Dad selling business. Asked if I want to take over
First year analyst at a EB 6 months in get bonus on February. My dad owns 75% of a few local businesses (restaurant + grocery store) and total take home comp is 750k total his share is 560k. Not really passionate about the industries but should I take it? I know I can grow it and spent my childhood working there. He says he could sell his share for 2mm. I’m passionate about finance but not sure if it’s something I want to do long term given w/l balance.
Bump
Bump
not really my wheel house or have any real insight here, but to me building businesses sounds like a lot more fun than being your MD's punching bag
Yeah but what If I don’t like running the business or want to come back to finance
Do an MBA chill in business school for two years and come back re-energized ;)
Are you sure you can grow it? That's capital intensive and to be honest, you realistically have no business moats. You'd be better off making your own career within IBD.
In addition, your parents deserve to rest. That $2mm payout allows them to retire in comfort and allows you to focus on your career without worrying about their financial status.
Yes - I’ve really pushed him to try to expand the restaurant and even found people that wanted to franchise. The restaurant is a hidden gem - double the average McDonald’s sales per sqft and 35% ebit margins.
also Covid resulted in business up 35-45% YoY
I think, just by reading your other comments here, you're misguidedly prioritizing top-line profits over your parents' health. You mentioned that COVID destroyed your dad's health, and it seems like he does want to keep it in the family, but is his pride worth losing out on a decade with him? I personally have been pushing my parents to get healthier so they can have as much time as possible with their grandchildren. I know selling the family business can be a tough thing to swallow, but at the end of the day, it's just a business. Your parents should be priority #1, not potential profits you're missing out on. It seems like, if you decide to stay on, your dad would continue working, and I don't think you want that.
Wait hold up - 35% EBIT margins? Doesn't take suggest upwards of 40% EBITDA margins? Am I missing something here? Not an expert or familiar with the space by any means but seems hard to believe that restaurant/grocery businesses can hit that sort of margins.
Take it and give me 35% equity to manage the businesses. Keep your EB job.
Ultimately a very personal decision but depending on the timeline for the sale, I would suggest seeing at least a full year or more of the IB analyst program through. That way you have a great foundation of experience to draw from in the event you choose to pursue something else down the road.
He wants to sell to retire so if I take over he won’t sell. He probably will sell in 1-2 years but wants to get out since Covid destroyed his health (100 hour weeks at almost 60).
you should do what the man in the sky tells you to do
What if you're atheist?
You ever just be minding your business and then here comes an atheist
If he wants to sell to retire especially if his health took a toll, I'd stay at my job and tell him to sell 100%. That's just me though, maybe there's more to the picture than what you wrote.
He has enough cash to retire twice over. He wants to keep it in the family cause he says it’s his life’s work
You should ask yourself if you intend on running it like a small business owner or an entrepreneur. There's nothing wrong with either...but there's a big difference.
Entrepreneur - I’m ambitious and want it to grow but you’re right, cash flow wouldn’t be going to my pocket
What's top line revenue for each entity and what does the cap table look like? Any ~ of CAGR?
If CAGR sucks, then it means the other partners and your dad are small business owners. You'd hate working with them.
Can you buy the whole cap table? It's not fun running a company when you're the only founder willing to go all in and grind away your life while others are taking a holiday etc.
I would finish your two years at the EB so you have the business acumen and deep understanding of capital allocation under your belt, then I would take over and look for ways to grow your dad’s business — seems like a hidden gem. The thing is, once you’ve finished your two years, you can always go back into finance if you decide to later down the road.
Good problem to have, congrats. My suggestion to you is to keep the decision relatively simple. Reason being: either way, you and your dad will be taken care of financially.
What is your long term goal? What'll make you happy? If you don't know or it's something in finance, stick with the current job. It gives you optionality.
If it's something in small business / restaurant or grocery industry / entrepreneurship, take over the business.
I think it's a no brainer for me even if long term I wanted to be in finance - take over the business. $560K annually is A LOT of money (equivalent to 1st / 2nd year VPs?), plus satisfaction of having ownership over something, plus you're young and you get a ton of experience running a business. Anyone competent / qualified can work at an investment bank. Not many people get to run a successful 750K cash flow business at 22 / 23 yrs old.
I always wanted to be an hedge fund PM at a L/S fund but when I got into IB, it kinda changed. I know I want to eventually start my own company, was thinking something where I buy/build businesses and let them operate (PE approach but using cash flow to acquire more vs sell)
What kind of businesses?
Sounds like you don't want to take it but are hesitating because it is financially lucrative. Not worth any amount of my imo, if you are not passionate about it.
I don’t really enjoy IB. I thought I’d enjoy finance but my interests are public markets investing and not really deal making (I think). Maybe I try that out? Problem is I feel like if I make a decision I can never go back. Take over the business and I can’t come back into finance with the same optionality, I don’t, he sells it and I hate PE/HF and I’m stuck. I was going to ask for a month off to help him with it but feel like that would ruin the relationship with the bank
Would it be possible to hire someone to run the business for you/help out your dad? This would ease the workload for your dad and also let you spend some more time in IB to see out your 1-2 years and decide.
That way your family still has "ownership" and you still have the option of taking over the business later on.
My dad doesn’t want to hire a manager because he doesn’t trust them. He tried it once but he said it was more stressful to baby sit
I was going to recommend this. What if he can bring on an experienced hire, someone with a good reputation? Probably have to pay a little more, but the business will stay in the family and you may still have the option to take over later on. If your dad really doesn't trust outside hires, he can keep an eye on them - 30 hrs is much more manageable and better for the health than 100 hrs.
well depends what you mean. is he still going to own the asset?
I'd do it in a heartbeat, get taxed less.
Yeah he’ll probably own it but I’ll get the cash flow. Either way I’m the only child and I don’t need it all
Does the thought of running a business excite you?
I'm one of those people who'd have a lot of fun with it.
If you are too, then do some due diligence on where the business can go and decide.
If you're not, why not let him just sell the business?
Yeah I’d say so. The thought of being my own boss does, my decisions affecting my financial well being but I’m so scared that I take it, fail or don’t like it and close the door to finance
I think you should run it. First, it pays good. Second, you already did 6 months IB, it’s not like you miss anything. Third, you can always go back to finance through MBA.
The opportunity to own your time is something I’d take tbh. You’re dads business is already established, it’s not like you’re going out and venturing on your own. I’d definitely go for it. IMO whatever gets me one step closer to owning my time is something I would go for. In this case it sounds like a great opportunity for you and your family.
My dad works as much as me, the thing is what if I regret it. I’ll look back and say “what if” on my finance career
Yea but your dad laid the ground work. No doubt you will have to work at first. But it’s a direct opportunity to reach this goal.
Bump
Wtf how is this even a question!?! Yes, take over your dad’s business:
1) it’s already established. no need to come up with a business plan, etc.
2) from what your saying, it does 40% EBITDA margins, which is somewhat unbelievable. If that’s true, this is an incredibly high ROIC business and there has to be some moat here??
3) you will be your own boss and not have to be your MD’s bitch (or your future boss’s)
4) how many 23 year olds have the opportunity to run (and even MAYBE grow) and own a highly profitable business?!? You literally are setting yourself for financial success here
In the event you somehow eff it all up or just want to get your MBA, you’re gonna have a very interesting story to tell for your MBA applications
Maybe, I hate staying in an office all day but we’ll see
Hope you read this OP. It seems like you're deterred by the lack of prestige / job type. You're worried if you're giving up something by leaving finance. You're worried that you're letting the chance of greatness go. Let me try to give you another point of view.
I have an alumni mentor who's much older than me who decided he wanted to be start his own private equity investing fund/firm shortly after college. This dude started as a PE analyst at BX/BCap/KKR, worked there for 4 years, then went to H/S. From there, as he decided he wanted to be independent and everything, and his two options for purchasing a business were to raise about 20-40mm in capital from investors, or to purchase a smaller business taking out about 2mm in loans. He went for the latter because that was obviously permanent ownership and everything. I don't remember exactly but he purchased the business at like 3-6x ebitda (big range, I really can't remember). The business he purchased was not "sexy" or "cool". Not going to expose him further but it wasn't. He took out 2mm-3mm in loans. He paid of that loan. Took out another to purchase his 2nd business, and rinsed and repeated. Like 15 years later now he owns several businesses and I'd estimate his take-home to be something like 3mm-5mm. That's more than most MD's at most IB's. As much or more than anyone but the top partners at the top funds in the PE world. And top of it, YOU own everything. You own it.
You have the same opportunity as my friend here. The very same, yet better, since you have no debt. If you have serious business ambitions, like you claim, do you understand what you could do? You have the opportunity to literally build out your own "investment firm" of businesses. There is no debt to be taken for the first one. You have a 600k/year cash source. The EBITDA margin is 40%? My friend was looking for anything above 15% as is industry standard. You are young and have your 20's ahead of you. This is literally the dream. In a year, with interest rates as they are, you could literally put down 25% and take out a loan to purchase another 2mm business which chips in another 300k-500k ebitda each year. There, you're up to 800k-1mm. Rinse and repeat every couple of years. If your dad's business is as good as you make it sound, and it was the right geography for me and everything, I would buy it in a heartbeat for 2mm. Like seriously, DM me if you don't decide to keep it.
Ya this comment x1000. Maybe you're not super passionate about the food business, but you can absolutely use that cashflow to search for other businesses to buy. This family business is an empire seed. Add some water and watch it grow.
My goal was always LS PM before running my own money. If I take the business, I kill that dream in 7 months
There is probably a lesser number of successful L/S PM's than there are NFL athletes.
out of interest how did he go about getting 2m loan? put down personal assets as collateral? Small Business Loan? not from US so don't know if you have specific programmes.
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