Should I stay or should I go??

I am writing this post in a effort to get some feedback and help me with my decision. I want to preface this by saying that I am frequent lurker on this forum, but unfortunately don't participate much in posts and replies.

I am 35 years old and have worked in the family roofing company for 14 years. The company was founded by my grandfather in 1958. When I first joined the company we were producing $1mil annually with 14 field employees. Today we have 25 field employees and finished the year just shy of $4mil in sales. We have consistent maintained high margins on our sales revenue as well.

Our company is currently owned by my father. In the next few years he wishes to retire and sell me the business. I am our only salesperson & project manager. It has always been this way since I joined the company. 95% of the customer base was built and is handled by me. My father has good intentions of passing the business and it's assets to the next generation, but I need to make sure my family & I are protected and have some security. He has put together agreements and trusts to protect his assets upon death, but he has recently remarried. I have spent a fortune on attorneys fees recently determining & evaluating my risks.

I have considered going into business for myself for the past several years. I have over the years formed an LLC, gotten my state contractor's license and have purchased several pieces of sheet metal equipment required to run a small shop. If I do leave one of the issues I must deal with is the guilt (the other catholics on the forum should understand this) for leaving my father.

If I stay I could lose it all in the event of my father's death or divorce.

Any thoughts on the transition of family businesses? What should I do? All I want to do is make the right decision!

Chris, Tough call. All I can suggest is that you sit down with a lawyer and hopefully your father at the same time and come up with a fair price and an iron clad contract that protects your interests. Did your Dad buy the business from his Dad? How long ago?

Do you own any of it? If so, did he just tell you or is it on paper? How old is he? What does he do and how old is he? Is it a corporation? If so, and you own some of it, how much. If he owns 51% and you own 49%, he or his new wife could just bankrupt it and you would have no say. Nothing seperates the milk from the cream as much as money and greed.

If everything else fails, you are going to have to learn to "assume the position!" Reach down and grab your ankles with both hands and you will "get the business!" It sounds like he may "own" the sandbox, but just remember that you are the "sand" You have a lot of pull in that you could just leave and start another business tomorrow and quickly most of the employees would follow you. If in fact you do 95% of the customer contact, I am sure a lot of them would go with you too. If things go to hell in a hand basket, you could probably buy the assets of the company cheaper than you could buy the business now if he isn't fair. Something to think about. good luck with that one. Been there and done it 40 years ago.

GKRFG. Thanks for the reply. My father did buy the company from his father. At the time the land was owned by the company. So that was part of the deal. Unfortunately for me, the land was purchased personally by my father and is no longer an asset of the company. He bought the company 20 years ago.

If I buy what am I really getting? The assets of the company? Mostly a fleet of trucks and some fully depreciated equipment?

Old School, thanks for the reply. We've had some loose documents drafted, but nothing finalized. My father will be 67 this year. He still comes in but takes extended one month vacations a couple of times a year.

The company is a c corp and he owns all of the shares of stock. I have no ownership in the company. I play out different scenarios everyday....what would happen if I left. What would our employees do? Where would the customers go?

I think his intentions are good. Im just worried if something happened to him and his wife had control over his estate and the company. We are very open that I don't trust her and she doesn't trust me.

Bottom line is that I want to do the right thing for me and my family and not have any regrets.

You need to email Mike HIcks at MikeAt HRI @AOL.com

He's not an attorney but he is a third generation owner, he is level-headed, he is compassionate, he is a family man, he is successful, and he has purchased a third generation business. Great guy, honest guy, humble guy. You can't do better than him. Do it now.

Colpaw, good advice from a "good" Egg. What ever happens, it has to be a "Win--Win" situation for the both of you. If there is a loser, it is going to be you and with a family, that is not fair. We all think that our roofing businesses are worth a lot fo money; any bussineses for that matter, but actually they are worth about what our last job was. things can go "south" in a hurry. If dad has been doing this for 40 years, he should have a lot of money stored outside of the business to live on. If you have been working it for 14 years, and you are family for crying out loud, have a independant apraiser come in and value the assets of the business, (at auction) and then arrive at a value for the "good will", and I would not pay too much for that. (less than 6 figures). That should be a good starting point.

The old man has already won from the sound of it and it is time for you to get your chance. Your new step mom married you dad, not the business. Stick to your guns and don't pay any more than a savvy busnessman would for the company. If you pay too much, you will not be around to do anything.

Why have you thought of starting your own business over the past few years? Why wouldn't you want to continue the business name that YOU have helped build?

I've seen businesses separate where client's/employees just complicate things because they don't do what you expect. If you leave that business, he could sell to somebody else, who will be your competition w/ your old phone number.

One thing to consider, and it could vary by state or personal connections, but in Illinois new roofing business start in the workers comp pool at 52%. Not fun.

What are your Fathers wishes regarding retirement? Is he looking for a lump sum as a in a purchase price or would he be open to a monthly pension type payout and still retain some share of the company? If I were in that situation I would seek a majority share, say 60% and offer him a monthly pension of say $5000.00 per month which would draw down on his equity ownership of perhaps 2% a year. This would enable you to purchase the company with no money down and at a cost of $5000.00 per month for 20 years. This would offer your Father a secure retirement income over the next 20 years plus the feeling of not losing complete control of something he has put his life into. Options could be drawn up for early payout or payment to his wife if she desired if he died before the 20 years were up.

Colpaw Said: If I do leave one of the issues I must deal with is the guilt (the other catholics on the forum should understand this) for leaving my father.

If your dad truly wants to sell you his company, why not draw up an Asset Purchase Agreement now so that your dad's wife would have no control or ownership upon his death or any other time?

I think you should stick it out with your father's co. But you do need to comunicate with him better about the transition. If, when he passes away you don't like how things turned out, that would be the time to break out on your own, you wouldn't be competing against him and eliminate the guilt and the existing customers would be more receptive of going over to you. You never mentioned whether you had siblings involved with the company and that could be a big factor in your decision as well.

You must remember a strong business is about strong numbers, not strong emotions. First, is there a buy sell agreement between anyone limiting the amount of ownership the new wife can get upon dad's death? If so how much? Will his shares transfer to you or to her? If nothing exists now, she will get them through right of survivorship. If the shares are held by a living trust, than you can inhereit them at his and her death, if you get a written agreement. Also if the buy/sell agreement between you and dad make the trust the beneficiary of your purchasing, you end up with all your money back (less what he spends) anyways as a part of the trust. How old is the new wife? Can your sales/margins support her until her death when you would then take over all shares and not owe anyone? This question should not be solely answered by an attorney. I would suggest you contact "leaderswithoutlimits" search youtube and listen to his information.. he has been through very similar issues and worse. He has very good advise on how to tie in estate planning and fair and equitable transfer of family business. Good Luck, my brother and I are in the same boat....Dad is 73, and we have been together since 1977. Its not business I worry about, its the funeral. Businesses are built and bankrupted overnight, dads are known for a lifetime. Just some other thoughts. Stay.

I guess the answer is.....yes and no. When you are young and working with your dad, it is a great time to learn and to help and pull your weight. Even in your early 20's when dad is in his 50's that works for a while. You would not want to "give" a young son that much control over the family business. When you get married and have a family, I believe it is well past time to start to actively pass on the business. If dad hasn't accumulated enough to start to leave, something is wrong, and it is not a business, it is a job and a hobby. There is nothing to "pass" on in a word.

You should be able to make enough in 25 years that you should be happy to leave and let the next generation do the work. It does make a difference how many are in the family. It certainly works for some, but not all. it is a matter of planning and execution of the plan. By your mid to late 30's, the plan whould be well on its way to completion. JMHO

Old school- good points. One question that consistently arises is if this a good long term investment? Yes one can make good money in this business, but will this be a sellable business when I want to retire? My father has a good security blanket by collecting revenue from land that the company will lease from him. My only exit strategy would be to sell the business.

Roof dawg- thanks. I've thought about wc expense for a new business and the first couple of years would be difficult. And you are right in questioning why I would want to leave a business that I helped build. How much should one pay for a company that one had part in building?

Businesses are bought and sold every day. Find out how much it is worth. If you helped to build it up, your father knows that and he should discount it to you, according to how much you helped to raise the value. Before you slap yourself on the back however, think about this. If 15 years ago the business did $1 million and this year it did $4 million that does not mean it did 4 times as much. Materials have more than doubled in that time, so doing the same amount of square footage at the same margins would mean that at most you have increased the volume of roofing by about 60 %. Not bad mind you, but dad did ok before you got there. If you have went from 14 field emplyees to 25, that about fits the rise in revenues percentage wise.

If your gross profits are at 20% your net would be about 250,00 to 300,000 a year. Maybe dad can sell the whole thing for a million cash, give you 40% of that for your efforts over the last 15 years, and he can collect his lease money from the land while you go and start your own business with cash money. Since he is selling and he would get the cash up front, you would not be liable for a non compete clause.

No hard feeling from the step mom, you get paid for your efforts over the last 15 years. Dad is happy, you are happy and you don't have the head aches either. You could start small and let the market build. If the company won't bring in $1 million, that would be a good sequway to let dad know what the real value is. It might as well be straight up business! again, JMHO