Howdy readers!
Today, I’ve got the story of how a buddy came to own a $60M business with $0 down…
- The entrepreneurship through apprenticeship model
Let’s do it!
(By the way: want to watch this as a video? Check it out here!)
Over the past decade, a friend has gone from fresh college grad to CEO and majority owner of a $60M-a-year business with no money.
It’s a path not many people take, called entrepreneurship through apprenticeship.
It’s not the easiest or fastest path, but it’s a fantastic option for the right person.
Here’s how it works.
1. Pick an industry
Find an industry where selling a business is challenging.
Take general contracting, for example. It’s tough to sell a GC business because project work is hard to forecast year after year.
You could also look at businesses built on relationships — a lot of digital agencies, contracting or consulting businesses are totally dependent on relationships with the owner, so changing hands is complicated and risky.
Look for an industry like this that appeals to you as an entrepreneur.
Because this kind of business tends to create owners struggling to find someone to take over the business.
My buddy — let’s call him Mike — decided he wanted to get into construction.
2. Find the right person
After you've identified an exciting industry, find someone approaching retirement age without a succession plan.
That's precisely what Mike did. He knew he wanted to get into construction, so he started learning stuff like project management, estimation, and other valuable things in general contracting.
Then he looked around and found a guy who was getting older, had sports cars and a boat, and wanted to spend his time fishing — but didn’t have a succession plan.
3. Join the business
Mike was strategic about picking his work, but he didn’t go in saying, “I want to take over your business.” For the first few years, he focused on being a great employee.
He became an expert in how the business was run.
He learned construction inside and out, and saw what it would take to run that kind of company.
By consistently doing great work, he built trust and affinity with the owner.
4. Become the succession plan
This is the delicate part. My buddy had chosen his company carefully and worked his butt off to be a great employee.
So, in year 4 or 5, he sat down with the owner and told him he’d like to own the business someday. By this point, he was like a son to the owner.
So they figured out a win-win scenario where my buddy would buy out the owner over time so the owner could start spending more time on his boat. Here’s how they set it up:
Mike became a partner in the business and took on tha majority of the work running the company. The owner started spending more time on his boat. Retiring a bit more each year.
Each year, a chunk of the profits (let’s say 20%) would be used to buy out the shares of the original owner.
Eventually, my buddy owned the whole business, and the original owner had his nest egg to retire on.
It took him years to do it, but he got there without having to take out an SBA loan or get investors or any of that.
—
Now Mike is a full-on entrepreneur, and he owns a business doing $60M/year. It’s a huge success story for him.
Of course, this approach has some downsides. For one, it’s slow compared to getting an SBA loan and owning 100% of something immediately.
The other con is that there’s no certainty. My buddy got lucky that the guy he signed up with didn’t bait and switch him on any of this stuff.
That said, even if he didn’t end up owning the company, he still learned the industry inside and out. And if Mike had seen that the original owner didn’t intend to pass the torch, he could have taken his knowledge elsewhere.
—
Mike will face the same challenges the original did down the road. He’s got a great business, but it’s built on relationships and not easy to sell.
And maybe in a few decades, he’ll start looking for an apprentice to take things over the same way he did.
I think it’s beautiful when you can develop a relationship with somebody, help them retire and live their best life, and potentially be the son or daughter or heir they didn’t have to take over the business. People want to know their life’s work will be in good hands.
What do you think? Do you know anyone who’s done this?
Have a great week!
Michael
