Should I abandon my current business to work with someone else on theirs?

[tamraho]

Hey guys,

It's been about 7 months since I started my current business in F&B industry, and I went from working alone to having 9 part-time employees. $20-30k monthly revenue with about $8-12k monthly profit.

I came to visit a bigger city to meet with owners who are doing similar things but on a bigger scale, and one of them offered me to join his team to start helping him open up multiple franchises.

He already has the infrastructure set up to mass produce products and a large distribution network as his other business supplies more than ~2000 stores and restaurants across the country. He has access to large amounts of capital, so initial investment capital won't be a problem.He told me to come back to him with how much I'd want to get paid and compensation when we sell the business ($50-100 mil exit plan is the goal).

I have a finance degree from a prestigious university, experience working in finance, know the business and operations pretty well since I started my own in a different city. He wants an "all-rounder" player on his team (I'd be the third member).

Pros are:- I'd have a mentor to avoid business mistakes that I would have made if working by myself- Access to capital that would take me years to build up- I can reduce the amount of physical labor that my current business requires me to do

Cons are:- I'd have to either close down my current business (9 employees will lose their part-time job) or hand over the business to one of my current employees.- I would be working for someone else, so I may not be able to take the business to the direction I see fit- If the business expansion doesn't work out or I get laid off, I would have forfeited my decently profitable and growing business.

What do you guys think? Any advice would be very appreciated.

If I were to go back to him with my compensation offer, what kind of offer do you guys think is reasonable?

TLDR: guy asked me to move to his city and work on his business on a larger scale than mine. What do you guys think about this? If so, what compensation package would be fair?

P.s. we both live in HQL cities with median income of $80k

 

[jenny50]

@tamraho If by F&B you mean food and beverage and specifically packed food, send me a DM - if you scroll through my post history for years you will see I am knowledgeable in the space.

That said, many times a situation like this is lots of talk and nothing real behind it. It is up to you to determine if that is the case.

If it seems legit, I would close your current operation (or sell it), ask for a salary that is twice your current net, and ask for 5% equity in the new company.

That is a tall ask, so you will probably be denied, but if he is the one chasing you, it can’t hurt to ask.

Normally in this scenario, someone like him would just offer you an industry competitive salary because why give away equity.

By the way, $50-100 million exit, while possible, is much less feasible in the food space than in something like tech. It would require $40-50 million in revenue (and presumably not reaching that by running in the red due to marketing costs, slotting, etc.) plus strong continued growth prospects beyond that.

 

[matt123]

@tamraho Not enough info. This sounds very much like a negotiating situation where the first person to put their offer on the table loses. Start thinking about what you believe might be worth it and fair for your involvement but make him state the initial proposal (which you will then negotiate off of.) That will give you a much better idea of what he's considering, how fairly he'll deal with you and how valuable he views you.

BTW, you have other options for your current business like put management in place or sell it.

 

[dsx]

@tamraho I don't really know without more information, but my suggestion would be to keep your location open and running as the pilot and test for the franchise template. You really want several rounds of iteration -- refining both efficiency and effectiveness -- before going all out on franchise partners.

You want to spend time working "on" the business, not in it. Because highly refined turnkey systems and processes are the benefit of the franchise product. A nice introduction to what I refer to as systems thinking is The E-Myth.

 

[jonathan817]

@tamraho I’d first make sure he gives me a solid offer with a contract so I could work off of that. I wouldn’t be willing to close the business without equity in the new company.

My ex fiancé started a business, slowly after 5 years he expanded across New York, Miami, & internationally. He figured out what made one location successful & hired good managers to run it. Now he doesn’t have to work & barely visits the locations. He’s in the food industry. He doesn’t have a finance degree he just focused on strong marketing & product development.

You have no idea how big your business could get, you already make a good profit, it’s already going well, why not keep it? How sure are you that this person will help you? Also consider at $20-$30k monthly revenue, a $50-$100 million exit would be difficult in the food industry.