Sharing Shop Space

Business owners caution against splitting shop occupancy between two separate businesses. March 4, 2006

A fellow cabinetmaker has agreed to share expenses in my cabinet shop, since both of us have outgrown our previous shops. I added on to my existing building 2000 sq. ft. to make the entire shop 2880 sq. ft. total. The value of the tools he is bringing to the business is about $20,500. I value my building at about $90,000 and tools $114,000. The shop expenses etc. are about $450 a month. I furnish all fasteners, cleaning, repairs, insurances, hand tools, air guns etc. What would be a fair amount for monthly rent? I know this is not a good setup and wished I never got into this but we are at a crossroad that needs to be addressed. I thought that fellow businessmen would be the fairest judge of this rent question.

Forum Responses
(Business Forum)
From contributor A:
Will you be sharing jobs as well? I currently have a cabinet guy renting space from me. We share tools, and pretty much cover our own consumables. I had hoped he would more or less work off his rent in times when he didn't have anything to do, but thus far it's not been very good for me. Last week when he said he would help me with a couple fixtures, he fooled around in the shop trying to figure out how to pack 3 bikes he had sold on ebay for a dollar apiece. Meanwhile my fixtures that were part of a larger specialty fixture job worth $60,000 went unbuilt until I built them. My point is, be careful on deals like these. You have a substantial investment in your business, but he does not.

From the original questioner:
Each man would run separate businesses.

From contributor B:
For the situation you describe your monthly shop expense can't be only $450 per month. He could easily use more than that a month in consumables alone. What about your electric bill, heat, insurance - fire, liability, workers comp? He's going to be working in your building, and he could be seen as part of your business and therefore an employee. What about your mortgage? Even if you don't have one that building still cost you money to erect. 20K in tools? That could all fit in a pickup. My advice is to reconsider and back out. He will benefit greatly and you will be stuck trying to get him out once he is in. If you still want to go ahead, then the rent should be closer to 1K a month.

From contributor C:
I've done this before and eventually had to take back the whole shop. I told him I needed more space for myself, a half-truth. He never cleaned up and was hard on the machines. Next time I'd partition off the space, designate his parking and rent it out at just under market value. After 6 months, ask him to sign a proper lease. This way, if he doesn't work out you can kick him out quickly. If he turns out to be helpful, take down the wall and start sharing more of each others assets, but not until. A good guy will prove himself, leaving you with no doubts. This is rare I believe. Good guys are usually the ones helping out, not taking help.

From contributor D:
It would be fair and reasonable to charge him half what the going rate is for comparable properties. After all, if he had his own shop he'd have to pay that rate - why does he get a discount for renting from you? In my area the average rent is about $2.10 per sq. ft. Find out what yours is, figure the rent based on the entire sq. ft., and charge him half. It's fair, it's easy to defend and it might be so much money that he’ll back out, saving you the trouble of having to kick him out in the very near future. If he doesn't back out, you'll be making a pretty good chunk of change. In any case, I would avoid any situations of working off the rent. What if his work is sub-standard? What if he's late? What if the piece comes back? It’s too many headaches.

From contributor E:
Get out of it, the arrangement is typically frustrating and a complete failure. For me it failed - lesson learned.

From contributor F:
I have done this in the past and it all ends up being a pain. First to go is your scrap plywood, then some slides, then he forgets to buy screws, then comes the lacquer, then the sand paper. Remember that nice piece of mahogany you were saving for that table you were going to build? When you go to look for it, somehow something has happened to it. It becomes too easy to rip you off, and soon he will be making bases out of your good cherry. If you need to do it then make two different rooms and each of you works separately and only shares big tools and nothing else - no sharing of hand tools.

From contributor G:
A fair price would be half of everything but I would ask why are you doing this? You have outgrown your last space, and the way it sounds you will out grow this one too. You had 2,000 and now 2,800, so if he gets half the shop you now have 1,400 – you’re going backwards. My first shop was a small 700 sq. ft. and now is 3,000 sq. ft. and the cost tripled but so did the work with the space. I would stay on your own for more reasons than can be posted on here or if you and the other guy get a long you may want to think about joining companies into one.

From contributor H:
Get out now! I went into this situation with a friend who was going to get his general license and use his half of the space for storage and work space. First it was a few cuts on my saw, and “can I use your router bits for a little project”. Soon, all my tools were being used freely and he was in the business of building cabinets. I had to tell him he couldn't use any of my machinery because of the huge investment I had made and we cut the shop in half just like a dorm room at school. 18 months later his half of the shop is such a mess I can't bring clients over, so the easiest thing for me to do is look for my own space.