Working with family is always a challenge, especially when it’s your dad and you’re 50/50 partners. It’s even more challenging when your dad is 55 with 35 years of industry experience and you’re 26 and fresh out of MBA School, having spent the last year working for a venture capital firm. Classic marriage of old school meets Generation X. He had the relevant industry experience and I had all the finance and operation solutions (or so I thought). My dad and I joked often how they never teach you in Business school how to grow a business with no working capital; they never teach you the business of ‘hustling’ and doing whatever it takes to keep the doors open.
We had a great 7 year run; managed to negotiate an extremely generous purchase price by a private equity firm and enhanced our coveted father/son bond. The experience provided invaluable life lessons that resulted in lots of long hours with no additional pay, headaches that often interrupted vacations, stressful father/son moments, and financial strains that permeated into personal affairs. Despite those challenges, I wouldn’t trade them for a $1 Million, well maybe $1 Million but definitely not $100,000. Those 7 years provided something that can’t be measured in dollars. It allowed me to help my dad satisfy his lifelong dream of owning his own business and provided time with a man that I truly admire. In retrospect, perhaps dad’s dream should have been more specific to include owning a profitable business that ran itself. But what greater gift can a son give than that of himself, helping his dad pursue his dream? My dad is my hero and has always went out of his way to support and help me achieve my goals.
When we ventured into small business ownership together, I pledged an unconditional 3 years to make a run at it, to give it everything I had to see if it had legs as he suspected. Although we didn’t retire with loads of extra money, we proudly walked away having achieved milestones others never dreamed possible of this rag tag father/son combo in an industry dominated by big box retailers and low margins.
- Doubled revenue 1st year and tripled sales year 2 with no credit facility
- Popularized virtual inventory: one of the first supplier integrated cloud inventory ordering sites
- Converted $20,000 of obsolete inventory into $300,000 of saleable merchandise
- Reduced manufacturing costs by 50%, labor costs by 25%, and insurance costs by 40%.
Opposites attract:
My dad and I are almost polar opposites when it comes to running a business. If you’re a fan of E-Myth by Michael Gerber (actually made dad read the book when we bought the business), my dad is the classic technician and I the entrepreneur. He’s laid back and subscribes to the school “if it ain’t broke, don’t fix it.” He believes everyone should take pride in their work and be thankful they have a job. He’s the type of man that will never complain of what you ask him to do; he is no stranger to hard work and doesn’t believe any work is beneath a man. He also believes a handshake is as good as a credit card and if you just keep customers happy, the business will make money – sensitivity analysis was completely foreign. Prior to us buying the business, no one had taken the time to evaluate what customers were buying and why; meaning, were they buying from us because we were the only person who could supply the product or were they genuinely trying to give us more business.
I, on the other hand, am high energy and constantly looking for the next big breakthrough. Passion and perseverance are my greatest attributes. I don’t believe in failure and I have trouble understanding why others are scared of change. I believe a single store business can’t compete in a commodity driven environment if customers are allowed to make decisions based solely on cost. I believe our success was predicated on our ability to create the value proposition for our customers – fair price, quick delivery and quality product. I recognize most people don’t enjoy their work and constantly try to find ways to make their job more enjoyable by getting their buy-in with big decisions (engaged employee usually equals higher sales). I recognized very early that my dad’s vision and sense of reality for our company was completely different than mine and that was something I just had to accept. One of the most important things to recognize and appreciate in family owned/operated businesses is the dynamics of family members. There are some things you just can’t change and the refusal to recognize that creates misery for everyone. You have to embrace who you are and what your business is or will become.
I love my dad and would run through brick walls for him (as he would me). He is a role model father and true salt of the earth: works hard, honest, loves his kids unconditionally and goes out of his way to help those in need, even to his own detriment. Those same attributes don’t always align with running and growing a for-profit business. Amazingly, my dad believes everyone shares his morality and truly believes people will honor their word and do the right thing. The business world makes cynics out of us all, a lesson I learned quickly in my MBA program and one that my dad finally learned as we were swindled out of $35,000 in our first few months of operating (another story in itself). As Reagan said, “trust but verify.”
5 LESSONS WE LEARNED WITHOUT KILLING EACH OTHER:
1: Timing is everything
Dad and I had the good luck of buying the automotive remanufacturing company July 3, 2001, two months before 9/11. Even luckier, 1/3 of our business was airline related – we supplied brake boosters for Delta’s and Air Trans’ TUG equipment (carts that haul your luggage to the plane). Within a few weeks of 9/11, we received letters from the airlines stating they were unable to pay their bills and it would be 6 months before they could make payments towards those debts. In addition, they wanted to continue buying from us with the intent to pay in 6-9 months (interest free of course). Stuck between a rock and a hard place, and with no immediate ability to replace 1/3 of our revenue, we acquiesced and continued supplying them. It was a tough 6 months but we survived and still managed to double revenue that year. To offset the airline cash shortage, I reduced my salary to $10,000 and took a night job at Home Depot working in hardware 4 days/week (dad took a pay cut as well but different based on his situation). After the 6 months had passed, the airlines made good on their promise and I was able to hang up my Home Depot apron. Working at Home Depot provided some great insight into how they managed inventory and their philosophy on loss leaders, pricing, inventory turns, etc…
God takes care of those who believe and he rewarded our perseverance through 9/11 and those 7 years of always doing the right thing. Call it luck or divine intervention, we sold the business September 8, 2008 (a few days before the 2nd Great Depression). Even more miraculous was the buyer’s lender went bankrupt 5 days after the closing. Had our closing been postponed a week, as requested by the buyer, the deal would have went south and we would have been left with a company worth 40% less than the final purchase price. As the deal finalized, we received a market premium, negotiated a guaranteed 3yr employment contract for my father at a 30% pay raise and were able to pay all our creditors.
2. Cash is King
You always hear cash is king but it never truly sinks in until it’s your money. From a profit and loss standpoint, we were making good money with healthy distributor margins but were forced to plow every dollar back into the business to replenish our inventory. Even though we were taking very modest salaries, cash became strained as our big credit buying customers were paying 15 days on average after we were due to pay our suppliers. We paid our suppliers 2% net 30 to receive timely pay discounts. Luckily, I was able to shore up a majority of this gap by creating buying incentives for these customers based on ‘cash received.’ At first, we were naïve in accepting the old “check was mailed on XX and our check number is 1234” story. With no line of credit to access and having invested every $ we had to buy inventory, we were cash poor. By a miracle of God, we also increased our Do-It-Yourself (DIY) business to satisfy weekly cash needs, a market we had always shunned in the past.
3. Establish roles and responsibilities
Prior to buying the company, we talked in depth about ‘untapped’ opportunity but we were short sighted in mapping out each other’s role in seizing those opportunities. Mistakenly, we both formed our own assumptions without communicating to each other. My dad assumed he’d continue his former role of waiting on customers – inside sales, answering incoming calls and serving them as they walked in the door. I assumed I’d focus on operations and outside sales, but we’d jointly tackle strategy. Dad was perfectly content continuing in his former role as he really enjoyed working with customers and helping them solve their problems (and he was great at it). Me, I envisioned hiring/training others to wait on customers and our collective efforts to be focused on growing the business and expanding. Although my dad had been working in the industry for over 35 years, he had never been exposed to the back office operations and their impact on all business operations. Most small business owners underestimate the impact of aging receivables, ROI of marketing campaigns and the concept of time value of money. Most try to do everything in-house due to the cost savings (and usually by themselves because they don’t trust others with their money) and fail to seize growth opportunities because they’re too busy doing payroll, chasing slow paying customers, etc. – too busy working in the business instead of working on the business.
4. Agree on end goal: hobby or business
The typical mistake a small business owner makes is confusing something they’re very good at (a hobby) for something that is profitable and has growth potential (a business). It became apparent very early our single store location couldn’t support two owners at the salaries we were targeting, hence a major dilemma and was on the cusp of being labeled by outsiders as a hobby. Neither of us could have predicted 9/11 in our wildest dreams nor the impact it would cause.
The only way for the business to support both of us comfortably was through some economies of scale, meaning more stores, meaning more partners. This reality ran counter to my dad’s whole premise behind going into business – i.e. being his own boss and not having to answer to anyone else. He wanted to be in business for himself because for 35 years was tired of watching someone else make all the decisions that he felt ran counter to what he was seeing day in and day out. He truly believed that once he bought the business he could take advantage of the untapped opportunity. While some of his beliefs were well founded, he had overlooked the necessary assets required to make them happen (inventory and line of credit – both of which were essentially nonexistent). I made it very clear in the beginning this was a 3 year stint for me and in no way did I have plans on retiring at this company. My dad also made it clear that he wanted to work at this job until retirement. It also became obvious that the business was more than just a paycheck for him; it was a source of enjoyment. He was clearly more concerned about never letting the customer down than insuring the company made a sustainable profit. Me on the other hand, I was in it to be a part of something bigger than myself and create a legacy. That being said, our objectives were at crossroads and I was accepting of my dad’s vision.
5. Once you leave work, don’t talk about work
Father and son interactions at work are challenging to say the least. We were all raised to honor our father and not challenge their authority. In the business environment, this presents a direct conflict to the idea of having a partner that challenges you and is always looking out for what’s best for the company. I respect my father to no end, even if we differ on opinions. My disagreements had nothing to do with respect but rather a differing in philosophies on what’s best for the company.
One thing we both agreed on was not using “dad” and “son” references at work. I called him Rick and he called me Shay. At times it was awkward, but in the end it helped us establish our work relationship while maintaining our coveted father/son bond. We wanted to keep the environment at work professional and give our employees the assurance that we were running a legitimate business and not playing favoritism. On the same note, we agreed that once we locked the doors every night, not to talk about work and make amends for any temper flares at work. Trust me, it happened. As investors and 50/50 partners, I felt we should be comfortable saying anything to each other that we would say to a business partner, even if might hurt their feelings. And many times I did hurt my dad’s feelings and make him angry. Fortunately or unfortunately, my dad is not one to express his frustrations and usually just bottles it up. Often times, I could see him getting worked up and I’d keep pressing until I could get a response. I stressed to him that he could never hurt my feelings as I knew how he really felt about me. I assured him it was alright to get angry; it was his money too and his dream. You have to fight for what you believe if you truly believe it’s the right way. Fighting for what you believe doesn’t mean you can’t change your mind when presented with better information. I know I made him angry at times and I made sure I apologized afterwards. We both went out of our way to always make sure we understood why we were angry. Many a nights dad would follow me home and join my wife and I for dinner. I feel very fortunate to have experienced such an opportunity. How many sons had the same opportunity? You can’t put a price on those experiences.
The Next Chapter
My dad still works for the same company even though it was recently acquired by a large automotive group out of NY for 20 cents on the dollar (unfortunately our buyers didn’t continue our value proposition strategy and decide to compete on cost). His job is still intact, doing what he loves to do – talking to the customer and providing them solutions. With a noncompete in place, I made a transition to healthcare, business development specifically, and having the time of my life. I have since moved to Nashville and have 5 amazing kids under 8. Life couldn’t be much better. My dad in turn has 5 amazing grandkids who love their ‘poppy.’
All in all, we had a great run. We didn’t make a lot of money but we didn’t lose a bunch either. In the world of business, sometimes not losing your shirt is quite an achievement. We both feel very blessed for the time spent together. Looking back we cherish those 80-90 hour work weeks when we were struggling to keep the doors open. We cherish the times when everyone counted us out, family members included, and yet we still made things happen. I often give thanks to the good Lord for the opportunity working side by side with my dad in pursuit of his dream. As we learned, the journey is 98% of the satisfaction. We didn’t accomplish all that we wanted to but, more importantly, we have no regrets. We gave it everything we had and never gave up. And for that, we are both all the better. In 2012, my dad flew to Kona, Hawaii to support me competing in the Ironman World Championships. As further evidence of our bond, he joined me in the annual Underpants Run (cropped the pic to protect your eyes). A truly unbreakable bond!
ABOUT SHAY
Shay is an All American and World ranked triathlete, burn survivor with scars over 65% of his body and is a sought out national motivational speaker. Despite being told he’d never compete in sports again at the age of 8, Shay is living testament to “Anything is Possible”: 4x Ironman, 4x member of Team USA, ranked top 1% of Ironmen worldwide and has competed in 9 triathlon world championships, including the Ironman World Championships in Kona, Hawaii. His mantra has always been to not merely be a “finisher” but to be a “competitor.” If you enjoyed this article, I encourage you to check out my other posts.