EtA(pprenticeship)

by a searcher from The University of Michigan - Stephen M. Ross School of Business

2 years ago

Hi all,

In the past few months I've heard the phrase "entrepreneurship through apprenticeship" a couple times and, on the surface, it sounds really attractive to me. The ability to enter as COO or similar, learn the business from the owner for a year+, get operating experience, maybe get compensated in equity etc all sound great, but I'm sure I'm neglecting many pros/cons.

Does anyone have any insight to share on the topic?

Any ideas on how one might find these kinds of opportunities (or even if they really exist)?

Any thoughts on how to pursue this kind of unique path would be appreciated.

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2 comments

searcher from Harvard University - Harvard Business School

I personally would not get into that sort of arrangement unless it was a contractual path to ownership with significant downsides (like several hundred thousand dollars) if the owner decided not to complete the sale to you after the agreed-upon period. Even with that sort of contract in place, I'd still be leery and have the contract checked by several attorneys just to be sure.

It sounds like you might also be talking about a path to CEO of a small business, which, if that's what you're looking for, there are several former searchers and micro-cap PE firms who are looking for operators as you're describing. It's relatively straightforward. You start as a COO/assistant to the CEO, become a CEO and then work your way up through progressively larger OpCos. Pros: you don't have to be a searcher. Cons: you never truly become an owner. Owners get to decide when the company is "large enough" (if ever) and start to step back. Owners get to decide to hire CEOs, compensate them for profitability, and search for the next business/retire to the beach.

There's no right answer, just a right answer for you. Nobody is going to disparage you for deciding to "just" be CEO, but you'll miss out on the potential upsides of being an owner. Check out this HBR article from Rick and Royce which neatly explains the tradeoff over time. If you go with the CEO route, you're effectively choosing the consultant route.

Best of luck!

https://hbr.org/2016/03/why-more-mbas-should-buy-small-businesses

2 years ago | like reply | 1 like

searcher

I'd recommend that you start with Yale's "How to Prepare for a Search Fund During Your MBA." That's a great resource and will link you to other resources, most of which are available for free online.

2 years ago | like reply | 1 like

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