Business & Family Dilemmas

[Ryan]

I realized how long this was when i typed this out, TLDR: I started a business, brought my dad in who owned the real state and provided labor.  This arrangement costs the business $110K+/year, which it can no longer afford.  Trying to find a nice way to get my dad to move on.  More details below.

I've had an e-comm business for close to 20 years.  Way back when, my dad's small business was winding down so he offered to ship all my products out of his commercial building.  Over time, we came up with an unorthodox commission structure where I basically took a % of the gross profit we made.  This kind of made sure our interests were aligned since he ran a lot of expenses through his business that were not related to my company.  Anyways, it worked out great for a LONG time and we both did pretty well off it.  He focused on operations, I focused on sales/marketing.

We saw sales start to dip in 2019 which started to worry me a bit, but they came back very strong in 2020 due to a pandemic bump.   2021 was not especially good....I should say that it would've been fine, but the labor (my dad's salary @ $50K/year) and taxes/utilities/rent ($60K/year) started to become a larger % of revenues and it basically sucked all the profit.  I think to some extent, my dad got used to having a surplus of profits so it caught him by surprise, as a result, not much was paid out to me this year. 

I don't think this is anything nefarious at all, I think he just thought the profits would be there and they weren't.  He has always paid me the commission I calculated so I didn't really care what he did with the remainder.  But after seeing the trends, I started pushing pretty hard for him to figure out another use for the building (lease/sell).  Leasing it out would likely give him a 6 figure stream of income since he owns it free/clear, I would take over the business and that would give me a nice income.  When I presented this option to him, he seemed to be taken aback, even though to me it seems extremely logical.   If we continue with the current course, he has to work everyday and make $+0K/year and I make $0.  If he leases it out, I make a good profit and he makes $100K+ doing nothing.  

My plan is to shift some of the labor back to the factory where it's produced, something I hadn't done previously because my dad always wanted to do it.  This will save money/time and make things easier on me.  I plan on operating out of my house and found a local business to receive/store merchandise until I need it.  The max I'll pay for storage is $450/month, likely much less than that.  Overhead will be reduced by at least $110K/year almost immediately.   My main problem is how much to push my dad on this.  I'd feel way too guilty by basically telling him "The business isn't covering these expenses any more", but I feel that he will move too slowly if he's not pushed.  He told me he is making progress, but all he has done is start to email people about buying some of the junk.   I told him to get a broker on the phone and set something up with him, once he figures out that selling junk is costing him $10K/month, maybe he'll move faster.

We have been partners in this from the beginning and I do feel like he feels like I'm cutting him out.  In a way, I am cutting him out.  He's in his mid-70's, he needs to take care of these things while he can and I do want him to enjoy his retirement.  Plus, from a selfish standpoint, I really don't want to work nights/weekends just so he has a place to go in everyday.  Any advice on how to approach this?  Am I being too harsh?

[debthaven]

Personally, I don't think you're being too harsh. I DO think you're not being frank enough. 

I'd feel way too guilty by basically telling him "The business isn't covering these expenses any more

Why?! That's silly ... it's the truth!

I would start with "Dad, we can't afford to do X, Y or Z anymore. Here are our options. I'm leaning towards X/Y/Z (obviously you only give him the feasible ones.) Which do you prefer?"

"If we continue with the current course, he has to work everyday and make $+0K/year and I make $0. If he leases it out, I make a good profit and he makes $100K+ doing nothing."

That seems eminently clear to me. 

IMO you're overthinking things. Just be honest with him and discuss the new options with him.  

Can you find him a smaller role in the new set-up? 

[Rukh O'Rorke]

It may be the biggest draw is working with you on this, being in business with his son. So it might feel like a rejection to him.

I endorse debthaven above, but might there be a middle ground sharing the space he has with another company?

[Ryan]

Feb 16, 2022 19:43:08 GMT -5 debthaven said:

Personally, I don't think you're being too harsh. I DO think you're not being frank enough. 

I'd feel way too guilty by basically telling him "The business isn't covering these expenses any more

Why?! That's silly ... it's the truth!

I would start with "Dad, we can't afford to do X, Y or Z anymore. Here are our options. I'm leaning towards X/Y/Z (obviously you only give him the feasible ones.) Which do you prefer?"

"If we continue with the current course, he has to work everyday and make $+0K/year and I make $0. If he leases it out, I make a good profit and he makes $100K+ doing nothing."

That seems eminently clear to me. 

IMO you're overthinking things. Just be honest with him and discuss the new options with him.  

Can you find him a smaller role in the new set-up? 

Just to clarify, I was clear that the business couldn't afford to cover those expenses going forward.  I also think that he understands that as well.  I think there are a few things that make it a little sticky:

• If we were leasing another building, we couldn't just get out of a lease when business started to slow.  So in some ways, I feel like he needs to have some sort of reasonable amount of time to know that after a certain date, the business will not be run there.  What is that reasonable amount of time though?  On the other hand, the business never needed that large of a building, so we really would've never signed a lease on a building of that size.  
• I told him that we've been chasing low-margin sales in order to cover the overhead and that going forward, I wanted to turn it into more of a lifestyle business with reduced expenses.  Less labor, less overhead, less sales, higher margin.  That way it can be comfortably run by me outside of normal business hours (when I have a job).  I was surprised that he sounds like he still wants to work, but honestly I just don't really want him to be a "co-owner" any longer.  I don't want him in charge of finances any longer.  I don't want to share in the profits any longer.   I want the funds to come to me and, if he's involved in helping, I'll pay him a wage.  It's hard to have this conversation without implying that I don't trust him with the finances.  He is in his 70's, I think ultimately I want him to just say "You know, that's enough for me, I'm going to voluntarily step aside" instead of fighting it.
• The other wildcard is that my brother has been helping.  My brother is a nice guy, but never had a solid career and I think my dad might've thought that he could run this day to day.  Realistically, my brother has never been an intregal part of the business, he's basically just filled in and collected a small salary.  Maybe my dad is feeling like that opportunity isn't there any more.

Could be that my dad is sad that a phase in his life is coming to an end.  He has always had a place to go and maybe he's concerned with what life will look like if that's not an option.  He originally mentioned selling the building and finding something smaller and I about fell out of my chair.

[Ryan]

Feb 16, 2022 19:51:05 GMT -5 Rukh O'Rorke said:

It may be the biggest draw is working with you on this, being in business with his son. So it might feel like a rejection to him.

I endorse debthaven above, but might there be a middle ground sharing the space he has with another company?

Yeah, that could be.  It has been great working with him and I think the partnership worked well.  I mean, he kind of said something to the extent of "I feel like I'm being cut out" before realizing that wasn't the case.  I made it very clear that he CAN be involved, but all the excessive overhead needs to be cut.  I have a wife, full-time job, and 4-kids.  If I'm going to spend time doing something that takes away from that, I want to be compensated.  

I told him today to talk with someone and look at options.  I am pretty comfortable with the idea that I just want to take it over completely.  On the one hand, he's always paid me what I felt I was owed.  On the other hand, II have never liked the structure of the business in that I don't have a good picture of what these expenses he's running through are.  Normally, it wouldn't matter to me because he's using his money.  Sometimes it DOES impact me because I hold back on inventory purchases because he says cash flow is tight.  If you're paying for your car out of the company money, then it is impacting the company ultimately.  I just want to put that to the side and have it not be an issue any longer.  Another year several years ago he just way overbought on inventory and we had a big cash crunch, he was just doing it without much thought.

[giramomma]

Feb 16, 2022 21:06:39 GMT -5 Ryan said:

Could be that my dad is sad that a phase in his life is coming to an end.  He has always had a place to go and maybe he's concerned with what life will look like if that's not an option.  He originally mentioned selling the building and finding something smaller and I about fell out of my chair.

Some people are the types that can't quit working, even in retirement. CountryGirl's husband is one of those.

What else does your dad do? Nothing? Maybe that's part of the equation, helping your dad find different things to do with his life.

Or you help your dad find a new job.

[Ryan]

Feb 16, 2022 21:15:39 GMT -5 giramomma said:

Feb 16, 2022 21:06:39 GMT -5 Ryan said:

Could be that my dad is sad that a phase in his life is coming to an end.  He has always had a place to go and maybe he's concerned with what life will look like if that's not an option.  He originally mentioned selling the building and finding something smaller and I about fell out of my chair.

Some people are the types that can't quit working, even in retirement. CountryGirl's husband is one of those.

What else does your dad do? Nothing? Maybe that's part of the equation, helping your dad find different things to do with his life.

Or you help your dad find a new job.

He has hobbies, he is a big crafter, he does a lot of projects around the house, he has a big house to take care of, he is active in his neighborhood, him and my mom travel at least 5 times a year.  That's partially why I was confused as to why he wanted to continue doing this.  He has made comments recently saying things like "I feel very unproductive" (because order volume is down) and he's made comments about wanting to take a week off during the busy season, but not sure if he would be able to do that.  

I don't think it's just staying busy though.  I think he has used the business to help out all of his kids in various ways.  I have 3 siblings and 1 is a preschool teacher, 1 is a SAHM, and the other probably should be on disability since they haven't worked steadily in awhile.  He almost views the business as an easy way to dish out money to the family.  He'll have them come in to work, he'll pay them.  However they aren't really working that hard.  

There are probably lots of reasons though and he doesn't articulate what he's thinking.  He has plenty to do to stay busy, he could rent out his building and make more money.  I have no idea why he'd want to continue doing this, it completely baffles me.  



 

[Tiny]

Maybe it's because it's an "ending". There's a "grieving" period involved when you stop doing something you've done for years and years.     Maybe that's the sticking point for your Dad - that feeling of "loss" and "grief" for what was.   Not being part of the business is an "ending" of sorts for him.  

Maybe that emotional issue needs to be worked thru/acknowledged.

[Ryan]

Feb 17, 2022 14:54:51 GMT -5 Tiny said:

Maybe it's because it's an "ending". There's a "grieving" period involved when you stop doing something you've done for years and years.     Maybe that's the sticking point for your Dad - that feeling of "loss" and "grief" for what was.   Not being part of the business is an "ending" of sorts for him.  

Maybe that emotional issue needs to be worked thru/acknowledged.

I think you're probably right, that's the only thing that would make logical sense.  I can understand it to some extent, I'm sure parents are happy to be empty nesters, but also very, very sad.   When I turned 40, nothing was really different but it makes you look back and realize how fast time is going.  For him, he might be sad that it's all over.  

My dad (and entire family) stays in the status quo though because they want to avoid facing reality.  My dad has been going to the same building for 30 years, he probably doesn't want to stop doing that.  Even though it's not logical to continue to do so.  My main frustration is that I wouldn't care if it was only impacting him.  If he had some rinky dink business that he ran out of there, I'd be fine with him doing whatever he wanted.  The problem is that I'm essentially paying for him to continue this.  

[bean29]

So the building he owns is a Commercial Building?  Does it have drive in doors?  Sounds like it is more like a warehouse building?  You realize this type of real estate is in short supply right now?  I would think leasing it on a triple net lease would be the best option, vs. selling it.  If he sells it he would have to pay capital gains tax.  If you and your siblings inherit it, you would have the benefit of a stepped up basis.

Most companies right now will try to negotiate a purchase.  Try not to sell and be careful not to give them an option to purchase.  You don't need to sell it to find someone that wants to lease the building. I think you need to do more than tell your Dad to contact a real estate company about leasing it.  You should research what companies in your area lease those types of buildings and talk to them.  When you give your Dad the low down on why you want restructure your business, tell him you truly feel that leasing the building at the market rate will give your parents the income and the freedom to do whatever travel and leisure activities they want. 

[Ryan]

Feb 17, 2022 15:52:40 GMT -5 bean29 said:

So the building he owns is a Commercial Building?  Does it have drive in doors?  Sounds like it is more like a warehouse building?  You realize this type of real estate is in short supply right now?  I would think leasing it on a triple net lease would be the best option, vs. selling it.  If he sells it he would have to pay capital gains tax.  If you and your siblings inherit it, you would have the benefit of a stepped up basis.

Most companies right now will try to negotiate a purchase.  Try not to sell and be careful not to give them an option to purchase.  You don't need to sell it to find someone that wants to lease the building. I think you need to do more than tell your Dad to contact a real estate company about leasing it.  You should research what companies in your area lease those types of buildings and talk to them.  When you give your Dad the low down on why you want restructure your business, tell him you truly feel that leasing the building at the market rate will give your parents the income and the freedom to do whatever travel and leisure activities they want. 

Yes, that's how most of this started.  I started thinking about how expensive it was to operate this building so I looked at leasing a smaller place.  There was a 2K SF place going for $2K/month and it was snapped up immediately.  Then I started looking around and seeing that there was basically nothing available.  There wasn't much to go off of because there were so many gaps in the market, but I estimated he could collect $100K-120K/year in rent on this.  When I told him this, he kind of jokingly said we should forget the business and just rent the place out.  After I officially presented that as the option that made the most sense, he basically told me it hit him like a ton of bricks.  Go figure.

When I followed up with him a couple weeks later, he said that he's not sure what he was going to do, he was thinking about renting a smaller place...after he said that I couldn't believe it.  I told him I found a great option where a local business would receive the merchandise for us, store pallets for $15/pallet/month.  This would resolve basically the biggest issue with not having warehouse space and reduce overhead a SIGNIFICANT amount.  More to come on that.

Thanks for the advice on that, I would much prefer to just take over everything for him just so I know everything is taken care of correctly.  He's the type of person that will call a person he knows vs. the person that has expertise on the matter.  

[Deleted]

I have no knowledge or experience running a business, but here’s my 2 cents.

You are looking at it from a strictly business point of view, and there’s nothing wrong with that. Your Dad, however, has some emotional stuff going on that is getting in the way of him seeing things clearly from a business and financial point of view. Some of the emotional aspects that have already come up in this thread are probably valid.

Even if you are just a no-nonsense kind of guy, I think you should find a way to assure and reassure your Dad that the changes you want to make have nothing to do with him personally or the role he’s played in the business, it’s just business and doing what makes the most sense financially. If I were you, I’d gather all the pertinent information and present it to him, and emphasize how it’s better financially for both of you (imo he’s winning if he can get $100k/year by leasing out the building) and more freedom for both of you (imo again, if he can get $100k/year without having to be somewhere and do stuff every day, that’s great). Is there a smaller role he can play in helping you with the business? If so, offer that, but only if you are comfortable with it.

I understand where you’re coming from, and I don’t think you are wrong. I’m rather emotional myself though, so I can also understand possible reasons why your Dad might be resistant to the changes you want to make. Good luck to you!

[Ryan]

Feb 17, 2022 18:32:42 GMT -5 @pinkcshmere said:

I have no knowledge or experience running a business, but here’s my 2 cents.

You are looking at it from a strictly business point of view, and there’s nothing wrong with that. Your Dad, however, has some emotional stuff going on that is getting in the way of him seeing things clearly from a business and financial point of view. Some of the emotional aspects that have already come up in this thread are probably valid.

Even if you are just a no-nonsense kind of guy, I think you should find a way to assure and reassure your Dad that the changes you want to make have nothing to do with him personally or the role he’s played in the business, it’s just business and doing what makes the most sense financially. If I were you, I’d gather all the pertinent information and present it to him, and emphasize how it’s better financially for both of you (imo he’s winning if he can get $100k/year by leasing out the building) and more freedom for both of you (imo again, if he can get $100k/year without having to be somewhere and do stuff every day, that’s great). Is there a smaller role he can play in helping you with the business? If so, offer that, but only if you are comfortable with it.

I understand where you’re coming from, and I don’t think you are wrong. I’m rather emotional myself though, so I can also understand possible reasons why your Dad might be resistant to the changes you want to make. Good luck to you!

I wish I knew what the issue was, but my dad is not the type of person that would just come out and say it...honestly I'm not even sure he knows what the issue is. Logically, it makes sense to do what I'm suggesting, I explain it to my wife and she's confused why my dad doesn't jump on this. I think what bothers me more though is that I think he should go along with it EVEN IF he didn't own the building, simply because I'm asking him to do so. He's in his mid-70's, he can retire easily and not worry about money. Yet he wants me to continue to spend nights/weekends working to essentially just give him something to do. I think that's what bothers me the most and I want him to understand that without me having to spell it out. This gig took him from being someone that didn't know what they were going to do in their mid 50's to someone that upgraded their lifestyle 5x, traveled, enjoyed the perks of the business, etc.  

[buystoys]

Feb 18, 2022 1:25:32 GMT -5 Ryan said:

Feb 17, 2022 18:32:42 GMT -5 @pinkcshmere said:

I have no knowledge or experience running a business, but here’s my 2 cents.

You are looking at it from a strictly business point of view, and there’s nothing wrong with that. Your Dad, however, has some emotional stuff going on that is getting in the way of him seeing things clearly from a business and financial point of view. Some of the emotional aspects that have already come up in this thread are probably valid.

Even if you are just a no-nonsense kind of guy, I think you should find a way to assure and reassure your Dad that the changes you want to make have nothing to do with him personally or the role he’s played in the business, it’s just business and doing what makes the most sense financially. If I were you, I’d gather all the pertinent information and present it to him, and emphasize how it’s better financially for both of you (imo he’s winning if he can get $100k/year by leasing out the building) and more freedom for both of you (imo again, if he can get $100k/year without having to be somewhere and do stuff every day, that’s great). Is there a smaller role he can play in helping you with the business? If so, offer that, but only if you are comfortable with it.

I understand where you’re coming from, and I don’t think you are wrong. I’m rather emotional myself though, so I can also understand possible reasons why your Dad might be resistant to the changes you want to make. Good luck to you!

I wish I knew what the issue was, but my dad is not the type of person that would just come out and say it...honestly I'm not even sure he knows what the issue is. Logically, it makes sense to do what I'm suggesting, I explain it to my wife and she's confused why my dad doesn't jump on this. I think what bothers me more though is that I think he should go along with it EVEN IF he didn't own the building, simply because I'm asking him to do so. He's in his mid-70's, he can retire easily and not worry about money. Yet he wants me to continue to spend nights/weekends working to essentially just give him something to do. I think that's what bothers me the most and I want him to understand that without me having to spell it out. This gig took him from being someone that didn't know what they were going to do in their mid 50's to someone that upgraded their lifestyle 5x, traveled, enjoyed the perks of the business, etc.  

I think you have to spell it out for him.  Obviously he isn't seeing the strain on you to keep the business at a level to support him and your siblings.  Or, if he sees it, he doesn't understand the negative impact on your life. 

I wish you luck in unraveling this.  It sounds like it's going to be difficult to do.

[bookkeeper]

I worked as a bookkeeper.  I went to work every day to make money.  I worked with farmers and ranchers who referred to their business choices as "lifestyle" centered, not necessarily profit centered.

OP's father has made this side gig into his "lifestyle" business.  I like to use facts to get my point across.  I would use some quarterly profit and loss numbers to show the father how the business is unprofitable (for you) in its current state.  With the numbers on a page in front of him, explain to the father that you work this business for money and you're not getting any. OP could ask his father if he would like to work for half or a quarter of what he makes now to make the business profitable. Put the ball back in his court so to speak.  

Nobody likes change, especially the kind that takes your six figure income away.  I would need some time to get over that as well.  Luckily, he can pivot and rent the commercial building and receive similar income from that. 

Lastly, what is the tax structure of your business.  LLC, C-corp, S-Corp?  Does the father really have a say in the business or is he a 1099 employee who is also renting space to the OP.   Untangling family from business is hard.  Someone will feel slighted no matter how the changes play out. This is the reason I have strict rules about doing business with family.

[TheOtherMe]

Feb 18, 2022 11:09:30 GMT -5 bookkeeper said:

   Untangling family from business is hard.  Someone will feel slighted no matter how the changes play out. This is the reason I have strict rules about doing business with family.

BIL found out how difficult it is to untangle family businesses.  His dad sold the farm to his 3 local sons and they set up a partnership.  The verbal agreement was that they would all three farm and take care of the bookwork.  Well, one brother decided his labor consisted only of the book work.  That caused a big rift and an ugly breakup.  The third brother didn't speak to the other two brothers for a few years.

So they became a two brother partnership.  That one worked smoothly as they bought another farm so each family had a house.  Each brother got to the point about the same time that they wanted to dissolve the partnership but they were each afraid to bring it up.  I don't remember who brought it up first, but the other was relieved so that dissolution was amicable.

Now BIL has one son who is buying in to the operation.  Eventually, it is to be split in fourths.  That son wants to buy out his dad's share and hopes to buy at least one of his sibling's share.   He recently bought his own crop farm.  When farms are sold around here now, the house is sold separately.  It went for far over what he thought it was worth even if it was in town.  So a retired couple will be living in the house and however many acres came with it.  

[tskeeter]

Ryan, to help yourself through this process, it might help to put on your empathy shirt and look at your proposal from your Dad’s perspective. 

A lot of your Dad’s life is tied up in the business.

The business gives your Dad someplace to go each day and something that he considers productive to do.  When my parents sold their small business, the biggest emotional issue Dad had to deal with was that he no longer considered himself productive.  Delivering orders for their business provided Dad a sense of completion and a sense of having accomplished something.  Being the caregiver for my Mom after her stroke was never ending, so no sense of accomplishment.

The business apparently covers a fair chunk of your parents expenses.  If your parents have to pay those expenses out of pocket and after taxes, it could affect your parents finances.  You indicated your Dad’s car is considered a business vehicle.  It takes something in the range of $10K to $12K a year of after tax income to cover the expenses of a mid level car.  If your parents medical care runs through the business, that would require another $6K or so of after tax income to pay for.  Then may also be a host of smaller expenses that run through the business, too.  My guess is that your Dad doesn’t have a good handle on what amount of expenses would shift from the business to him and your Mom personally, if the business support were to go away.  Fear of the unknown is one of the scariest things we each deal with.

Your Dad has been able to use the business as a means to provide short term financial and emotional support to your siblings.  That goes away if Dad is no longer a part of the business operation.  If the business goes away, any financial support for our siblings becomes a hand out, not compensation for “work”.  Your parents may not be financially able, or comfortable with providing your siblings hand outs.  So, the business has provided a great alternative.

I’m sure there are other emotional factors in play that I’m not thinking of, too.

If you can figure out how to expose and address some of Your Dad’s emotional concerns, you might find the process you are going through to be less conflict prone and less emotional for both of you.

[Deleted]

Feb 18, 2022 1:25:32 GMT -5 Ryan said:

Feb 17, 2022 18:32:42 GMT -5 @pinkcshmere said:

I have no knowledge or experience running a business, but here’s my 2 cents.

You are looking at it from a strictly business point of view, and there’s nothing wrong with that. Your Dad, however, has some emotional stuff going on that is getting in the way of him seeing things clearly from a business and financial point of view. Some of the emotional aspects that have already come up in this thread are probably valid.

Even if you are just a no-nonsense kind of guy, I think you should find a way to assure and reassure your Dad that the changes you want to make have nothing to do with him personally or the role he’s played in the business, it’s just business and doing what makes the most sense financially. If I were you, I’d gather all the pertinent information and present it to him, and emphasize how it’s better financially for both of you (imo he’s winning if he can get $100k/year by leasing out the building) and more freedom for both of you (imo again, if he can get $100k/year without having to be somewhere and do stuff every day, that’s great). Is there a smaller role he can play in helping you with the business? If so, offer that, but only if you are comfortable with it.

I understand where you’re coming from, and I don’t think you are wrong. I’m rather emotional myself though, so I can also understand possible reasons why your Dad might be resistant to the changes you want to make. Good luck to you!

I wish I knew what the issue was, but my dad is not the type of person that would just come out and say it...honestly I'm not even sure he knows what the issue is. Logically, it makes sense to do what I'm suggesting, I explain it to my wife and she's confused why my dad doesn't jump on this. I think what bothers me more though is that I think he should go along with it EVEN IF he didn't own the building, simply because I'm asking him to do so. He's in his mid-70's, he can retire easily and not worry about money. Yet he wants me to continue to spend nights/weekends working to essentially just give him something to do. I think that's what bothers me the most and I want him to understand that without me having to spell it out. This gig took him from being someone that didn't know what they were going to do in their mid 50's to someone that upgraded their lifestyle 5x, traveled, enjoyed the perks of the business, etc.  

I think you might be underestimating how important it is to some people to have something to do every day that makes them feel productive. I didn’t realize how big of a deal that is to some people until I started talking to coworkers who refuse to retire even though they’ve been eligible for years, simply because they feel better about themselves getting up and going to work every day. The fact that the business allowed him to upgrade his lifestyle and help your siblings may also be more important to him than you realize, even though leasing the building would get him a nice chunk of change.

He might not even realize how much time you spend working nights and weekends and how much better for you it would be if you didn’t have to do that, while making the business more profitable at the same time. I’m afraid you probably ARE going to have to spell that out for him.

Imo, you’re just going to have to communicate clearly. Present facts and figures about the money that can be saved and how much income he can get from leasing the building, be honest about the impact the current situation is having on you and your family and try to gently address whatever emotional issues you learn are hindering him from seeing the necessity for changes. It sounds like he’s a great Dad, and while his feelings might still be a little hurt, I would hope it would matter to him if he understood the numbers and that it’s important to you to free up your nights and weekends to have more time for yourself and your family.

[Ryan]

Feb 18, 2022 11:09:30 GMT -5 bookkeeper said:

I worked as a bookkeeper.  I went to work every day to make money.  I worked with farmers and ranchers who referred to their business choices as "lifestyle" centered, not necessarily profit centered.

OP's father has made this side gig into his "lifestyle" business.  I like to use facts to get my point across.  I would use some quarterly profit and loss numbers to show the father how the business is unprofitable (for you) in its current state.  With the numbers on a page in front of him, explain to the father that you work this business for money and you're not getting any. OP could ask his father if he would like to work for half or a quarter of what he makes now to make the business profitable. Put the ball back in his court so to speak.  

Nobody likes change, especially the kind that takes your six figure income away.  I would need some time to get over that as well.  Luckily, he can pivot and rent the commercial building and receive similar income from that. 

Lastly, what is the tax structure of your business.  LLC, C-corp, S-Corp?  Does the father really have a say in the business or is he a 1099 employee who is also renting space to the OP.   Untangling family from business is hard.  Someone will feel slighted no matter how the changes play out. This is the reason I have strict rules about doing business with family.

Yeah, I think thing that was challenging was that I thought it would be an easier conversation.  My dad and I are pretty similar in a lot of ways, so I had assumed he'd already know what we had to do before I brought it up.  He literally just told me a few weeks ago that the business broke even and there was no profits to pay me out of.  I think in his mind he's thinking that he kinda broke even too, he got paid maybe $45K + $20K in rent, but he had to go in everyday.  In my mind though, I'm thinking "What am I even doing this for?!"  

To answer your question, yes, our setup is very messy which is why he does have a say.  When I started the business, it took off so quickly that I had nothing setup (corporation, sales tax, accounting, etc).  My dad did have everything setup through his business and he had a very large tax loss carryforward to burn through.  We ran everything through his company and I took a % of profits.  We both got paid very well, but I always hated this setup.  Ultimately, if I was adamant enough, he would go along with me but I don't want him to go along, I want him to come to the same conclusion.  

[Ryan]

Feb 18, 2022 14:06:34 GMT -5 tskeeter said:

Ryan, to help yourself through this process, it might help to put on your empathy shirt and look at your proposal from your Dad’s perspective. 

A lot of your Dad’s life is tied up in the business.

The business gives your Dad someplace to go each day and something that he considers productive to do.  When my parents sold their small business, the biggest emotional issue Dad had to deal with was that he no longer considered himself productive.  Delivering orders for their business provided Dad a sense of completion and a sense of having accomplished something.  Being the caregiver for my Mom after her stroke was never ending, so no sense of accomplishment.

The business apparently covers a fair chunk of your parents expenses.  If your parents have to pay those expenses out of pocket and after taxes, it could affect your parents finances.  You indicated your Dad’s car is considered a business vehicle.  It takes something in the range of $10K to $12K a year of after tax income to cover the expenses of a mid level car.  If your parents medical care runs through the business, that would require another $6K or so of after tax income to pay for.  Then may also be a host of smaller expenses that run through the business, too.  My guess is that your Dad doesn’t have a good handle on what amount of expenses would shift from the business to him and your Mom personally, if the business support were to go away.  Fear of the unknown is one of the scariest things we each deal with.

Your Dad has been able to use the business as a means to provide short term financial and emotional support to your siblings.  That goes away if Dad is no longer a part of the business operation.  If the business goes away, any financial support for our siblings becomes a hand out, not compensation for “work”.  Your parents may not be financially able, or comfortable with providing your siblings hand outs.  So, the business has provided a great alternative.

I’m sure there are other emotional factors in play that I’m not thinking of, too.

If you can figure out how to expose and address some of Your Dad’s emotional concerns, you might find the process you are going through to be less conflict prone and less emotional for both of you.

Yeah, I don't think it's possible for it to be financial because he would fare FAR better financially if he leased the building out.  Him being far better off financially would help ME out because it would reduce the business expenses.   Leaving that out, the only possible reason is that he wants to feel productive.  I don't doubt that the transition would be hard, but I have a hard time feeling sympathetic in that situation.  I'm not telling him to retire from a job where he is paid by someone else, I'm asking him to retire from a job where he's effectively paid by me.  

[finnime]

It might go easier for you both if you approached your father as a partner in a business that is no longer prospering. Express how glad you are that it did so well for you (both) for so long, and that a lot of businesses are now needing to make changes in the wake of Covid, but certainly neither of you can afford to work for no return. Then describe to him directly the money in renting out the warehouse, that certainly he can't pass up. And that you've been surprised to find that you can source storage and mailing for very low prices. And then, what does he think you (both) should do?

He may feel without saying so that operations is the actual business. Since he's been the operations guy, he's been running the business. Success or failure in this view is his. It might even be a relief for him, if this is the case, to see it from another viewpoint.

Don't feel guilty. Just jointly take a look at the numbers and go from there.

[giramomma]

Feb 18, 2022 23:58:32 GMT -5 Ryan said:

To answer your question, yes, our setup is very messy which is why he does have a say.  When I started the business, it took off so quickly that I had nothing setup (corporation, sales tax, accounting, etc).  My dad did have everything setup through his business and he had a very large tax loss carryforward to burn through.  We ran everything through his company and I took a % of profits.  We both got paid very well, but I always hated this setup.  Ultimately, if I was adamant enough, he would go along with me but I don't want him to go along, I want him to come to the same conclusion.  

So. It really seems like this is the sticking point.

How you want it to go, probably isn't going to.

I think the first step is coming to terms with this. Coming to terms with the fact that you are going to have to meet your dad where he's at, and a figure out a plan there. Not trying to go at it from your ideal.

I wonder if some of this for you is you feel like roles are flipping and you need to start "parenting" your dad a little bit. I mean, it isn't parenting your dad. But, frankly, your last sentence is how we approach parenting our kids  when they get older. I don't want them to get an education beyond high school just because we make them or try to condition them to believing that's the only option. I want them to understand for themselves why a post high school education is important.

Which takes a lot of conversations. Not just one. Over a long period of time.

It sounds like you don't really have these sorts of conversations with your dad, either. I think it's the generation. I rarely had deep conversations with my dad when he was alive. I barely knew him. Because he just didn't share.  If your dad shared, you wouldn't be guessing/baffled at his choices. You'd know.

You have got two choices. You either take control of the situation or you relinquish control. There's no middle ground.

You pick the choice you can live with. There's going to be negative fall out either way. You take control and force your dad to retire, it's got one set of consequences. You continuing on has a whole other set of consequences. So, the question becomes, which set of consequences can you better live with? Which set of consequences can you work with/around better?

This is a good introduction to aging parents for you. This is going to play out again, and again. Now it will be the business, later it's going to be something else.

My parents should have got their affairs in order 10 years ago. That's when my dad got his terminal cancer diagnosis. Furthermore, they had 20 years from when I was very much not their responsibility until he died to do things like update the house, make sure mom was taken care of in the next stage of her life.

They chose not to. It BAFFLES me why they never did. Well, I think I know some of the reasoning why. My mom is under some illusion that we are owed a fun life. Deep cleaning and maintaining a house is generally not fun. No one  talks about fixing a house that is settling in the same way they talk about vacations.

So. They chose fun over doing what they were supposed to. That decision has now come to haunt my mom. What I would like my mom to do is come to the conclusion that she needs to leave her home of 40+ years and move into an apartment. I would like her to relinquish control. I would like her to understand that we can't do things exclusively on her timeline. Shit, I'd even like her to get mentally healthy, and come to the conclusion on her own that she's lonely and driven everyone away because of her untreated mental illness.

Wishes in one hand and all that.

I have two choices. I either meet her where she's at and I relinquish control or I hire a lawyer to try to declare her incompetent so that I can take control. Neither is what I prefer. But, meeting her where she is at is more palatable for me. So. That's what we do.

[Lizard Queen]

I come from stubborn Polish stock, so I would have to out-stubborn my mom.  Reasoning did not work with  her. Ymmv.

[geenamercile]

I agree with giramomma last post, with this being the sticking point.  Ultimately, if I was adamant enough, he would go along with me but I don't want him to go along, I want him to come to the same conclusion.

My guess is that one point your goals and priorities aligned, even if they were not the same for the business they worked together.  It also seems like your dad gave you a fair amount of help at the start.  I do wonder if he is a partner of the business if this is really something that you can just decided or not, but I don't know enough about business set ups to have a thought on that besides a question. 

But back to the sticking point, I don't think he will come to the same conclusion because the business is filling different needs for him, goals, and values for him then for you, and your and his are no longer working together.  You have had people offer some theories on what his may be, but without you two really talking about it you aren't going to know. 

I also wonder if part of this is a sticking point because at least from what it seems to me, you are practically trying to push him out.  Yes you gave him another option to make it better, but you are trying to take over a business that you were both doing to only you doing.  I understand your reasons on why you want to do this and it works better for you.  But I wonder if there is some guilt about this, and if he came to the same conclusion if it would erase that guilt.  You have a hard decision to make, and you want him to make it easy for you.  At the same time, I don't think you shouldn't lay out the reasons for him on why this isn't working for you and your family.  Which is the approach I would take, instead of making it about him, tell him why you can't keep doing things this way, and maybe you will be able to come up with an option together?  I hope for peace for both of you.        

[Ryan]

Feb 19, 2022 9:08:52 GMT -5 giramomma said:

Feb 18, 2022 23:58:32 GMT -5 Ryan said:

To answer your question, yes, our setup is very messy which is why he does have a say.  When I started the business, it took off so quickly that I had nothing setup (corporation, sales tax, accounting, etc).  My dad did have everything setup through his business and he had a very large tax loss carryforward to burn through.  We ran everything through his company and I took a % of profits.  We both got paid very well, but I always hated this setup.  Ultimately, if I was adamant enough, he would go along with me but I don't want him to go along, I want him to come to the same conclusion.  

So. It really seems like this is the sticking point.

How you want it to go, probably isn't going to.

I think the first step is coming to terms with this. Coming to terms with the fact that you are going to have to meet your dad where he's at, and a figure out a plan there. Not trying to go at it from your ideal.

I wonder if some of this for you is you feel like roles are flipping and you need to start "parenting" your dad a little bit. I mean, it isn't parenting your dad. But, frankly, your last sentence is how we approach parenting our kids  when they get older. I don't want them to get an education beyond high school just because we make them or try to condition them to believing that's the only option. I want them to understand for themselves why a post high school education is important.

Which takes a lot of conversations. Not just one. Over a long period of time.

It sounds like you don't really have these sorts of conversations with your dad, either. I think it's the generation. I rarely had deep conversations with my dad when he was alive. I barely knew him. Because he just didn't share.  If your dad shared, you wouldn't be guessing/baffled at his choices. You'd know.

You have got two choices. You either take control of the situation or you relinquish control. There's no middle ground.

You pick the choice you can live with. There's going to be negative fall out either way. You take control and force your dad to retire, it's got one set of consequences. You continuing on has a whole other set of consequences. So, the question becomes, which set of consequences can you better live with? Which set of consequences can you work with/around better?

This is a good introduction to aging parents for you. This is going to play out again, and again. Now it will be the business, later it's going to be something else.

My parents should have got their affairs in order 10 years ago. That's when my dad got his terminal cancer diagnosis. Furthermore, they had 20 years from when I was very much not their responsibility until he died to do things like update the house, make sure mom was taken care of in the next stage of her life.

They chose not to. It BAFFLES me why they never did. Well, I think I know some of the reasoning why. My mom is under some illusion that we are owed a fun life. Deep cleaning and maintaining a house is generally not fun. No one  talks about fixing a house that is settling in the same way they talk about vacations.

So. They chose fun over doing what they were supposed to. That decision has now come to haunt my mom. What I would like my mom to do is come to the conclusion that she needs to leave her home of 40+ years and move into an apartment. I would like her to relinquish control. I would like her to understand that we can't do things exclusively on her timeline. Shit, I'd even like her to get mentally healthy, and come to the conclusion on her own that she's lonely and driven everyone away because of her untreated mental illness.

Wishes in one hand and all that.

I have two choices. I either meet her where she's at and I relinquish control or I hire a lawyer to try to declare her incompetent so that I can take control. Neither is what I prefer. But, meeting her where she is at is more palatable for me. So. That's what we do.

Thanks for the response, that's good advice.  My dad is not good at all at expressing what he's feeling.  I didn't really realize this until I was older and 1 of my siblings was really not moving forward with life.  Still living at home, not working, being treated like a child.  I would always ask my dad what was going on and he just said that he doesn't like to bring it up because everyone gets upset.  He might have gotten just too worn out to fight about issues, he had his hands full when they were raising all of us.

Sorry about your mom though, that sounds tough and I'm not looking forward to that as my parents age.  I consider myself a very patient, uncontrolling person, but I find it hard to sit back when people that are close to me are doing things that I would consider to be a bad move.  

[djAdvocate]

i bought my business from my dad in 1991.  at the time, it was a 3 person shop, my dad and two workers.  he just wanted OUT.  he was tired, wanted to travel, and did not want the liability, so that made it easy.

he got bored super fast.  within 2 years, he was back on the payroll.  for about a decade, i left him there.  but i ONLY paid him for time worked.  he would come down (5 hour drive) once every two weeks and work for a few days, and go home.  eventually, he decided that wasn't working for him either, as his $$ were getting eaten up by travel time and expenses, so we went to a 1099 arrangement.  he showed up whenever the hell he wanted, and i paid him a flat rate for his time (generous).  that went on for about another 5 years, and then i threw him a retirement party.  at the retirement party, he made a little speech and basically said this was the nicest firing he ever got.  i think he was joking, but he has a very sarcastic sense of humor, so who knows.

truth is, it was his baby, but i took this business from 3 employees to 12, 15-folding revenue in 20 years.  so, it is more mine than his at this point by a long shot.  if you feel the same, you need to work out a new pay arrangement with your old man.  don't kick him to the curb, just be the boss.

[Ryan]

Feb 19, 2022 13:28:13 GMT -5 geenamercile said:

I agree with giramomma last post, with this being the sticking point.  Ultimately, if I was adamant enough, he would go along with me but I don't want him to go along, I want him to come to the same conclusion.

My guess is that one point your goals and priorities aligned, even if they were not the same for the business they worked together.  It also seems like your dad gave you a fair amount of help at the start.  I do wonder if he is a partner of the business if this is really something that you can just decided or not, but I don't know enough about business set ups to have a thought on that besides a question. 

But back to the sticking point, I don't think he will come to the same conclusion because the business is filling different needs for him, goals, and values for him then for you, and your and his are no longer working together.  You have had people offer some theories on what his may be, but without you two really talking about it you aren't going to know. 

I also wonder if part of this is a sticking point because at least from what it seems to me, you are practically trying to push him out.  Yes you gave him another option to make it better, but you are trying to take over a business that you were both doing to only you doing.  I understand your reasons on why you want to do this and it works better for you.  But I wonder if there is some guilt about this, and if he came to the same conclusion if it would erase that guilt.  You have a hard decision to make, and you want him to make it easy for you.  At the same time, I don't think you shouldn't lay out the reasons for him on why this isn't working for you and your family.  Which is the approach I would take, instead of making it about him, tell him why you can't keep doing things this way, and maybe you will be able to come up with an option together?  I hope for peace for both of you.        

Thanks for the advice.  I do have some guilt, mostly because ultimately this is not a choice that he would make on his own, so I'm kind of forcing his hand to some extent.  Just to be clear though, the only reason I even presented that option was because of something he said.  I was just looking at commercial real estate and was surprised at how expensive it was, so I asked him something about his building.  When I relayed how much rents were going for, he said something to the extent of "forget the business, we can rent the building".  When I heard that, I started thinking of what the future would look like and thought that renting the building would be a perfect income source for him and I could take over the business and keep it going at a smaller scale.  I was actually shocked at how shocked he was, esp. after he made that comment only a week or 2 earlier.

I did end up speaking to him yesterday and got a little more insight, not that I'm really sure I understand the full picture still.  I think he was a little upset with me for pushing him a little too hard on the building.  I went through my rationale including the following:

-Business historically exceeded $1M and upwards of $1.7M during the peak.  Last year was $750K, which was break-even for us and that's including us paying a well below market rent to him for use of the building.  Projections were lower for 2022 and I was guessing we were looking at a loss of $80K or so.  

-We are really competing against people that do not have overhead in the US.  They are having all the work done in overseas factories and the product is going straight to distribution centers within the US.

-He knows I'm busy, I work full-time, I have kids in all these activities, so if I'm going to spend time doing something, I need it to be profitable.  

-There is really not a succession plan for the business.  If something were to happen to my dad, even something like him breaking his hand, we'd have some issues.  Not to mention that the work is fairly manual, so while my dad probably likes aspects of it, it's definitely going to get more challenging year after year.

-I tried to get him to understand that the business would be more fun when it's profitable.  It's not fun for me to stay up and work on something when I'm not sure if there is a payoff.  It's not fun for either of us when we have to work 8 months before we're at break-even.  If we implement this plan, we will be profitable from day 1 and we can scale it up/down comfortably.

After all this was said and done, I think he understood where I was coming from.  I also know that he is overwhelmed with how much stuff he has to go through in the building, so I offered to help.  He said that he does need someone pushing him to do this because he has been avoiding it for the past 40 years and look where it got him, he knows that this would've been a manageable task if he did it a little at a time.  My advice to him was to meet with a broker, so I'll help him set that up.  He needs to hear what the end plan is and I think that'll make doing all this work worthwhile, it'll also help him to decide if trying to sell old equipment is worth it in the end when he might be giving up a month of rent.

Having the conversation was good and I don't regret the direction I'm pushing him.  This is part of getting his affairs in order, if he doesn't do it now, then this would be an absolutely ENOURMOUS task for my family in the future.  I also told him that it could be part of plan to provide some income for my siblings that need additional income.  

It was kind of interesting because he has so much stuff in there, like literally SO MUCH stuff.  I think what he does it just put things off.  He has old bikes from growing up, old toys, old placemats, old furniture....all this stuff that is not "core memory" type stuff.  He has a HUGE pile of stuff from his dad's place up there after he passed away.  Instead of dealing with it at the time (15+ years ago), he just moved it to this building...maybe he can't bring himself to throw stuff out so he just keeps it.   To me it's so crazy because I'm not like that at all, I purge as I go.  If my kids don't use it, it's gone.  I have maybe a handful of things that are really sentimental that I'll never throw out, everything else I'll just remember from the pictures.  

[Ryan]

Feb 20, 2022 0:09:04 GMT -5 djAdvocate said:

i bought my business from my dad in 1991.  at the time, it was a 3 person shop, my dad and two workers.  he just wanted OUT.  he was tired, wanted to travel, and did not want the liability, so that made it easy.

he got bored super fast.  within 2 years, he was back on the payroll.  for about a decade, i left him there.  but i ONLY paid him for time worked.  he would come down (5 hour drive) once every two weeks and work for a few days, and go home.  eventually, he decided that wasn't working for him either, as his $$ were getting eaten up by travel time and expenses, so we went to a 1099 arrangement.  he showed up whenever the hell he wanted, and i paid him a flat rate for his time (generous).  that went on for about another 5 years, and then i threw him a retirement party.  at the retirement party, he made a little speech and basically said this was the nicest firing he ever got.  i think he was joking, but he has a very sarcastic sense of humor, so who knows.

truth is, it was his baby, but i took this business from 3 employees to 12, 15-folding revenue in 20 years.  so, it is more mine than his at this point by a long shot.  if you feel the same, you need to work out a new pay arrangement with your old man.  don't kick him to the curb, just be the boss.

Yeah, my dad has always said that he wants to do something so I'm not surprised that he wants to keep working.  It boggles my mind to want to work in your mid-70's, but maybe he thinks if he stops it'll start a slow decline.  I am in your boat, I definitely don't want to push him out, I just want the expenses gone.  I think he'll thank me for this in a year or so, or maybe that's wishful thinking.  

I mentioned this in the above post, but I think I'm realizing that it's the building, the memories, and all the clutter in the building that he's having a hard time with.  If he could snap his fingers and had the building sold, he would probably do so.  He just doesn't want to deal with the feelings or memories when he starts to pick through everything.  He said he even was having a hard time scrapping a machine he hasn't used in 35 years because he was thinking about how much time it took him to build it.  That's where him and I are different, I'd drop kick that stuff to the curb if it was unnecessary clutter.

[Deleted]

It’s great that you two had a conversation. All the stuff he has in the building does provide more insight. On top of change period, which a lot of people struggle with (I’m one of those people, except I’d love a POSITIVE change that meant I had enough income that I don’t have to work every day), there’s also all the stuff he’ll have to let go of that he’s been storing there, plus whatever other emotional stuff he has going on about it.

Remain firm….. trying to handle it gracefully and having compassion for how difficult this is for him doesn’t mean you can’t also be firm about what needs to happen with the business. 

[NomoreDramaQ1015]

Could you help him go through the stuff?

It will take patience but you can listen to him talk about that machine he built, tell stories of stuff from your childhood and maybe share your own.

If he knows all that history isn't forgotten and someone acknowledges his struggle it may make it easier to let go.

As far as the overwhelming physical work involved see if you have any companies like Got Junk. They can haul while you guys point and direct. He doesn't have to worry about emptying it out himself.