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!

Yes you need a good and experienced transactional lawyer to whom you and your dad trust the most. They can help you in legal documentation and you will not have to worry about any legal problem while having dad's business.

Thanks Mike! I'll shoot you an email today.

Colpaw,

I don't know how I missed this thread, but your situation is EXACTLY like mine 12 years ago. Except for the new wife.

As egg said, MikeAtHRI@aol.com and I'd be happy to give you my cell number to talk.

We did some creative things with company stock, which already owned 10% of when we signed the purchase cgreement, to great reduce the "value" of the company, and made the bulk of the purchase price the realestate. Between the continuing salary, insurance, vehicle, and monthly payments, I'm paying dad multiple 7 figures over a 25 years period.

It takes a lot of trust for a parent to set their child free with their life's work, in the hopes that they will pay them their due over an extended period. Now that I have adult sons of my own, I truly appreciate the trust that dad had in me. From what you describe, it sounds like your dad should, and does have the same trust in you.

Seriously, I'd love to share what I can, if you're still in the decision process. There is little value to buying a roofing company. But there is a great deal of value in what your dad and grandfather have done before you. If dad has the faith in you, don't throw it away.

And egg. Thank you.

Thank you to all that have replied & offered input/advice. I will be making my decision in the next couple of weeks.

(I promise to be more active on this forum as well)

You need to relax..........a good business attorney that both you and your Dad trust (to handle the details) can easily draft a sale document for you. You're not buying employees, equipment, etc. you're buying the years of good business practice and reputation that your Dad (and you) developed. To go on your own would be starting all over and believe me, going it alone is not pleasant and very risky. Just sit down with Dad and work things out. Forget about the new wife, that's Dad's problem, not yours. I hope it all works out because starting a new business in today's climate is VERY hard to do.

JET

Old School - I agree that inflation and significant material price increases affect the sale number. But the personal income my father has received in the last five years is 4 to 5 times what he made in the previous 40 years!! We have done very well in the last 7 to 8 years. If my father sold the company to someone else I would not benefit financially. I presently have no ownership in the company.

Seen-it-all - the agreement between my father & I would be a payout over a 7-year period in the form of a note with monthly payments to him. Upon his demise the note would be forgiven. If his new wife would receive any benefit from the buyout I am not interested in the deal.

Roofguy - this agreement is what I'm shooting for.

Wywoody - I have one other sibling who not interested in the business.

Moatsroof - the agreement with the trust as the beneficiary is basically what has been discussed. Following his death, then his wife's death I would be the beneficiary of the land where the company operates from. Am I missing the big picture on this one? Should I be grateful that I'm even being considered as an ultimate beneficiary? I paint this awful picture that I'm 65 years old and still paying rent to the widowed third wife and no way to retire!

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?

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.

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.

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.

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.

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.

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.

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?