How I Got In, Got Out, and Made My Money in the Family Business
Don’t ignore the good old family business — I made my fortune, retired in my 40’s, and am still speaking to my relatives
I get it, I really do. You want to do your own thing. Be a self-made person in the great American tradition. But I want to draw your attention to two big considerations you should factor in.
- The “self-made” business success is a myth. Countless articles and books (the seminal one is by Irving G. Wyllie in 1954 called, naturally, “The Self-made Man in America; The Myth of Rags to Riches”) point out that no one is truly self-made; almost everyone has significant investments and contributions from a host of sources, including family, friends, teachers, and others. This is not my main interest in this article, but if you want more, it has been well-covered by Ray Williams (see The Myth of the “Self-Made” Man and Woman in America).
- No, my interest lies in convincing you to look closer to home, perhaps even in your home to see if you can join what your parents, uncle/aunt, siblings, and so forth may have already started — I give you: the humble family business.
Look at the stats before you call me crazy (oh, and I get why you might call me crazy by the way).
Firstly, they’re not so humble, check this out:
- 57% of all the businesses in the USA are family businesses,
- They employ nearly 100 million people, and
- They contribute 63% of the GDP and 78% of job creation.
So? So you’d be a fool to ignore the little family business if you have plans to make your millions. I didn’t (ignore it) and I did (make my seven figures). Here is my story, warts and all, and the takeaways I can glean from that experience.
Hey Dad, can I come work for you?
I was 23. I was six months away from finishing my law degree. I’d done really well through a mixture of fear of failure and pig-headedness and had been offered a full-time job with what was arguably the best law firm in Sydney at the time.
But as I wrote elsewhere, a simple chat with the partners stopped cold any interest I had in pursuing that career. Instead, I sat my mum and dad down and very soberly said I’d like to come work full-time in the business. Henmark, was the name, by the way, from the ahem, clever shortening of Henry and Marketing.
Oh, I also told them I was about to go over to my 19-year-old girlfriend's place and ask her to marry me, but that is a whole other story.
“I suppose so.”
If I was expecting great excitement and encouragement, I sure didn’t get it. First, I think they were shell-shocked about the engagement. But deeper than that, they had really wanted a professional in the family. Dad had left school at fourteen, and there had been significant pressure on me to get a degree.
I don’t think they should have been that surprised, really, as I’d been doing my own business ventures — door-to-door sales of toilet cleaner (stuff Dad had bought at auction that he gave me to clear… I was 11). Renovating and selling bikes, then motorbikes, then cars (I bought my first car at 14). And then it was onto creating a mail-order business with my best friend. We brought to the world the “No Mist Shower Screen” and the “Good Luck Horseshoe”, neither of which did all that well.
But you get the picture: I’d been an entrepreneur-in-training for most of my young life. And I had, of course, worked holidays and weekends, doing stock-takes and whatever else was needed in Henmark through my school years. I actually kind of ran it for three months when I was 21 during a deferment from university — partly so my parents could take their long-service leave, and partly because a 5-year degree is just so long, and I needed a time-out.
Death threats, wisdom teeth, and a torn-off fingernail
Six months later, and newly returned from my honeymoon, I began my full-time job. Let’s just say it was a nightmare for that first year. My dad had no idea what to do with me, so I had to create my own job. His salesmen took an instant set against me convinced, I was out to get them, and made life really horrible, with yep, no joke, not-so-subtle death threats. I didn’t say they were smart (I mean who in their right mind threatens the owner's kid?), but they were sure mean.
And the fingernail? Literally the first few days at work, I pulled one off completely by catching it on the rubber conveyor belt that we used to move stock around. That healed down after a couple of weeks and then it was into hospital for my wisdom teeth, and then my wife got really sick.
But then we started to grow, and grow.
As I started to poke around the place, I began to notice all sorts of things that could be done better. I should have mentioned this before, but Henmark was not an exciting place to work.
Dad had gotten into the “rag-trade”, but in the least glamorous end of it. Our clients bought the tools to cut the cloth up so the sewers could stitch it. It was heavy tables and heavy machines to spread out and cut fabric in the dirty backrooms on the 3rd floors of very old buildings in Surry Hills (at the time the heart of the Sydney schmutter business). This was before all clothing was imported, by the way. There was nothing about this that was remotely interesting and, yes I did begin to wonder if I had made a really terrible decision—that maybe the law wasn’t as bad as I had thought.
Then, three things happened.
Firstly, we did have a few “celebrity-designer” clients that we sold special scissors and papers to, and some of these designers had retail shops. And I noticed something — the very few products we had that the designers bought from us for their shops—some clothes hangers and tagging guns—had much, much higher margins than our traditional products. So I set about introducing more of these high-margin retail items. I started sourcing more hangers, and bags, and racks, and anything a fashion shop would need.
Secondly, we were set up like an old warehouse or car parts type of operation. It was incredibly inefficient to go out back, select an item, then come back. So I bashed down the dividing wall and turned the stockroom into a showroom, and pretty soon that was going so well we needed another level of the building and another, and then we had to move.
And the third thing? Remember those salesmen (they were men only) who sent me a death threat? Well, they left and set up shop in opposition to us. This had happened before to Dad, and it was quite devastating. If your business, like ours, was only marginally profitable, losing even 10% of sales can be a death blow. So what had been up till then me “playing around” with the hangers and so forth now became a very focussed way to get new business to prop up what was lost.
Enough story already, get to the take-aways!
Glad you asked.
What You Should Know About Getting Into the Family Business
1. Always, always, always get down your agreements in writing
There is no such thing as a gentleman’s agreement. People forget, choose to forget, and worse, yes even in families. In my case, I stepped into a business no one was interested in, including my Dad. He was tired, and after the initial shock of me joining up, began to enjoy life and took frequent holidays. But then the business started to get interesting, started to grow, and well, he seemed to forget the plan to retire.
This is another story, but the gist is… I ended up having to buy the business off Dad 13 years later, by which time it was a completely different business selling none of the original products, as I had changed the business completely to shop fittings. This left me cash-strapped and underfunded for years.
2. Being family isn’t enough; you need to be good
This is not the place to be humble. I was hungry, driven, and full of bravado. I’m not sure Dad always knew what I was up to, but after that tough first year, the results spoke for themselves.
We doubled and doubled again in revenue. I spotted the “gap” and exploited it. Once I realised that the same clients that bought scissors from us would also be interested in hangers, then I added bags, tags, mannequins, counters, and eventually full shop fit-out services (we did several seven-figure jobs).
I also broadened the client range by opening other branches in other states of Australia, and began targeting high-value clients companies like David Jones and Myer (something like Bergdorf and Macy’s equivalents).
3. Some people want you to fail
The death threats weren’t the end of my challenges with Dad’s existing people. Sadly, over the first couple of years, almost everyone in the team left or was asked to leave. This was really hard, and anyone who knows me knows I’m a pretty fun guy, but a generational change in a business is often just that — a whole new start.
And it wasn’t just the staff, either. Dad’s accountant was very, very challenging. He continually dissed me, told me we couldn’t achieve the targets I was shooting for, and when we did, he found a reason to say that it was lucky or stupid. He also shut down my plans for us to buy a building (that, funnily enough, ultimately worked in my favour). And he pretty much cursed me when we finally changed to a new accountant.
I could go on and on about this; one guy even left saying he wanted to get out before the ship went down. Happily, this was just a horrible but necessary phase, and the people who came along after that, by and large, stayed for the journey, and they were glad they did. I made some lifelong friends and, even after I sold the business, we still keep in touch regularly.
4. How are you going to get your payday?
You might be reading this because you saw the bit about me retiring in my forties. Well, it’s a funny story.
I had no plans to sell out. My great weakness was that I was all about building, and not so much about profiting, so all my focus was on how we would grow this year and by how much. Actually, I looked at the figures daily, even twice daily to see if we were growing compared to last year, and if not, I took action.
The problem was, as a product company, we needed product. And growth meant we needed more product, and more product. So whatever profit we were making was going back into building a bigger and bigger stock-holding. Funding was always a challenge, and when I got on to a whole new range of products, sometimes the funding had to be creative and painful. We never did put a second-story on our house, because literally the day the builders were meant to start, I needed the money for some containers of shelving for the business.
But then, along came a buyer. We’d been annoying this company for a while. Initially, they were the kings of Melbourne and we were the kings of Sydney. But then we set up in Perth, and Melbourne, and another in Sydney, and it became clear that a better solution than a war was for one of us to take the other out. So, I sold, pocketed seven figures, and to boot had renters for my building.
5. The building
My plan had always been to try and turn our rent into repayment of a building, but the dream faded as the accountant told my Dad not to do it, and then Sydney went through another housing boom. That led to the Surry Hills premise doubling overnight in rent.
After a few sleepless nights, I noticed that the suburbs south of Sydney were so much cheaper than my current rental payment would be—enough to enable me to finance a purchase. So I bought the crappiest building you have ever seen. I renovated it, but not too much, as I knew it would be a knockdown one day. It was, but not before I had nearly tripled my money.
The point is, you’ve got to find ways to get your money out of the business. Maybe you’re making a good profit and can do it, but look at shares, real estate, and the like to “insure” yourself so all your eggs are not in the one basket. Of course, all this advice is predicated on you now being the owner of the business, because that is your first job.
Summing Up
Maybe you need to be able to say, “I did it, I’m the founder”. Good luck to you—as I said, I get it. I console myself about that by remembering that I moved the company in a different direction, doubled, doubled, and doubled the sales again, and ultimately bought it (frankly for more than it was worth). Still, I’ll never claim the title of “founder.”
But I did make good money, and I’m still talking to my brothers — one of them tried working in the family business for a while, but it didn’t suit him (funny twist — after I retired from my business I actually worked for him for a while; you can read a bit of that here).
So, if going to work in the family business is an option for you, remember:
- Get it in writing.
- Make a big difference.
- Be prepared for some hate.
- Work out how you can get your payday, and go for it!
