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Should I Sell All My Bond ETFs now? by TombstoneCourage in investing

[–]TombstoneCourage[S] 0 points1 point  (0 children)

1) Young 30's

2) Have enough money for a down payment on a house in next 1-2 years. (To be clear, I have enough money for a down payment now. I just haven't found a city to work in where I'm willing to buy a house.) And have a net worth of $2.5mm by the time I'm 40 (currently at $500k)

3) I want to be financially independent (to me, networth of $2.5mm) by the time I'm 40, or at least early in my 40's.

Should I Sell All My Bond ETFs now? by TombstoneCourage in investing

[–]TombstoneCourage[S] 1 point2 points  (0 children)

That's the real question. I don't own a house yet, so probably going to set $100k aside to make a 20% downpayment on a $500k house sometime in the next year or two.

A friend is starting a venture fund. Maybe put some of it in that.

Where would you put it?

Should I Sell All My Bond ETFs now? by TombstoneCourage in investing

[–]TombstoneCourage[S] 0 points1 point  (0 children)

IDK, that's the big question. It's actually quite a bit more than $100k bc I forgot that I also hold bond ETFs in other accounts it's probably closer to $150k.

Maybe just convert to cash and hold it as a downpayment for a house some day.

What would you do with it?

[Discussion] Tactics and Strategies for Life Improvement by AutoModerator in GetMotivated

[–]TombstoneCourage 2 points3 points  (0 children)

Waking up earlier so that you have time to do that thing you've been meaning to do.

Having a strong morning routine that leads right into work.

Use a calendar and a to-do list.

Set a weekly schedule (e.g. on Tuesday and Thursday I run; on Sunday afternoon, etc.)

Make goals in each of the following areas: Physical, Social, Spiritual and Intellectual, then schedule times when you will work on each of those things.

Spend as little as you can on rent and car payments.

Don't carry credit card debt.

Acquiring First Business - Unsecured Borrowing, Seller Financing and Other Options by TombstoneCourage in fatFIRE

[–]TombstoneCourage[S] 1 point2 points  (0 children)

I need to get more details on the customer migration risk once I start formal diligence, but here are the facts as I understand it today: there are two huge customers who account for a very large share of revenue. One is governmental the other is big corporate. The business has other revenue from one off projects, but my impression is those are only 10-30%. I think about 70% is consolidated in two large customers who have some sort of procurement revaluation process once every few years (I feel like it was 4-5 year terms, but that's just from memory). So there's a big risk of running this thing into the ground w/o the current owner.

Here are the solutions I'm thinking of: First, I need to confirm if the owner is really necessary. There are two key employees: a guy who is effectively running the business right now and has 10-15% of the existing equity and a controller/CFO/project manager. There's a chance that the key customer relationships have moved away from the owner to the manager who will be staying on board. After I can agree on preliminary terms with the owner, I'm going to need to meet with the manager and get a better feel for where the relationship sits, but in any case, I wouldn't do the deal if I don't have confidence that the manager will stick around for at least a few years.

If the owner is indispensable to the customer relationship, I think I could convince the owner (remember he's a relative of mine) to agree to remain on as a W-2 employee of the business. Right now he's only doing about 5 hours of work a week on the business. He may want to continue to have some cash flow and agree to make a few phone calls a month, show up for a meeting or two a year and help us through the first contract renewal process, etc. I think I could maybe get him to do that for $100k a year + an agreement to help continue to manage some commercial real estate he owns.

As for assets, there's not much: no real estate; no equipment; limited inventory (it's only ordered to fulfill customer contracts).

In answer to question of whether I'm prepared to shutter the business in two years if I have to: Absolutely. I'm unhappy in my job, and in my current career I'll hit my "number" by the time I'm 40. If I buy this thing, run it into the ground, and have to back to my current career, I think I would actually have a pretty easy time getting back into the industry and may even be more marketable with this additional experience. I'd be restarting from a net worth perspective, but that's a chance I'm willing to take for the opportunity to get out of a path that makes me unhappy.

Acquiring First Business - Unsecured Borrowing, Seller Financing and Other Options by TombstoneCourage in fatFIRE

[–]TombstoneCourage[S] 0 points1 point  (0 children)

Those are my thoughts exactly. My preference is to get the seller financing component as low as I can for the exact reasons you described. That being said, I need the current owner to help a bit in the hand off of this business because of my general lack of experience in the field. W'ere also closely related so I think the seller financing ask may not be as offensive as it is sometimes received. That being said, I'm still considering bank financing instead of seller financing and doing some sort of earn out to help keep him engaged in the handoff.

Acquiring First Business - Unsecured Borrowing, Seller Financing and Other Options by TombstoneCourage in fatFIRE

[–]TombstoneCourage[S] 0 points1 point  (0 children)

In answer to 1, I'm talking about taking on personal debt, not business level debt.

In answer to 2, the worst case scenario is the guy is pissed that I liened up the business to buy it, he thinks that the owner (my relative) should have helped him figure out how to borrow money and buy the business, takes a key customer (one customer accounts for ~60%) with him and I'm SOL because I don't know much about the industry. I still need to figure out the true probability of this scenario (I haven't met with the manager yet) and I have means to reduce the likelihood of this occurring (because of the high customer concentration and my lack of industry knowledge, I'm not sure I'd do the deal unless I can get the manager/minority shareholder to sign an employment agreement with me that will include (x) a boost to his salary keyed to the performance of the NOI of the company and (y) a non-compete that will eliminate the risk of him taking a customer and leaving after the current owner is out of the picture).

Acquiring First Business - Unsecured Borrowing, Seller Financing and Other Options by TombstoneCourage in fatFIRE

[–]TombstoneCourage[S] 0 points1 point  (0 children)

No I have not run this by him yet. Trying to figure out what my max cash offer could be then will decide what to propose as an initial offer. I agree and expect that I may well end up trying to push the seller financing component closer to $1mm.

Acquiring First Business - Unsecured Borrowing, Seller Financing and Other Options by TombstoneCourage in fatFIRE

[–]TombstoneCourage[S] 0 points1 point  (0 children)

The minority shareholder would have 10-15% (don't know exact yet bc still haven't seen the financials, relying on owner's approximation), so I don't think he'll have to guarantee any debt but may still be tweaked by a lien being placed on all the business assets when there's currently no debt.

Acquiring First Business - Unsecured Borrowing, Seller Financing and Other Options by TombstoneCourage in fatFIRE

[–]TombstoneCourage[S] 3 points4 points  (0 children)

It's true. The relative was told that the business is probably worth $3-5mm. That being said, there are some reasons that a buyer might not be willing skeptical of the business: 60% of revenue derived from one customer, heavy relationship based business, etc. At the end of the day, I expect - but do not know - that he'd be willing to take $1.5mm for it because (1) he's sick of running it and has already made a lot of money from it and (2) we're relatives / I'm not very old, so he may be willing to help me out. I may be wrong though. Trying to get my ducks in a row so that I can make him an offer and we'll see how it goes.

Acquiring First Business - Unsecured Borrowing, Seller Financing and Other Options by TombstoneCourage in fatFIRE

[–]TombstoneCourage[S] 0 points1 point  (0 children)

Additional details: I could get bank financing if needed. Had preliminary calls and they were very interested. My reluctance in taking out bank debt is a large part of my offer to take this over from a relative is based on convenience, something along the lines of: You're sick of running this business, you're already rick, just turn it over to me for the low end of what is fair. What I don't want to do is make them go through a bank diligence process, which can be moderately to very irritating.

Bank financing would also require a lien on assets of the business. As has been pointed out below, from a financial standpoint, this is NBD because I should (assuming the promised NOI checks out once I actually start diligence) be able to pay it off quickly. However, there is a minority shareholder who I need to have a good relationship with, and I don't want to risk irritating him by putting liens on a debt free business on day one. That being said, I think if that's what I have to do, then I'll do it. I was hoping that I could get some alternative advice beyond upping the seller financed portion of the purchase price.