What will you choose: Family Business or IB?

Looking for advice from experienced people here.

Thinking whether to join the family business (oil trading) or to continue with the IB path.

A little background about me: From a non-target and took a gap year to gain more experience. I'm currently on a long-term IB internship with a large well-known bank (not the BBs) and I'm treated like a full-time analyst. At the end of my current internship, I will have more than a year experience in IB. I have a year left for school and fortunately, my bosses offered me FT conversion after graduation. I do enjoy the IB work and it pays reasonably well, but joining the family business appeals to me too. Looking forward, if I join the family business, I will probably be taking over in a couple of years' time (around 5 to 7 years) after learning the ropes of the business. In terms of the size of the family business, it's pretty small (about $10M revenue) and my parents are very satisfied with the current size. They are not interested in expanding the business so this could be where I can come in.

So right now, I have two choices - family business or FT IB. On the side note, I understand that many will suggest going to IB to gain some FT experience but the thing is, I have been treated like a FT analyst for a year already so I'm not sure if that would be relevant to me.

Would love to hear it from guys who are in family businesses!

 

Doesn't matter if the skills are transferable. It earns you credibility which is way more important (assuming you're at an at least second tier respectable bank). If no name boutique, dont waste your time and go into family biz.

Ugh the FBI still quotes the Dow... -Matt Levine
 

I'm next in line to take over my family business. Never wanted to but unfortunate circumstances require me to step up and learn now.

If it's where you want to end up and have a good relationship with your family, I'd go for it. Also need to consider how much time you have left to learn from them. Not sure how IB would add value. You mentioned it doesn't necessarily translate to your biz. You don't need it network either.

[quote=mbavsmfin]I don't wear watches bro. Because it's always MBA BALLER time! [/quote]
 

Family business. If it is 10M in revenue now, you could grow the business and sell it in 10 years for a significant amount of money. Get that EBITDA up to 3M-5M and your looking at a very nice payday. Take the proceeds from the sale, put it in fixed income portfolio, and never work another day in your life.

Edit: After thinking about it for a couple more minutes I do agree with others that continuing with IB in the short term is probably a better idea.

 

I would 100% go for the IB option and then into the family business, if that interests you later on.

You can go IB -> Family biz. You can't necessarily go Family Biz ->IB.

Even if you know that the family biz is what you want long-term, it will be beneficial to gain a network of professional friends and acquaintances to take with you when and if you leave finance. You will also perhaps pick up some knowledge of how a larger company is run, which will be helpful if you eventually decide on trying to expand the family biz.

Array
 

Still mentoring a gal who owns the largest electronic retailers (i.e. think Best Buy). She got her MBA at INSEAD and currently still working at her family business. Prior to that she had a few years of corporate experience. Mentoring another gal who owns one of the biggest financial services firm (i.e. UOB). She got her MBA from Imperial College and also now back running at family's bank. A few key take away from mentoring them:

  1. Your age will matter a lot. You need to work a few years more to gain respect from the senior management at your family office and it will take time.
  2. Currently, you are way too young and inexperienced. Need a few years of grinding out to really learn how to do things.
  3. I would either move to IBD Industry Group related to your industry (in your case Oil & Gas) to really learn the business and perhaps even move to PE side to learn how JV, M&A and Post-M&A integration works. Another alternative would be to work for a firm within the same industry that your current family business aspire to be in the next 5-10 years.
  4. You need to get a few things right to take your family business to the next level: i) do you have the management skill, ii) can you find a way to tap better financing, iii) can you run the company better, and iv) do you understand how to manage the corporate culture to prepare for growth. Usually in order to do all of those above, you need experience and network from a much better platform.

Think Big. Think for the future.

Happy to answer more questions if needed.

 
Best Response

Looking at things from other side of the coin, why moving to the family business will be a bad idea now; here are a few pointers that I have seen from mentoring second-generation millionaires and SME owners:

1) Family will always tell you that you can take over the business but usually the founders will not give up control. There are a few major changes that need to be made to convert from "family business" to "business family". The latter means that family business has been institutionalized and the founding family member sit on BOD and do not run day to day business.

2) When you start to run the family business, you will become the face of the company. A lot of my mentees struggled to tap into the network and resources that were readily available to them while they were working at big firms (i.e. BCG, Evercore). These resources were provided to you because you were working at a big platform; but once you move into your own shop, it doesn't mean that you can call upon them. So you will need to use your personal relationship, which get heavily discounted once you are no longer at your old job.

3) I have seen a lot of second-generation CEOs lack technical skills and focus too much on management skills. This is because they don't really understand the business drivers and tend to follow "I choose to work with people I like model" rather than "hiring the right person for the right job model".

4) You need time and experience to "mellow" out. Was a raising junior executive myself. I remembered pounding tables and yelling at mid level management (age 40+ while I was in my mid 20s). Realized that it was a big mistake. I got my point across but hurt my subordinate's feeling; and made my life difficult down the road. A few years later, I had "mellowed" out and now have more patience and have "empathy" and see things from other perspectives. That takes time and experience.

5) Most importantly, your family, senior management at your family business and your business associates will need you to "prove" that you are "up to the job". This means that there will be constant mind-fucking and back-stabbing at the family business. You need to be prepared and have the mental capacity to deal with that. The best way to mitigate that is to already have an established track record (your current experience is not going to qualify for it - i am sorry to say that). You will need to "earn their trust" in running your family business.

 

I would recommend leveraging the offer at your current bank to get into an oil & gas group at a BB or elite Boutique. Hit the ground running, work hard, and soak up all the knowledge you can. From there, I'd say you have two options: a) move to an oil and gas PE fund in an investing role, b) move to a large oil trader (Vitol, Trafigura, etc.)

At the PE fund, you'll be able to take the valuation skills you learned in banking and apply it as an investor across whatever oil and gas subverticals your fund is focused on. After 2 years there, you can move to one of the fund's portfolio companies in a strategy/finance role and round out your skillset as an operator.

Moving to a large oil trading firm will get you a more applicable strategy/business development experience and skillset for your family business and you'd be additionally benefited by the fact that you'd be learning from the best-in-class people in the space but you'd also give up the experience you'd gain from working at a PE fund and being an investor.

If I were you, I'd do 2 years banking -> 2 years PE ->2 years PE portco -> 2-4 years oil trading firm in a strategy/business development role (I'm suggesting more than 2 years here with the assumption that you can do 2 years in one role, soak up knowledge, and then lateral to a different but relevant division and soak up more knowledge there.) After that, you can go back to the family firm and learn from your parents.

Following the above path would give you the benefit of having a much wider skillset that you can use to grow your family's business and start outcompeting competitors in your space. You also are able to have a much wider life experience by creating a large network of motivated and capable colleagues and friends in your space and (maybe) living in various cities as opposed to go back to your hometown and working in the family business. Also, if your parents are hardworking and not that old (younger than 70), you build yourself time until they are actually closer to being ready to hand the reins over to you.

Think I covered everything but I wrote this pretty quickly so let me know if you have any other questions.

 

To echo some of the comments above I would recommend getting into an oil and gas group in IB for a few years. You should have some inherent knowledge that you've absorbed from dinner table conversations, and your "why" for those groups is strong. Use that experience to build your network, skills and credibility outside of the family business. You will then have an easier time explaining why you are fit to lead the employees through the transition, and it cuts down on some of the nepotism/spoiled rich kid impact that others in the business will impart on you.

I had a fairly interesting experience with this as my family runs a mid-sized logistics company that is spread out across a lot of family members (too many really). When I was leaving NYC after 5 years there was a hard push by my family to have me come back to the family company (for many reasons I didn't want to do that). I was viewed as a superior future leader by the non-family management over my much older cousins because of my outside experience at high profile banks. My cousins all just joined the company after college and have only ever worked there. The company is still going through major succession issues because they can't identify a family member suited to take over. Family business is complicated...building some outside experience is the right track in my opinion.

 

Thanks for sharing your experience. Well, in my case, there isn't that many family members running the business. Only my parents and one uncle. Do you think that getting outside experience is still beneficial? vs learning the ropes of the business

 
juinerouge:
Thanks for sharing your experience. Well, in my case, there isn't that many family members running the business. Only my parents and one uncle. Do you think that getting outside experience is still beneficial? vs learning the ropes of the business

Are there employees? The outside experience helps establish your credentials to your future employees, and the contacts that you would build in banking (particularly in an O&G group) are valuable. Plus, the diversity of experience will make you more well-rounded and better prepared to take over. So, yes, I think it's still very beneficial.

 

I would go the IB route if I had the choice. Personally I hope to own/operate a business, so I see the appeal in skipping the IB crap, but like you mentioned, this will give you credibility amongst the employees (should you end up working there) as well as provide you the experience you need to go to bschool (should you decide to go)...all while making you some money, providing some life experience (so you have a better idea of what you want to do in the future) and providing a career hedge (should the family business be bought/sold/bankrupt/etc.).

Either way, it sounds like you have a great opportunity. I just feel the IB way would provide more security, in terms of marketability, in the future should you decide the family business isn't for you. Good luck.

Regards

"The trouble with our liberal friends is not that they're ignorant, it's just that they know so much that isn't so." - Ronald Reagan
 

You always have the family thing to fall back on. Go do something else for a bit that will give you more experience outside the purview of the place and comeback with some new found skills and a different perspective.

If I had asked people what they wanted, they would have said faster horses - Henry Ford
 

The degree I am finishing is in mathematics, I did not have any previous IB internships, or have any knowledge about corporate finance, so getting an IB job is not going to be that easy.

I do think it would be the correct thing it would be the correct thing to get the experience somewhere else first, because of the greater credibility and also reducement of the risk (after all 10% of the company is still not that much?).

 

The only thing better than making a lot of money is making a lot of money while doing very little work. I would go with the family business.

Men are so simple and so much inclined to obey immediate needs that a deceiver will never lack victims for his deceptions. -Niccolo Machiavelli
 

Yes, I do intend evenutally working at the "family" business. However as I have said I am not guaranteed a good position immediately, and the other two families own a bigger share of it, so they are seen as in charge (three guys from the other two families are already working there, they got leading roles immediately, but are more or less just overseeing that the company is doing good, and all the key things that are happening - but not execution, thus they are probably not working more than 30 hours per week. I would not be guaranteed such a position immediately).

So for me I think it would make sense to first make an MBA at a good school, and then come back. I think then I could have a pretty good role and would seem more credible.

So the question boils down to mainly what should I do for the next two years or so to get into a good MBA program later :)

 

I can assure you the best option is to go to IB first. It is very valuable to work for someone else (and put up with their crap) and will make you a far better manager when/if you subsequently take over the running of the business.

My father took over the family business (similar size, maybe bit smaller, though with 100% equity) and he always tells me his greatest regret was not working for someone else first. He finished university and immediately went into a high level position, taking over as MD a couple of years later.

There is no doubt that working in IB and doing your MBA first will be far more beneficial than going straight into the firm, plus the opportunity cost is pretty low as it is only really a small amount of time that you are having to 'give up' running the business for - and even that is assuming you could go straight into a position anyway. Whereas IB & MBA behind you gives you a much stronger background to go into the firm, gives you much better exit opps if after running the biz for a while you decide you want a change and overall will add much more value to you and make you far better at running the business anyway.

 

I thought IB experience would only be that good if you want to do finance at that company? Am I just naive to think this?

If I was in your shoes, I'd probably go with the family biz, but maybe that's just me.

 

You call this a dilemma? First, go thank you father for his decision not to pull out and create you. Second, work in the industry of your family business. This can be done by working in FP&A at a larger company in your industry or get into the industry group in IB or ER. Spend a couple of years there, then either transfer or get an MBA then transfer.

If the other two families have a combined 51, they can oust your old man so don't put his job in jeopardy and learn the industry.

 
HFFBALLfan123:
Whoever threw monkey sh*t at me for quoting biggie is a complete idiot....

I agree -- what's this place coming to, if a guy can't even quote some Big without getting monkey sh*t thrown at 'em?

kingtut:
People will respect you more for having made a name for yourself rather than relying on the family name to hook you up with a cush job.

That's actually a good point that I didn't even consider. Similarly, you could go into consulting, a developmental/rotational program, or any number of other impressive careers that'd allow you to learn a ton.

 

Go family business.... the stuff you learn in corporate is not that transferable and at a junior level you won't see the stuff that matters to be applied to an executive role at dad's place.

 

Saw this thread and figured I'd give my cents.

I was in the same place. I turned down some good job offers and admissions to top quant programs to join a family business. I occasionally regret it, but it was still a smart move. Your dad is in an incumbent position and likely has decades of business experience. Assuming you two can have a decent working relationship, he could be an invaluable business mentor.

Even if it doesn't work out, you will still learn more--particularly, the intangible aspects to running a business that most people have to learn the hard way, often after years of banging their heads and at a financial expense. These are the sorts of things aren't taught in MBA programs.

Long story short, you have the opportunity to gain real business experience from an incumbent's vantage point without risking your own money. Unless you're completely set on IB, then I would say do it. It's easy to fall in love with the finance world because it's prestigious. But if you want to create serious wealth and have fast track to real business experience, then jump on it.

As for me, it's been six years and I'm moving on to something else. . But that's after I've accumulated enough to where I'm more or less set. Maybe I could have done that somewhere else, but I really doubt it. I'm not that much of a rainmaker. I would likely be putting in long hours to make someone else rich. Even if it hadn't worked out, I would have learned what not do, which is half the battle. Again, at no expense.

Anyway, good luck with the decision.

 
Short Bus All-Star:
Even if it doesn't work out, you will still learn more--particularly, the intangible aspects to running a business that most people have to learn the hard way, often after years of banging their heads and at a financial expense. These are the sorts of things aren't taught in MBA programs.

SB for you.

 

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