[HN Gopher] After my dad died, I ran and sold his company (2018)
___________________________________________________________________
After my dad died, I ran and sold his company (2018)
Author : ziptron
Score : 502 points
Date : 2024-06-22 12:49 UTC (10 hours ago)
(HTM) web link (anandsanwal.me)
(TXT) w3m dump (anandsanwal.me)
| goodJobWalrus wrote:
| In case the author is reading this, I am wondering why Dad did
| not have a succession plan, and was it ever discussed in the
| family what should happen after? What was dad's plan?
| IshanMi wrote:
| The author mentions that his father was in touch with a PE-
| backed chemical company a month before he passed, who re-
| engaged a month after- sounds like that might have been his
| succession plan?
| _rm wrote:
| From reading it, and the various references to various
| potential buyers his father had already been in discussion
| with, it appears his plan was to sell it before that.
|
| This is a big problem with these kinds of businesses. A lot of
| these solo owners who build up a business over the course of
| many decades serious underestimate how hard they are to sell,
| and have an unrealistic idea of what valuation they'll be able
| to get.
|
| There is a whole industry of those bottom feeders the author
| referred to, who's business is precisely waiting for these sole
| owners to either die, or better yet become incapacitated to the
| extent they are forced to sell their businesses (but not so
| much that they can't hold a pen and read a sales contract), so
| that they can swoop in and offer them 2x or 3x - "what's your
| best alternative?".
| amadeuspagel wrote:
| If there's a whole industry of them, shouldn't there be lots
| of competition to buy these companies?
| actionfromafar wrote:
| A whole industry of bottom-feeders _buyers_ , but the
| companies they are buying are not necessarily in the same
| markets as each other, at all.
| bell-cot wrote:
| There's vastly more profit in buying a few companies at 33
| paise on the rupee than in buying lots of companies at 99
| paise on the rupee. And coordinated punishment of any
| newcomers - who try to disrupt a status quo of systematic
| underbidding - does not even require communication between
| the incumbents.
| smcin wrote:
| What exactly is the coordinated punishment of newcomers?
| bell-cot wrote:
| The simplest tactic is to bid up anything they're trying
| to buy to 101+ paise on the rupee.
| lotsofpulp wrote:
| Then who is buying at 33 paise? You are contradicting
| yourself.
|
| If something "worth" 1 rupee is not selling for 1
| rupee,then the logical conclusion, absent
| collusion/cartel/monopsony behavior, is that it is not
| worth 1 rupee or even 99 paise, but rather the 33 paise
| that it is selling at.
| bell-cot wrote:
| The established players - and occasional _well-behaved_
| newcomers - are buying at (say) 33 paise on the rupee.
|
| The "1 rupee" is what the business _would_ be worth, in a
| highly efficient, open market. Which this market clearly
| is not. And the regulars are quietly colluding to keep it
| that way.
| lotsofpulp wrote:
| The context of _rm's post is not about the OP's dad's
| specific business in its specific regulatory environment
| which may or may not constitute a "highly efficient, open
| market".
|
| > lot of these solo owners who build up a business over
| the course of many decades serious underestimate how hard
| they are to sell, and have an unrealistic idea of what
| valuation they'll be able to get.
|
| From this, I get the sense that _rm was talking about
| owners of niche businesses that are surprised to find a
| smaller market of interested buyers, and hence are
| surprised they cannot sell their business at a price they
| hoped to get.
|
| My point was simply that just because a seller cannot get
| a buyer to pay the price they hoped, that does not make
| the buyer a "bad" person.
| bell-cot wrote:
| > My point was...
|
| Quite true. And it's possible that (due to
| regulatory/tax/social/etc. factors in India) small
| businesses could only be sold at large discounts to their
| "Wall Street theoretical" values - even in a perfectly
| efficient market.
|
| I originally commented in response to amadeuspagel saying
| "If there's a whole industry of them, shouldn't there be
| lots of competition to buy these companies?" - by
| pointing out a simple way in which the market could be
| very inefficient.
|
| Yes, even if there's a carved-in-stone rule that
| businesses sell for (say) 10X their annual profit, there
| will be plenty of business owners who imagine that
| _their_ business is somehow the exception.
|
| Related is the problem of owners misrepresenting their
| businesses to potential buyers. Which would lead
| perfectly rational and honest buyers to offer them far
| below 100 paise on the rupee, due to the risk of being
| swindled.
| daedrdev wrote:
| Yeah his father probably had been receiving lowball and
| unserious offers for years if one were to find the right
| email folder
| FredPret wrote:
| I'm not commenting on OP or their family business, but a
| multiple of 2x or 3x could be more than fair for a hands-on
| small business.
|
| Consider that there are large public companies with
| established management systems that you can buy and hold,
| completely hands-off, for multiples of 5x - 10x. GM is
| trading at 5x, lots of banks are in that range, huge
| equipment rentals, mines, etc.
| im3w1l wrote:
| Doesn't a multiple of 5 basically mean the market is
| seriously worried that the business will shrink / go
| bankrupt?
| FredPret wrote:
| Perhaps, but investors are neither fully informed nor
| fully rational.
|
| People get overexcited about new trends, then everybody
| jumps on the bandwagon, and good but boring stocks are
| ignored. Doesn't mean these are weak businesses though.
| lotsofpulp wrote:
| Why are the buyers referred to in derogatory terms? By the
| same logic, the seller should also be referred to in the same
| derogatory terms, for holding out for too high of a price.
|
| Or one could do the sensible thing and leave emotion out of
| it, and realize business is just business. The market price
| is the price that results in a transaction.
| chmod775 wrote:
| >Why are the buyers referred to in derogatory terms?
|
| Because they are taking advantage of the owner's impaired
| judgement due to their personal situation/ill health in
| trying to extract an unfair price. Such behavior is
| referred to as "morally reprehensible" at best, and is
| skirting the legal line of what would be considered a
| contract made under duress at worst.
| lotsofpulp wrote:
| So no one should ever buy from someone who is dying or
| ill?
|
| That's crazy. Supply and demand curves are in constant
| flux. The seller didn't like the market prices when they
| were healthy, that does not mean they are entitled to a
| minimum price. Everyone gets ill and dies eventually, and
| everyone knows it. They are free to sell before that at
| the market price.
| chmod775 wrote:
| > So no one should ever buy from someone who is dying or
| ill?
|
| You can do that. However there's an issue with basing a
| business around reaching out to people with bad-faith
| offers the week their parents died or they were
| hospitalized themselves.
| gedy wrote:
| > Because they are taking advantage of the owner's
| impaired judgement due to their personal situation/ill
| health in trying to extract an unfair price
|
| I think you are assuming way too much - a lot of older
| folks sell things "because they are done", and much is
| upside from when they purchased or started originally.
| Even when they are ill, many folks just don't care enough
| about the money enough to wait it out, negotiate, etc.
| chmod775 wrote:
| I'm not assuming anything. I was answering a question
| based on:
|
| > There is a whole industry of those bottom feeders the
| author referred to, who's business is precisely waiting
| for these sole owners to either die, or better yet become
| incapacitated to the extent they are forced to sell their
| businesses (but not so much that they can't hold a pen
| and read a sales contract), so that they can swoop in and
| offer them 2x or 3x - "what's your best alternative?".
|
| It's not material to my answer whether that statement is
| true or not. If you think it is untrue, take it up with
| user "_rm".
| _rm wrote:
| Easy to see how specifically targeting the dead or dying
| for profit is worthy of derogatory terms.
|
| If you think otherwise, maybe you shouldn't view "bottom
| feeder" as derogatory? They keep the seabed clean do they
| not? It's all just "business".
|
| And yes, the sellers in this case are also in the wrong,
| best case being bad luck, mid case being failure to
| prioritize, through to ignorance, delusion, stubbornness,
| arrogance, etc.
| asanwal wrote:
| Hi - author here.
|
| This is a big question tbh and the lack of a succession plan is
| a function of many things:
|
| 1. This was my dad's baby. He loved the engineering and the
| science of it and so the idea of retiring from it was difficult
| for him to conceive. Doing that also requires thinking about
| one's mortality which I also believe was difficult for him.
|
| 2. This was a small market business in a tier 2 city in India.
| Attracting talent that could take it over was challenging. And
| myself and my siblings having been born and brought up in the
| States and being utterly clueless about the engineering/science
| of the company made us a non-starter.
|
| 3. As others have pointed out, he was thinking about
| succession/exit because he knew it was required for the biz to
| live on and grow. But life unfortunately had other plans and he
| was taken away from us unexpectedly.
|
| There are definitely lots of could haves, should haves, would
| haves, etc I've thought about afterwards, but this was clearly
| one of those "play the cards you're dealt" kind of situations.
|
| Thanks for reading.
| 999900000999 wrote:
| Thanks for writing a great article.
|
| I was honestly impressed with how much you cared for your
| employees.
|
| The American way would be to just sell it to the highest
| bidder without any concern for anything else.
|
| Does India have a different social contract? I'd never expect
| a company to actually look out for my best interest.
|
| It seems like you really cared for your team. Are lifers
| common in India?
|
| Back in my grandpa's time, you worked at the same place for
| 20 years, they gave you a gold watch, and then you retired.
|
| Now your expected to jump ship often or your leaving money on
| the table.
| asanwal wrote:
| Thank you.
|
| I don't think there is an Indian social contract but having
| been born and brought up here in the USA, I'd be talking
| out of my a$$ on that topic :)
|
| This was maybe more of an implied or expected contract I
| had with my dad and mom who built the business and by
| extension the Atlas team.
|
| Job hopping is quite common in India, but that's probably
| more common in larger cities. In a tier 2 city like where
| my dad's business was, there are limited options for a
| plant engineer for example, and as far as I can tell, the
| skills they have in a fine chemicals plant may not be
| immediately transferable to a plastics manufacturer.
|
| And finally, many were with my dad for 10+ years so
| probably some amount of comfort in knowing the domain, the
| job, the boss, etc.
| jll29 wrote:
| Thanks for the story and for putting the employees first.
| M&A of your sort should always select suitors based on
| chemistry fit - so when I read your list of candidates,
| it was already clear to me you would sell to the one
| listed last, and I'm glad it worked.
|
| Selling to Private Equity is almost never what any
| founder would have wanted, as their job is to slice and
| dice, "cut the fat" and sell the pieces to different
| highest bidders.
| 999900000999 wrote:
| >Selling to Private Equity is almost never what any
| founder would have wanted, as their job is to slice and
| dice, "cut the fat" and sell the pieces to different
| highest bidders.
|
| Depends on the founder, I'm happy that the OP decided to
| look after his workers, but there's no loyalty in
| business.
|
| Many founders would just look at the largest payday and
| be done with it.
|
| I guess you can have a George Lucas moment and criticize
| the new owners for destroying what you made, but you're
| sitting nice with your profits.
|
| OP comes off as someone who was already really
| comfortable, and the business appears to of been
| profitable.
|
| But it would have been a completely different story if
| they were losing money, at a point you might just have to
| sell the company for parts and cut your losses.
|
| Maybe offer some of the lifers generous severance
| packages.
| Applejinx wrote:
| Does it count as business, though, if you're just busting
| it out, light a match? Is that not more, vandalism? Seems
| not as difficult.
| ren01r wrote:
| Lifers are common in manufacturing/industrials in India.
| Jumping ships is the norm in tech as it is in the US.
| mattzito wrote:
| There are lots of family owned businesses in the US that
| look after their employees. I think it's more that there
| are significantly fewer tech companies in general that are
| family owned businesses.
| noufalibrahim wrote:
| This was a great ride, a very gripping read and a very
| touching story. Congratulations on your adventure and I'm
| sure your father and his second family is proud of you.
| svat wrote:
| Thanks for sharing. Curious how things are now 6 years later:
| do you still keep in touch with some of the employees? Has
| the outcome been good for them?
| tootie wrote:
| This was a great read. You could sell this story to Netflix.
| triyambakam wrote:
| I'm curious if you can share: how were you raised in the US
| while your father was in India? You were raised by a
| relative, or your mother lived away from your father?
| jfdsaflkjv wrote:
| The Dad probably expected to live longer and run the business
| until then. Sounds like it was a big part of his identity.
|
| Besides, most closely-held businesses don't have succession
| plans anyway.
| codegeek wrote:
| This was in India where succession planning for small business
| is non-existent and if kids don't pick up their family
| business, it's over. However, even in America, this situation
| exists for small businesses. With so many baby boomers retiring
| from businesses like HVAC etc, their kids don't necessarily
| want to continue the business.
| amadeuspagel wrote:
| Fascinating article, but reading it I kept asking myself: Why not
| promote someone to CEO? Surely any top-level manager already
| working at the company will do a better a job then someone who's
| only qualification is working there 18 years ago.
| asanwal wrote:
| Author here
|
| 1. He died suddenly so would have been a good thing to explore
| and do with time. It certainly would have made my life easier
| :)
|
| 2. Building a business that is small to medium-sized with no
| brand recogntion in a tier 2 city in India doesn't afford you
| access to tier 1 talent. India's talent and talent preferences
| are incredibly different than the USA.
| jfdsaflkjv wrote:
| The author had business experience having founded and running
| the successful CB Insights so it's not like some naive well-to-
| do kid took things over.
|
| By the end you realize the author 1) researched the industry,
| 2) improved the product mix 3) grew the highest-margin product
| and 4) sold to a buyer with values that protected his workers
| and his dad's legacy.
|
| Someone with that quality/ability is really hard to find, even
| at really big companies.
| tibbydudeza wrote:
| Amazing story - shows the importance of succession planning -
| worked for a family-owned company but the apples did not fall
| close to the tree - the sons and daughters could not match the
| father.
|
| Like what happened to Wang.
|
| Today they are technically bankrupt and reluctantly handed over
| control to seasoned management and they are spinning out parts of
| the company to raise capital to save the core business.
| sspiff wrote:
| > While I don't think most people would ever find themselves in a
| similar situation (I certainly hope not),
|
| I'm not sure what the author means by this. Sad though it may be,
| most people will experience their dad dieing.
|
| And inheriting control of a company sounds like a 1%'er problem
| if I ever heard one.
|
| What is OP wishing to spare the rest of us from, exactly?
| stavros wrote:
| I think he meant "inheriting a company in a sector you know
| nothing about".
| jfdsaflkjv wrote:
| I know exactly what the author meant by that. He meant losing a
| parent at a young age. It doesn't happen to most people.
| gus_massa wrote:
| The difference is that usualy after a few days you resume your
| normal life. In this case, he was constantly reminded about his
| father death.
| diob wrote:
| It'd definitely not something I can relate to. My parents will
| leave me nothing, and have spent most of their life taking from
| me.
| mizzao wrote:
| > Candidly, my only qualification to run Atlas at this time was
| that I was the founder's son.
|
| It seems like an even more important qualification was that the
| founder's son was also a founder. Otherwise this would have been
| much less likely to work.
| peter_l_downs wrote:
| Maybe. Frankly this is a very impressive outcome that is
| attributable both to the Father's business and management
| practices, as well as the Son's business and management
| practices. No matter how good you are at running a web
| business, if you inherit a totally fucked business with poor
| practices, very unlikely you could engineer this outcome.
|
| My condolences to the OP and I was happy to read such a well-
| written article describing a fantastic outcome for his father's
| company.
| CPLX wrote:
| It's an odd sentence to be honest. Being the son of the founder
| of a business has been the strongest qualification for running
| that business for at least 3,000 years.
|
| On top of that he had worked in this same company for two
| years, had an Ivy League degree, had worked both in startups
| and large scale investment banking firms, and had founded and
| run an unrelated $100M+ enterprise.
| OldGuyInTheClub wrote:
| Yeah, but other than that, ... ;-)
|
| The author was born/raised in the US which, not explicitly
| mentioned, means his father must have spent most of his time
| in India, away from the family, running the business. If so,
| that's a big sacrifice that the son amply reciprocated.
| langsoul-com wrote:
| Wonder if the author could speak about how him already being a
| founder played into the equation.
|
| Let's say he was a software dev, no team lead, no manager,
| individual contributor. How would things play out?
| asanwal wrote:
| Hi,
|
| Having founded and run CB Insights certainly helped mostly cuz
| I had some sense of where to focus.
|
| In this case, we had product-market fit to use a tech term. My
| dad's product was great.
|
| And so I didn't need to worry about that. If I had to worry
| about that, this probably doesn't unfold as it did.
|
| That meant I just had to worry about 2 things:
|
| 1. Making sure we were buying raw materials at rates that
| allowed us to sell the product profitably 2. 'Ringing the
| register' aka making sales. And that ultimately is not
| intellectually hard but just requires effort, i.e. researching,
| calling, emailing, etc.
| sureglymop wrote:
| Hey. This is completely unrelated but I wanted to ask if you
| provide an RSS feed for your blog? I did find a /feed page
| but I'm unsure if it's working.
| asanwal wrote:
| I set this blog up 24 hours ago and just started moving old
| writings to it and still have another 200ish to go.
|
| So the honest answer is I don't know.
|
| Tbh, getting on HN today was completely unexpected.
|
| I believe you can subscribe via email for updates. And
| hopefully I'll figure out the RSS thing soon as well.
| Thanks
| ziptron wrote:
| OP here. @asanwal, in case you're wondering, a mutual
| connection of ours liked your LinkedIn post featuring
| this article. That's how I found this.
| Tblue468 wrote:
| Looks like this is a WordPress site, and the HTML source
| does contain: <link rel="alternate"
| type="application/rss+xml" title=" » Feed"
| href="https://anandsanwal.me/feed/" />
|
| So I'd assume that https://anandsanwal.me/feed/ is indeed
| the RSS feed. IIRC, _/ feed/_ is what WordPress uses for
| that purpose.
| electrodank wrote:
| Left field comment but I'd love to be thrown into an MBA-like
| simulator (HBS?) and have to figure out the industry and the
| company and stabilize it/make it grow and whatnot within some
| time window.
|
| Great read, thank you to the author who took the time to write up
| all that, it was very insightful and must have been fucking
| difficult in many ways.
| asdflksdajvlkj wrote:
| https://www.capitalismlab.com/
| jacknews wrote:
| Wouldn't it have been better if ownership of the company,
| essentially comprised of the workers and managers, actually
| passed to the workers who knew what they were doing?
|
| To me this just highlights the absurdity of capitalist ownership.
| OJFord wrote:
| For them sure, not for OP and family? It wasn't run on a total
| profit share before OP's father died, it would be weird (and
| very bad incentive) if that suddenly changed.
|
| No doubt that sort of thing happens sometimes, or especially
| donating an inheritance to charity, but it being the default
| would be more absurd to me, when it was already in 'capitalist
| ownership'.
| johndhi wrote:
| This is incredibly well written (in addition to being
| substantively compelling). Bravo!
| Ozzie_osman wrote:
| This was a great read.
|
| A few years out of school, I took a detour from
| tech/entrepreneurship to work in my family business (overseeing
| operations in a construction manufacturing facility, in Egypt),
| mostly with my Uncle. In my case, though I fully prefer tech as
| an industry, the deal-breakers were a dismal economic/political
| climate and an... interesting Uncle.
|
| Apart from that, a lot of the article resonated. A few other
| things that stood out and made the transition hard for me were:
| corruption (in the construction industry, hard to avoid) and
| culture/hierarchy.
| renewiltord wrote:
| Sorry to hear about your dad. Seems to have been a good and smart
| man.
|
| This was a pretty insightful story. Thank you for sharing it.
| skybrian wrote:
| This is quite a good story. Since it happened in 2018, I wonder
| what's happened to the business since then?
| amtamt wrote:
| Maharashtra has a long history of cooperatives, some of
| whichquite successful. I wonder if employees brought up or were
| given a option to form a cooperative, if immediate liquidity was
| not a major requirement.
| kylehotchkiss wrote:
| This is such a heartwarming story. Thank you for sharing about
| this Anand. I loved the part about how your dad's legacy is all
| the children of employees who could continue their education.
| didip wrote:
| Thank you for sharing this unique story. Some parts of your story
| resonated with my life, hope you don't mind me sharing:
|
| * At times it felt like the true sons are the companies they
| started. They live and breathe in them. I have a strange
| detachment to my own family because of this.
|
| * Thus, they have serious attachment issues and zero succession
| plans.
|
| * My mom later passed away too soon and missed out much of the
| life experience she could have had. Glad that she did travel
| around the world before death.
|
| * Even after all that, my old man still doesn't have succession
| plan. Dunno what's gonna happen to all the people working for
| him. And the clock is ticking.
|
| * Like OP, I spent most of my life in the US, so I too would be
| useless in dealing with the businesses. Even the real estate
| company (something I know a bit in the US) is far too different
| back there.
|
| Also, blatant corruption is simply not my cup of tea.
|
| I tried to help them multiple times. I offered to sponsor them
| green card, but they consistently refused. I offered if they need
| help finding private equity to liquidate and just retire.
| Sometimes I wonder if my mom could have been saved with US
| quality healthcare.
|
| Oh well, I did my best, there was nothing I could have done.
| OldGuyInTheClub wrote:
| As a chemist I know what coumarin is but had no idea of its place
| in the chemical industry, least of all as a substitute for
| vanillin which looks nothing like it. Often, two molecules that
| are just sliiiightly different will have entirely different
| functions. Here, two molecules that are completely different can
| be substituted in some capacity.
|
| But, damn, what a fine piece of writing. A seamless connection of
| facts and reminiscences all taking me somewhere. The author tells
| his family's and their extended family's story, without all the
| contortions and schnookery involved in "telling a story" in our
| marketing-besotted culture.
|
| "Touching the product makes it different" is a remarkable turn of
| phrase.
| elevatedastalt wrote:
| Vanilla bean != Vanillin, since the smell of natural vanilla
| bean has a many more components to it other than Vanillin which
| lend it that characteristic odor (sweet, animalic, slightly
| woody and herbaceous).
|
| Vanillin by itself is of course a principle component. However,
| coumarin and vanillin don't smell too similar. Coumarin has
| more of a herbaceous, 'hay' smell, quite different from
| vanillin itself.
| OldGuyInTheClub wrote:
| Agreed. My use of "substitute" was a bad choice. I would not
| have thought that coumarin could/would be used as a component
| in vanilla substitutes.
|
| "They make glue out of horses. I don't know who started that.
| Who saw that potential? That's pretty amazing to me..." ---
| Jerry Seinfeld [1]
|
| [1] https://scrapsfromtheloft.com/comedy/jerry-seinfeld-im-
| telli...
| voiceblue wrote:
| > without all the contortions and schnookery involved in
| "telling a story" in our marketing-besotted culture.
|
| This is probably the only story I've read on here that didn't
| reek of self promotion or self aggrandization, or even a "I did
| this so you don't have to" -- it was the kind of story you
| might find on Blogger back in the day. Exceedingly rare now.
| OldGuyInTheClub wrote:
| I eagerly read some of the other posts on the author's site
| and came away rather disappointed. But, that doesn't detract
| from my appreciation of this one.
| iamgopal wrote:
| Wow !! We have supplied machinery to this company, how wonderful
| to find such write up at other end of the spectrum. World is
| small and gol.
| confused_boner wrote:
| Pitch it to Bollywood, has script potential
| prakhar897 wrote:
| Great Story! I have a question.
|
| Why didn't you elevate someone from inside to the CEO position?
| Seems like a great way to maintain ownership (and take care of
| people) while also rewarding the best employees.
| asanwal wrote:
| Unfortunately, didn't have the talent internally to do that.
|
| Running the biz required a set of generalist biz skills and the
| company was mostly specialists.
| jlg23 wrote:
| from the article:
|
| > Option 3 -- Find a young, aggressive, ambitious person to run
| Atlas
|
| > [...]
|
| > This would have been an amazing opportunity for the right
| person, but it wasn't in the cards.
| boberoni wrote:
| _> business is about growth or margin.
|
| > To grow, we could do 1 of 2 things:
|
| > - Sell more of our existing products, primarily Coumarin
|
| > - Add new products
|
| > If we focused on margin, that'd mean focusing on:
|
| > - Increasing efficiency in manufacturing
|
| > - Reducing expenses_
|
| Good insights. I'm curious if there are other models of business
| that are just as simple and useful... :)
| Umofomia wrote:
| I noticed the word 'jugaad' from his speech and looked it up:
| https://en.wikipedia.org/wiki/Jugaad
|
| It seems like a very befitting word for the eponymous "hacker"
| ethos of this site.
| bprater wrote:
| "Plus, margin is hard to rally the team around."
|
| "Growth is tangible."
|
| Love the way he packaged this!
| smrtinsert wrote:
| this was an absolute incredible story. I would absolutely watch a
| movie about this story. learning history and family through
| something that at its surface seems so cold and difficult to
| process is very intriguing, a triumph of small business, cultural
| differences (americanized indian returns to india), i sense a
| great film in this story. thanks for sharing!
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