Path to ETA via Accepting a "second in command" job?
December 03, 2021
by a searcher from The University of Chicago - Booth School of Business in Virginia Beach, VA, USA
I was exploring buying a company and made a great relationship with the owner and CEO ($25mm revenue). The owner was ultimately not ready to sell at the moment, but offered me a job as the President, basically the second in command with a path.
Has anyone seen examples of going down this path? How did it turn out? What questions should one ask when considering this type of opportunity?
It could decrease some risk but also limit upside, but also could be a rewarding way to spend a career.
from Northwestern University in Tampa, FL, USA
Taking the president role in an existing company gives you the opportunity to explore your management blind spots, really think about what you enjoy and don't enjoy doing, and explore what you do and don't like about the business / industry / market. It gives you the chance to do extended diligence and uncover whether it is really a company you would want to buy or would be happy running long term. And if you do decide to buy and can work out a deal, you'll already be through the hardest part of the learning curve. If it's at all a decent business, I don't think it would be hard for you to find investors to back you in a buyout.
Imagine the worst case scenario - you get a couple years down the road, you are ready to buy, and the owner isn't ready to sell or willing to sell on terms that make sense to you. You can walk. And I'd argue you came away with a couple of years of great experience, learned more about yourself and what you really want, and would be much more focused in picking back up a search. To me it's mostly about thinking about what's most import to you right now - are you still trying / willing to invest time in learning? Or are you trying to maximize your financial return as quickly as possible?
I'm in a similar, but nuanced, version of this situation right now. I'd be happy to discuss my experience further if you want to bounce ideas. redacted
from United States Naval Academy in Sherman Oaks, Los Angeles, CA, USA
I would only recommend taking on the role of president if the owner releases a significant amount of equity - 40 to 50% as well as an appropriate salary. I would also make it financially painful for the owner to fire you before a certain amount of time has passed, say two years. If you and the owner don't get along and you agree to part ways before then, the owner will have to buy you out at the current valuation as well as give you a massive severance. This is an over-simplified explanation of this type of arrangement, but you get the idea. It protects your time and let's you participate in the growth financially.
Outside of an arrangement with significant equity, I recommend taking a hard pass on the presidency. Who knows, maybe in a couple years they may swing back around when they ARE ready to sell.