Do banking and PE make you a better business owner?
Hello, I will be joining a BB bank (GS/MS/JP) in London as an IBD analyst. I always had in mind moving to a PE and then proving myself there and eventually starting my own PE fund either in London or NYC. However, I have now understood that this is indeed a very difficult path. My father runs and owns pretty decent businesses in South America. He recently lost passion for one of his businesses ($1.5mln EBITDA and about $14mln revenue which makes up approximately a third of his wealth I would say) as he wants to concentrate on another venture which he sees as more promising. I have 4 siblings and three-half siblings from a first marriage and so I will be inheriting relatively little by the time he passes away (hopefully as late as possible).
However, given the recent developments, he offered to give me 51% of the shares in the business I previously mentioned provided I go back to South America and dedicate completely to it. The business is currently growing at a modest 4% a year and could give a very high income from the start. I could also expand it by LBOing competitors (it has no leverage at the moment) and by organically growing revenues. It is a manufacturing B2B business which is mostly national so it has the potential for international expansion.
He said I can either take the offer now or wait 5-6 years and take over the business after having had some experience in London. I have three choices in front of me:
- Join the business immediately giving up my banking role
- Joining the business after 5-6 years in finance after which I will hopefully have had 2 years of banking experience and 3-4 years of PE experience
- Never join the business and continue to build a career in finance with the objective of making the big bucks there (harder and harder these days?), thus giving up on quite a bit of wealth as I would end up inheriting only 1/7 of that many many many years from now.
What do you guys suggest I do? Will the PE and banking experience make me a better entrepreneur and CEO or will it be useless in that regard? I am willing to work hard in any field and I would probably enjoy all of the options, tbh my main motivation is maximizing long-term wealth, my objective is not to have a comfortable living but to be truly wealthy ($50mln+ net worth) by the time I am 60.
P.S.= I know I am privileged to be in this situation and I am very grateful to my dad for having worked so hard thus giving many more opportunities
Your family situation sounds like a mess. How are your other seven siblings going to feel about this decision? What if your dad decides suddenly not to give it to you and you decline the job offer? Why is he deciding to give it to you instead of hold onto it on his own (low growth possibly?)
Family businesses can be very messy (take it from someone who was in/joined one). At the very least, I would give it a couple of years before you decide. You need add value to the business you are joining (otherwise it'll burn to the ground). B2B businesses survive on relationships. How would your dad's clients feel about a 22 year with no work experience taking over their accounts? Do you think your company's employees will respect you?
Hey thanks for your input, I understand your point of view but my father is a man of his word and would not take back his offer, especially after I quit my job. I have been working all my life (Bachelor+GMAT+Master) plus a summer internship in investment banking at a lower tier BB that I turned down to then recruit for (GS/MS/JP) and honestly the last thing I want upon graduation is to work all night on meaningless power points and Excel spreadsheets, so my heart tells me to go for the business, but another part of me tells I am just being lazy and filled with excessive ambition and that I should at least hold a full time job before becoming a CEO. As far as respect of employees, I am a pretty imposing figure (6 feet 4 inches) and look much older than 23 (I guess I look about 30), I went to top schools and the employees know it and my father is a person who gets great respect in the firm and since he values me so much I think that will at least partially translate into employees respecting me.
Okay definitely go do that banking + PE stint first cos it sounds like you really need to get the shit kicked out of you for a bit
Consider the situation from another perspective; you go home take over the business and what? 1. You do a super job, launch something massive from this platform and blow your own mind. Well that's great - and low odds. 2. You do a so-so job and feel like a schmuck because you didn't do your own thing and you're stuck in your home town working for your siblings. Most likely scenario, and a couple siblings criticize your work. 3. You screw it up and you're a colossal failure, in the most public way possible.
And in all those scenarios you didn't spread your wings, run with the big dogs in London and see what it takes to play on a global stage. You went back to the security and comfort of a small pond.
Now if you go too London and crush it you can go back and buy your home town and everyone in it.
If you go to London and are mediocre - so what. You're independent and can pivot again and again. Home will always be there. But, if you go to London and screw it all up, then you just go home tell everyone you rocked London and ask dad for a job. And the local girls will think you're really cool because you went away, had some balls and did something cooler than all the other hometown heroes.
Oh, as far as BB experience helping you run a small business - nope. It will probably f8ck you all up and take away the very basic common sense and get-your-hands-dirty attitude that a small enterprise needs to run on. Now if you worked in LMM PE then it would be very relatable, especially in operations. But maybe you make a zillion $s in BB and you never have to worry about these small things again.
Good luck either way.
He would able to buy his town? Dude he is from South America, not Africa. Also, if he will be able to buy a town with finance money then he can buy three with his business money, firm is not a 1mln revenue firm, it is a pretty large business that can give him 400-600K of dividends every year since he is 22, do the math on that, he will become richer than even PE partners only HF managers will be richer, and this is just if he runs it as it is. Post taxes he will be earning more than an MD from day 1. Also, I believe you did not read the post properly, he would have the majority and thus could do whatever the fuck he wants, he would not be working for his siblings at all. Even if he crashes it in banking and becomes a post MBA PE VP at 30, he will still make less net of faces than now with his business and most importantly he will be able to save nothing because of high cost of living. How do post MBA supersuccessful finance guys have have saved up? 500K? Maybe 1mln? Maybe 2? That is nothing compared to the net worth he will building by working on his own company as you also said the offer will always be there, but from what I understand he has a 5-6 years window to take it or one of his siblings will. Also, you seem to be forgetting that salary is not equal wealth. Salary means dick! It is a mean to an end, and the end should be a very high net worth that allows you to generate a very high passive income. You need savings for that, lots and lots of them, and before you can accumulate such meaningful assets with your banking savings living in London or NYC you will be a burned out and unhappy 50 years old MD devastated by taxes, high cost of living, and terrible hours, and this is at best oif you actually succeed in making MD.
I say go and take the offer and watch us all make 1/6 of you after taxes (at analyst level) while working much more and slaving away for our bosses doing super boring power point work :( 15 years from now come back on this forum And hire us for your big M&A where we will be sharing a few millions with our team while you will be buying a corporation worth hundreds of millions. Take it and do not fuck it up by being too risk adverse or obsessed by prestige that you become a slave that is underpaid for the hours worked (fact). Good luck to you and do not fuck it up!
+1 for local girls will think you are cool cause you did something away from home for a few years. This sounds slightly cringe, but trust me its awesome to go back to hometown with some international experience, you feel like you have an edge over everyone
I say go for the business, here are the three options: 1) you steadily grow it, 10% growth in profits means the business will double in 7.2 years, this means that your 51% stake that is currently worth around 5 MLN will be worth 10 in approx. 7 years and if he growth continues 20 in 14 years and 40 in 21 years (you thus achieve the growth you wanted and easily reach your target net worth by 60) 2) you massively grow it and expand it making it a very powerful conglomerate and becoming worth hundreds of millions or even billions of dollars 3) You just run the operations as they are investing the profits wisely every year (assuming 400K in dividends for your 51% stake, you will easily be able to save and invest 200K a year while most people like us are Go stuck in London/NYC feeling rich because of “prestige” while actually being able to save nothing and living in shitty houses with less than 2,000 sq ft 4) You bankrupt the business
Now, to me, optionn4 seems very very unlucky, let’s face it: most of us working in finance are much smarter than the average business owner and yet we have little to show for it as net worth. Why should a man who has achieved a lot in his life for his age (MS/GS/JP) fuck up the company completely?
My biggest concern for you is your ultimate goal being entirely money focused. You can't know this now because of your age, but you have to have other motivations for you to succeed / excel at anything.
Why? Because success (In your case defined by reaching 50M net worth) requires actions, repeated over and over, for a long time. That takes drive, not just ambition. Anyone can want to be worth $X, but are they willing to do all the necessary things for many years in order to get there? Most will get comfortable way before they reach the goal and simply run out of gas.
Look at your dad in this particular business. He's bored or sick of it. Whatever. He lost interest and is moving on. He still has drive but for something else.
The drive comes from passion for what you're doing and getting excited about setting and reaching goals. If you're not super excited about the business or banking or anything, hard to get there.
Ask yourself what you really like about each option. Forget about prestige and all that crap. Nobody but 20 something's care about that. Trust me, when life gets in the way, prestige is way overrated. What are you best suited for? the banking/ PE career vs actually owning/ operating a business are vastly different. Very different skills required.
You have the rare opportunity to own a business without the dramatic risk normally associated with starting and building something. That seems pretty cool to me but you may operate better under the supervision / structure of the banking world. Those are the types of things I would consider.
I did a bachelor in engineering and did not love it but I am currently doing a master in finance and I am loving it, also very passionate about business even though running a small company may be limiting compared to running a larger one
So knowing what you like and don't like is important. For example, you don't like engineering but you want to be worth 50M. If the best path to 50M was through engineering, it would be very hard for you to get there as, at some point, your dislike for engineering would outweigh your goal of 50M because the actual engineering work would be the daily grind. If you don't like it, at some point you're just going to say, "maybe 10M is enough".
Larger businesses have certain complexities that smaller shops avoid. Of course you can hire all of that away, but that creates even more complexity. That's part of running a business. There's the actual work of the business, making widgets, and there's the running of the business. Once you get to a certain size, you're running a business.
The bank , PE role is more like doing the work of the business. If you really like that type of work and want to focus on it, that's great.
However, if the actual work doesn't matter, maybe you like the idea of (and may actually like) the running of a business. Making sure HR, Sales, Marketing, Service, R&D, etc are all properly sourced and working well. Maintaining great relationships with your key clients and vendors.
Very different than "doing a deal" and moving on.
I apologize sir If I am off the mark and sound condescending with my remark but are you fit to run a business in an emerging market?
I'm from Egypt and My uncle runs a large conglomerate with interests in many different areas (refineries, construction, banking) with his business running revenue in the high 9 figures. My cousins are mostly unfit to run the business except my oldest one who was the typical Rosey>Oxford lad, and I mostly have come to the conclusion that I don't quite have the all around nepotism, ballsyness, and in general politik skill to run a business in Egypt, either, not like I would run my uncle's business anyways bought more of my fathers property development in Alexandria and Cairo.
I grew up in France, and the UK though so I guess that was obvious. I'm assuming you grew up in Brazil? If that's the case than I'm assuming you shouldn't have a problem running any business. Are you going to be dealing with government officials and in general "3rd world" business practices. Does your father run a modern western business or does he run an "eastern" business (gov't largess, patronage, corruption)?
Apologies if my questions are a bit direct, but succeeding in emerging markets is different than succeeding in commerce in developed western countries. I'm sure you know though.
Best of luck mate! Make the most of your options and your life, and I hope you hit centi-millionaire status and not just 50mil. If I were you I would spend some time working in banking in the west first, not to learn how to be a better entrepreneur, but too mature..but if you don't need it I don't see why you can't go back.
In spirit of the best show in TV just ending
Valar Morghulis!