sound fair to you, perhaps ask yourself if you really want a partner.
 
I have had and still have airplane partnerships.

My first was a 50/50 with my neighbor on his V35 Bonanza. He would think about selling every time the stock market went dow, so we waited and bought 1/2 share on a three year no interest payment plan. I am an A&P, so did a major panel upgrade and engine top. All expenses 50/50. He always helped where able, disassembled for annual, let me go crazy on the panel, was kept in his personal hangar. Never felt unfair. Owned a great airplane for 1/2 price.

He had health issues, so sold his 1/2 to another neighbor. A good friend too. It is now in my hangar, still own for 50% of what it would normally take to maintain, I still have yet to tear out the interior for annual. I bought any special tools, bought nice jacks and nitrogen regulator. He is a little more hands off. Still a great partnership. I would not own the plane without of having a partner.

I allowed a friend/employee buy in a 1/4 share in my PA12 Super Cruiser while getting his license. Between his CFI instruction I taught him how to fly a tail dragged. While, I put the **** thing on its nose and payed back his entire investment. We then bought is back from the insurance company 50/50. Still working on it. Total rebuild.

The same Pa12 partner, me, and 2 other neighbors bought another PA12. It floats around in different hangars. One partner got out and we payed him off. I am now an IA and so is one other partner. We all work on it and pay all repairs 1/3 share. My employee now has his license and signed got his tail dragged rating in the 12. He flys it more than us, but we all have another fun and cheap plane to fly.

I have a lot of great friends and planes to fly. We all keep it simple and do not expect perfect time equity.



This is a lot like how my brother & I operate our "partnership". We're partners in a 172 and a Rans S6S, any and all maintenance and insurance is split exactly 50/50. He owns his RV9A, I own a 150 and my RV9A. All the airplanes stay in my hangars, and he pays about $3800/yr. "hangar rent".

For the most part, if I were looking at (or for) a partner, I'd just put my price out there and go with it. You really DON'T have to justify it. It's sort of like trying to justify owning an airplane just for fun. lol
 
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