Join the Family Business or strike out on my own?

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TheRedHare
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Join the Family Business or strike out on my own?

Post by TheRedHare »

So after reading this topic: viewtopic.php?f=3&t=9992 it got me thinking about joining the family business, and helping it grow.

My mom started a bed & breakfast inn/ restaurant back in the late 80s. For quite awhile the business was doing really well, and it was highly regarded. But around 2005 and onward the business took a nose dive financially. My dad had a heart attack and thus couldn't work anymore so we lost a good chunk of household rev (he had a plumbing business). And then when 2008 hit, my mom's business had to struggle to make ends meet. Flash forward to today and things are still running, but they are in quite a bit of debt. But the business has slowly been regaining profits so there seems to be hope still. Plus we now have a liqueur license so that could bring in ever more money (the profit margin for booze is crazy high). They also do caterings and weddings so there's that too.

Not only does my mom work there, but my oldest sister and her son (my nephew). All of which are great cooks and wonderful caretakers/ hosts. I didn't really have an interest in cooking but I did have great respect for their trade. Because I've grown up around it, I would say i have a pretty good understanding of how a restaurant business works. I'm not much of a cook (never really tried) but I could see myself helping them with marketing, accounting and other business needs, and also be able to help out with any manual labor like washing dishes. The downside is that the business needs quite a bit of work in terms of upgrades, marketing, leaning out processes and cutting costs...plus the inn could use a little tlc and upgrades too.

The business is very highly rated, and has become a sort of landmark in the area. It's combination of great food, location and history give it charm. The location is pretty, but there isn't a ton of foot traffic...just a small road that passes through the small town. So it's important to market well. Although a lot of people from the city like to visit the area because of how pretty it is.

Now, the question I have for you guys is what your opinions are on the possibly of going into the family business. I have a vision with the business, and think it could do very well if we were to market our product better, have good hard workers (family), and lean out the business in terms of costs. I guess the risk would of course be giving up my cushy software job, and if something were to happen and the business failed, would I be able to get back into software? I'm sure employers would like it all that much seeing a gap in my resume. Thoughts on that?

I wouldn't expect going to work in the family biz to be a cake walk. I would expect it to be really hard work, long hours, lots of sweat, and would require a diverse set of skills (cooking, cleaning, repairing, marketing, accounting, IT, management, customer relations, ect. ). Come to think of it, that's pretty ERE as you have to have a lot of various skills. My parents' home is about a 5min. drive from there and they have about 10 acres in the woods. I figured I could maybe stay there, or one day build a tiny house on some of the land...maybe even two and airbnb out the other. Not only would I be able to assist my aging parents, but I'd be close to work, in a location I love (the Appalachian mountains, very peaceful), doing something meaningful and fulfilling (building a family business with your family).

Am I looking at all this with rose colored glasses? Let me know ya'lls thoughts.

TheRedHare
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Re: Join the Family Business or strike out on my own?

Post by TheRedHare »

Also, I've been thinking about doing this for a long time. Not just because of reading that one post, but it did make me realize that if you wanted to be really successful (which I'd like to be :) ) that you'd really need to have business of your own.

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Sclass
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Re: Join the Family Business or strike out on my own?

Post by Sclass »

This really depends on you and your relationship with your folks.

Personally I would strike out on my own. I returned to my family’s business after many years of operating my own shops. It kind of happened spontaneously during my early retirement. I regret it because it came with a lot of other responsibilities like managing my mother’s geriatric care team.

But really this depends on you and your family. Some people would be happy doing something like this. In my case there were a lot of strings.

As for the liquor license...I’ve always had this fantasy of providing a little place where people just came to hang out, drink and escape. Kind of like the bar in Casablanca. The closest I came to this was my dorm room in college. Wouldn’t it be cool to have the place where your friends came to get happy...and get paid? Maybe it’ll be a rewarding experience?

TheRedHare
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Re: Join the Family Business or strike out on my own?

Post by TheRedHare »

I have a very tight knit family. Sure, we've all had arguments and bitch at each other ever now and again, but that's pretty normal.

My biggest concern is trying to scale the business up whenever the time came. The place isn't very populated, although it can be very touristy, and like any business you'll have a busy season and down seasons. Another issue is finding good quality workers. This is something my mom has complained about. Finding good employees is difficult.
Some ideas I've had on scaling up would be
-getting a food truck and driving to events
-host live music at restaurant (they are starting to do this more often)
-more caterings, and weddings
-update rooms to suit modern standards
-buy adjacent coffee shop and make it an accompanying business (coffee, snacks, pastries)
-open up in another location in a more populated area.

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Re: Join the Family Business or strike out on my own?

Post by jacob »

Sclass wrote:
Mon Jul 02, 2018 11:18 am
As for the liquor license...I’ve always had this fantasy of providing a little place where people just came to hang out, drink and escape. Kind of like the bar in Casablanca. The closest I came to this was my dorm room in college. Wouldn’t it be cool to have the place where your friends came to get happy...and get paid? Maybe it’ll be a rewarding experience?
Hmmm ... I have some thoughts on that ;)

It's a very cool and rewarding experience alright. However, whenever things go wrong (and they will), it also feels like running an adult daycare center, and thus during those times when sane people want to GTFO, you, as the proprietor, have unfortunately sold out that option (because you live there), and so you have to stay and deal with the fallout. There's a difference between you[.having].theplace and you.goingto(theplace) which changes both your relationships and your life.

Augustus
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Re: Join the Family Business or strike out on my own?

Post by Augustus »

I don't do business with family. I wont even do partnerships anymore after having a bad one. There are a ton of problems with it. Things like:
-Are you going to buy your parents out when they retire? For how much? What if you can't agree on a valuation, i.e. they value it higher than you do? What if they want to liquidate because that's what they are using to fund their retirement? It's their business, they took the risk, they built it, they should be able to sell it if they want, where does that leave you?
-Who makes decisions? What happens if the losing party disagrees?
-What happens when one party perceives the other party to be lazy?
-How are you splitting profits and losses?
-B&B's go out of business a lot
-What if they want more money out of it and want to draw larger salaries?
-What happens if they get sick and can't work and you have to shoulder the whole thing?

TheRedHare
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Re: Join the Family Business or strike out on my own?

Post by TheRedHare »

Sclass wrote:
Mon Jul 02, 2018 11:18 am
As for the liquor license...I’ve always had this fantasy of providing a little place where people just came to hang out, drink and escape. Kind of like the bar in Casablanca. The closest I came to this was my dorm room in college. Wouldn’t it be cool to have the place where your friends came to get happy...and get paid? Maybe it’ll be a rewarding experience?
Yeah, Jacob makes a good point. I know that dealing with my drunk friends would be a huge handful. You'd hope that they would be respectful, but it's hard to tell. But hey, the more they drink, the more money we make. I think the markup for liquor is something like 200%, maybe more; I know it's stupid high though.

TheRedHare
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Re: Join the Family Business or strike out on my own?

Post by TheRedHare »

Augustus wrote:
Mon Jul 02, 2018 1:27 pm
I don't do business with family. I wont even do partnerships anymore after having a bad one. There are a ton of problems with it. Things like:
-Are you going to buy your parents out when they retire? For how much? What if you can't agree on a valuation, i.e. they value it higher than you do? What if they want to liquidate because that's what they are using to fund their retirement? It's their business, they took the risk, they built it, they should be able to sell it if they want, where does that leave you?
-Who makes decisions? What happens if the losing party disagrees?
-What happens when one party perceives the other party to be lazy?
-How are you splitting profits and losses?
-B&B's go out of business a lot
-What if they want more money out of it and want to draw larger salaries?
-What happens if they get sick and can't work and you have to shoulder the whole thing?
Yeah, you make some very valid points. I've definitely considered some of these, but you made some others that I didn't think about. I suppose this would require a sit down meeting with the fam in order to draw plans up just so that everyone knows what's going to happen before anything is done.

TheRedHare
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Re: Join the Family Business or strike out on my own?

Post by TheRedHare »

@Augustus,

Assuming everything has been settled with the fam. I wonder if keeping my day job and investing money into the business thus allowing it to grow would be a good idea? I'm thinking on various upgrades for the place. Why invest all my money into stocks when I could invest in a local business which I would take part ownership in and have more control over.

Although I wouldn't be as available for day to day management type role, I would be able to have some say as to what should be done with investment money. Instead of taking money from the business via salary, a low one at that, I could keep my current job but still have some stake in the business - If it seems to be taking off and I get tired of my current job, I step into a more active management roll.

Thoughts to consider?

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Sclass
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Re: Join the Family Business or strike out on my own?

Post by Sclass »

TheRedHare wrote:
Mon Jul 02, 2018 1:30 pm
Augustus wrote:
Mon Jul 02, 2018 1:27 pm
-Are you going to buy your parents out when they retire? For how much? What if you can't agree on a valuation, i.e. they value it higher than you do? What if they want to liquidate because that's what they are using to fund their retirement? It's their business, they took the risk, they built it, they should be able to sell it if they want, where does that leave you?
-Who makes decisions? What happens if the losing party disagrees?
-What happens when one party perceives the other party to be lazy?
-How are you splitting profits and losses?
Well said. This is my experience so far. Not being able to sell illiquid assets has basically reduced me to a high level employee.

Yeah the bar idea is just a fantasy. I had a friend who ran an out of the way place that catered to cheaters. Literally a hidey hole for extramarital affairs. Romantic, private, and secluded yet close to downtown LA. You couldn’t even see a sign or building from the street yet everyone knew where it was. It was a wonderful place to go into and get lost from reality. My friend worked really hard at creating the atmosphere and I don’t think she had much fun running it. She ended up having an affair herself and she lost it in the divorce settlement.

No drunkards there. Mostly the thieving staff was the problem.

Augustus
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Re: Join the Family Business or strike out on my own?

Post by Augustus »

I couldn't tell you. Some family businesses do well, some don't. I've avoided them for the reasons outlined above. My parents will be retiring in 5 years, I know they need as much money as possible, and their best bet is to sell and get paid off over 5 years to avoid crazy taxation. I have no interest paying that kind of money for their business, so it doesn't make sense for either of us.

I also have my own business I started before they bought theirs, so I'm not really excited the way you are. In my opinion your parents retirement situation is the critical factor in your decision. How old are they and how is their financial situation? If they've got a couple million in assets and don't need the b&b then it makes more sense for them to show you the ropes and pass it on. One good benefit is the educational aspect, you can open your own after you learn the ropes, and they can sell theirs for money.

As a parent I'd much rather have my daughter learn the ropes and strike out on her own. I think that's more stable and it helps both of us stay stronger.

TheRedHare
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Re: Join the Family Business or strike out on my own?

Post by TheRedHare »

Yeah, I guess this is the big red flag as my parent's don't have any savings. The business has been the only thing saving them from bankruptcy. My parents are also much older, my mom is in her mid 60s. They currently have the business up for sale, but it's been up there for about 1 or 2 years and haven't had many bites. We've had to couple of people interested, but they didn't seem too serious.

In all honestly, if I were an investor I'd be weary as the place could use some work. It's turn key, so everything is included, but some of the equipment is old and needs to be updated. Not only does the business have debt, but my mom has quite a bit of personal debt too. My dad is totally out of commission as far as work goes, in fact I'm not sure he'll be alive in the next 10 years (he's in his 70s and is not in very good health). So really the business, their home and the land is about all they have in terms of assets; everything else is sorta hand to mouth. So yeah, it's a bit of a mess really.

But the business was profitable last year, so there maybe some signs of it coming around. I think the big issue is that because of the amount of debt my mother racked up over the past several years, it's suffering and all the profits end up going to paying bills and debt instead of reinvesting in the business.

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Re: Join the Family Business or strike out on my own?

Post by Augustus »

Even if you just learn the ropes with the intent to strike out on your own, that is VERY valuable. But it sounds like your parents need the money from the business. Businesses take a long time to sell, especially when local economies are small.

TheRedHare
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Re: Join the Family Business or strike out on my own?

Post by TheRedHare »

Yeah, they definitely would need it. My nephew and I thought about doing our own thing, but it's tough when starting from scratch. I was thinking about maybe being able to gather up some local investors and having them buy out my mom while my eldest sister, myself and nephew could split up what's left accordingly. What would be some key points that investors look for in order to buy into the business? I guess if they did buy into it, they'd essentially be paying off all the debt of the restaurant.

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Re: Join the Family Business or strike out on my own?

Post by Augustus »

I imagine that they look for someone who has experience and knows what they're doing, has a good plan, provides a forecast of financials based on facts, etc.

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Re: Join the Family Business or strike out on my own?

Post by Finn »

I read through your other thread about having a large family, and I definitely think you should join your own family’s business. In your case, these two issues are intertwined. You should do for your parents what you think you want your future children to do for you. No question about it.

I don’t have a family business to join, so I don’t have the experience of what it’s like. But I can tell that *you* do need that experience before you do anything else (=have kids expecting them to work for you). And even if you end up loving the whole experience, remember that your own future kids might not. They have that right.

Set up ground rules before you join though. Best of luck!

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Re: Join the Family Business or strike out on my own?

Post by 7Wannabe5 »

I agree with Finn. Financial boundaries are ultimately artificial, because we all die. My friend who is worth close to 100 million is in the process of trying to transfer as much of his money as possible to the child he didn't acknowledge/adopt until she was an adult (because her mother was a teenage prostitute/addictwhen he met her -the child was born in prison) before he dies. This daughter routinely spends $20,000/month on miscellaneous. I know that he half envies one of his younger brother who is only moderately affluent, but has long-term successful marriage to social peer, three grown daughters, and many grand-children. IOW, my very wealthy friend now wishes that he had invested more of his life vigor towards traditional and aspirational class values.

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Re: Join the Family Business or strike out on my own?

Post by ffj »

So your parents have no savings and large debts, are older, 60's and 70's, and run a small business that keeps them afloat, barely.

Walk away. Unless you want your labor and investments to be their retirement fund. And you may, but from a financial standpoint there are many red flags here. You will be their care-giver, their source of income, and there is no guarantee the business will do any better for you either. I've watched a friend of mine have a nervous breakdown over a similar set-up, and I've seen others invest everything into restaurants that ultimately fail, some taking many years to do so, to be left with nothing. Because while the business provided a salary, and really not much in relation to hours worked, it never flourished enough so that they were making good profit, at least enough consistently.

There is a small country store/restaurant near my home that has been on the market for at least two years now. The owners are older with poor health and start their day at 5 in the morning and close up shop around 8 that night, six days a week. I'm guessing here, but they probably make just enough to cover their bills with some extra money in their pockets. Their hourly rate has to be terrible and they are prisoners to their business for 15 hours a day! They even live right behind the store so they are always around it and can't escape it. Maybe I'm projecting here, but that would be hell on earth for me.

I think you should delve into what is really motivating your desires here and act accordingly. But don't be naive about the costs. Good luck.

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Re: Join the Family Business or strike out on my own?

Post by prognastat »

I would probably avoid it, but I generally try to avoid entangling myself financially with family and friends. In my experience at best it doesn't affect your relationship and at worst it ends up in ruins.

TheRedHare
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Re: Join the Family Business or strike out on my own?

Post by TheRedHare »

These are all very valid points. I spoke to my mother about the financial details and how things currently corporate. To my surprise, they are only open 4 days out of the week, have only 3 cooks (all women above the age of 50), and several younger servers that are demanding in terms of pay, and time off. They seem to be busy all the time, but the problem is that they don't have enough skilled labor to take over the cooking, and much of the manual labor. And because they are so heavy on operating costs(utilities, licenses, insurances, payroll), it makes it tough to make a profit. Another issue is that no one other than my mother seems to care for the businesses continued success, or is at least oblivious on how to run a business, none of the employees really want to work and just want to collect a paycheck....no surprise here as this is pretty normal. Another issue is that with the labor that she currently has, they have power over my mother because they're already well skilled in what it is they do and will threaten to leave if their demands arn't made.

So I told my mom that it might be best to try and find a young worker who has an interest in the food industry and teach them while paying them a decent sum. This should then allow her to open the restaurant more often and generate more cash flow.

Initially I thought that an investment in marketing and a decent website would generate more income, but after speaking with my mom it sounded like being open only 4 days out of the week is the issue. I think they make excellent food, and have really great hospitality skills, they just need more skilled workers...which is tough in a small town.
ffj wrote:
Wed Jul 04, 2018 9:05 am
I think you should delve into what is really motivating your desires here and act accordingly. But don't be naive about the costs. Good luck.
I thought about this a lot and I think there are several reasons why:
1.Money (tbh, as it seems like one of the only ways to be financially successful, it to own your own business)
2. Family (I come from a pretty close family, so there is a desire to help continue the business. I also like the idea of family businesses as it seems to give a sense of belonging.)
3. Autonomy (When you own your business or can have a significant impact on its operations, this gives a sense of autonomy and security)
4. Opportunity (When you have a business of your own the sky is the limit.)
5. Status (tbh, when you own your own business, especially a successful one, your social status can go way up. Social status can then bring you power which gives you the power to have influence. I'm thinking more in a local sense as I have no interest in anything beyond that as it gets too messy.)
6. Building a strong system( ERE talks a lot about systems, and so I think owning a small family business would allow one to live a traditional lifestyle with a large family which brings a built in social security system. The idea of having a family all in one location is (to me) lovely and warm. I've been around large traditional families that were quite religious and was surprised by the amount of joy that it brought me to just be amoungst them. I digress....so having a large family to with at least 3 generations creates a strong social system. The grandparents can provide wisdom to the children and advice to the parents, the parents provide stability and care to the grandparents and children, the children offer joy, vitality and the continued success of the family) This is what was normal for hundreds of years and provided strong civilizations. The reason for a family business is that it can allow the entire family to work, provide income for the parents, and teach children a useful skill(s).

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