My dad is an entrepreneur and is now tired of running his company.
I’m a first year IB Analyst and from what I’ve seen, I am not impressed with the career trajectory, overall wealth generation and job satisfaction of those above me (23-30 yrs old) that stay in IB. was a shock to me that some late 20 year olds in banking still live with roommates.
The company generates around $3.5MM rev and 700K EBITDA per year, and would be theoretically mine. Obviously he’d be operating heavily until I got a grasp and taking distributions annually to live but I would be making all strategic decisions. This is not a sexy company by any means, and would be classified under consumer/retail and possibly industrial services.
Despite this, I have a true passion for investing and the path I am now will align me well to join a distressed HF or distressed debt shop which has been a dream of mine for a long time.
Safe to say I’m in a bit of a pickle.
Maybe some older folks could chime in and speak some wisdom?
What are your opinions here?
This is real and I’m actually considering the option.
DISCLAIMER: I do not for one second take for granted the opportunity to be in IB and the salary you make as a college graduate. I understand I am in a privileged place.
Also. Selling the company is a non option in my opinion it would be stupid to sell a company with so much potential for organic growth.
apologize for the rant and do appreciate the life advice
Entrepreneur here.
Take over the company, scale that bitch and use your IB background to orchestrate some fun m&a plays. Once EBITDA gets up to around $1M or so then sourcing non recourse debt for acquisitions gets much easier.
hey man! Can I pm you ? I'm an entrepreneur as well. lol.
lol.
May I ask what kind of company you have and what your background was?
Bootstrapped a few companies to 7 figures before 23 or so. All direct to consumer/eComm. Dropped out of school to focus on the businesses. Now I do angel deals/buyouts. I'll net ~$1M this year FWIW.
Hey can you elaborate on how sourcing debt become easier?
Lenders start offering non-recourse debt around that EBITDA level. Sometimes as low as $500k if the co. is older with a strong top line.
$700k EBITDA?
LOLOLOLOL
His dad is probably paying himself half a million a year and working whenever he wants, not to mention the business has EV. What do you make? :)
You are 100% correct. The man gets to walk into the office whenever he pleases I’ve never seen anything like it.
Oh and SBd :)
@I3DCashStaffer clearly has never built his own business before. Growing a company from scratch to $700K EBITDA without access to a lot of outside capital is hard as hell. OP, props to your Dad for building something that can provide for him and his employees.
Now the question is about what you should do. If you really want to pursue distressed debt or special situations investing you should do that. No sense in taking over the family business if all it will cause is resentment. You're young and clearly have your own interests. See if your Dad can hold onto the business for a few more years while you pursue your career. It's nice to have the business there in case your interests change. If you still love investing after a few years, he can always try to sell it or hire a GM to take a step back.
Thank you for the legitimate response and I do appreciate your opinion. I3D is clearly 17 years old.
Yeah, my thought was there’s only one time in my life I can be an IB Analyst and try to break into special situations investing as you had mentioned.
Why not do IB for at least a year or two and then take it over? Would probably help you run the biz
IB is not remotely applicable to any business that small. LMM PE guys can sort of add value, but it would be a waste of OPs time to do IB for 2 years solely for the purpose of using that "experience" to build the business. Inefficient.
somewhat disagree. If I ever built it up to the point where we were growing through acquisitions then my time as an analyst would be somewhat valuable for analyzing the companies or if I ever intended to sell. Otherwise; I agree.
Not OP, but I'm in a situation where my dad wants me to work for a certain number of years before taking over a similar sized family business. I'm trying to get into IB right now (in my last year of school), but is there a different experience you would recommend to groom me for the job?
Make sure you're ready OP before you take over. Employees HATE nepotism and there will be a handful of managers there who will not take kindly to a fresh graduate being their boss/being handed a job that some likely feel should have been theirs.
Fortunately or unfortunately there are only 3-4 managers and none of them want to take over the company. BTW - when I say taking it over I won’t actually “own” the company, I will just be implementing all the changes and Have full autonomy over business and strategy and implementing new growth initiatives. So yes, theoretically I’d be giving orders.
Also, the majority of employees are uneducated factory workers (my dad pays these people well and even hires them out of prison to give them a second chance) and they have 0 input on business day 2 day.
Run the business. Why on earth would you sit in an office and make edits to PowerPoint.
You can run so many expenses through that business as well.
Choice is so simple.
You don’t think in the long term IB & special sits investing would be more lucrative? Just curious.
1) if it is more lucrative it is also less certain and going to involve a whole lot of misery and pointless work.
2) income through entrepreneurship > W2 income
3) you can run through endless goodies through a company.
4) you say yourself you can grow the business. Grow it, take dividends and income and eventually sell it if you want.
Ask yourself if you want an extra couple hundred K gross income to work for a bank or firm that can can you, give you shit for taking time off, make you do bulkshit for the sake of it, etc.
Would you rather grow an already established business or grind up the corporate ladder for another ten or so years to make $1 mil? Employees are not wealthy.
I would think you are too young for this opportunity. These things make more sense when you are over 30 and sick of corpirate.
No.
100% take the business.
20% ebitda margin is nice. do your father proud. with your IB experience you can make the business into something he could never.
the richest people are not corporate types usually, they run 'non-sexy' small businesses and distribute every year. this is not a question OP. you are very fortunate.
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A few friends of mine are in a similar position. I would take everything (advice wise) with a grain of salt. Everyone's situation is different.
That being said, would you be up to the task? Do you have an understanding of the day to day functions of the business? Will your family help you as needed with the business?
I would sit down with them and talk to the family about it more.
Being an entrepreneur and sticking with the IB -> buyside path are just totally different things. My father is an entrepreneur and as a result I’ve seen how backbreaking the work is; on balance I’ve opted for finance as it’s less volatile and, while gruelling, not gruelling in the same ‘risky’ way. Naturally, my dad would hate doing what I do. It’s a very personal decision and I don’t think it should only come down to which avenue is more potentially lucrative - your biz could go bust, your fund could be regulated out of existence (or also go bust...) - you can’t predict everything.
Another point I’d note is that the reason I haven’t gone my own way is to date I have not been passionate about a business idea, and in my view running a successful business requires a level of commitment that’s not needed in most other places.
I think before you decide to take over the business (what I would obviously lean toward), I would ask these questions:
Control
Is your dad REALLY ready to step away or is he going to resist change if/when you step in and want to make a change he disagrees with? How do you know this? Will he actually give you full operating control legally?
Ownership
If you are going to make this business your career and be acting CEO for the foreseeable future, what is the path to ownership (important to hammer this out up front and get a contract drafted, even if it is family to prevent any resentment or misunderstanding later). Would your dad ever want to sell? who controls this decision and what if everyone is not on board?
Pay and Expenses
Similar to the idea on #2 above, how are you going to run the business? Will most of the funds be paid out in distributions or salary? How will that be decided and over what time frame does that change?
Growth
Do you see ways in which you can legitimately grow the business if you worked on it full time? To what size?
...those are just some of the topics I'd want to make sure I hammered out well before making a decision one way or another. Some of them are tough to answer but I think they are important questions and I think having the tough conversations up front with dad will be something you are happy about later on.
Good luck! Patrick
Thank you for all the amazing posts. This was extremely helpful.
Do you have funding secured to take the company private at $420 / share?
Hey man,
A few notes, that may be helpful,
Many people drop out of IB/PE to start search funds and would theoretically be looking for this kind of business. You already have it, id highly consider this.
Charles Koch took over his dad's business that was making about 35M topline and a few M in EBITDA. Koch industries is now worth over 100BN.
The industry may be unsexy, but the cashflows could allow you to use your IB/Investing knowledge to scale into something big enough to build a legacy.
I might be biased because I quit PE to become an entrepreneur, but yeah, id def go the business route.
Staying in IB to know how to run M&A at a company this size (or any size imo) is a colossal mistake. Industry depth, the type of which you can only get by being in the game is way more valuable deal execution knowledge when deciding who/when/how to acquire.
If the business still has real growth potential, I'd take it. Your dad's probably not going to cede full control to you right away but you can figure all that out later after you prove yourself.
Yeah exactly. IB/M&A has very little relevant skill set to a small business. Completely different but once you hit scale a lot of the M&A/IB stuff will be useful from a strategic perspective. OP will be living tactical for a while though. :)
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