This is a unique opportunity with both potential rewards and risks. Here’s a breakdown to help you decide:
Pros:
- Profit Sharing: Increased income through salary bonus and dividends.
- Solid Business: Consistent growth, strong moat, and experienced partners.
- Control & Alignment: Direct influence on company decisions and aligned incentives with partners.
- Growth Potential: Potential for future appreciation of your ownership stake.
Cons:
- Liquidity Risk: Difficulty selling your share if you need to exit the company.
- Key Person Risk: Reliance on key partners, potential disruption if they leave.
- Debt Risk: Taking a loan increases financial burden.
- Concentration Risk: Putting a significant portion of your net worth in one company.
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One small point about small consultancies, after having been in a few and having inside info in a few more: the golden years are the early years, when the team is rock solid, clients are fairly easy to get (because more often than not they are the bosses’ ex colleagues), money is rolling, morale is high.
It gets exponentially hard once the team is growing. Key person risk identified above is a big one, especially if a handful of key people hold most of the connections/bring the business.
Joining a small team as a partner, working your ass, socks, nails, soul off and exiting (or staying!) a millionaire in 3-5 years via an acquisition is a valid high risk high gain play. Do you see a potential exit in 5 years? Max 10.
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that’s a very good point, thanks
they are effectively strong personas among the existing partners, who know what happen in 20+ years when they are out. The key partners are all now ~50 to 55 years old.
According to the partner contract, I’ll have to stay at least 5 years. I’m ready to work that long, and maybe get FIRE’d along the way and reduce to barista FIRE a few time later, depending on the wealth I will be able to get.
So yeah, 5 to 10 years will definitively do it. On the longer term, I have no idea.
Eh early retirement is not necessary, a lot of people enjoy working, but it’s certainly a good exit strategy. I think the key is what sort of plans does the partnership have for the future: selling, growing, maintaining. Whichever they are you’ll weigh them in your decision.
I am lucky to have worked with a few people who’ve created and sold a few consultancies, the overall sentiment is overwhelmingly that the first million is fairly easy, a crack team of 4-5 dedicated senior people with good connections can easily do that in a year, then 5mn is a key milestone requiring a larger team, 10mn, 20+ is where it gets A LOT harder if we’re talking about organic (ie not acquisitions) growth. 50mn requires a fairly big team but by that time some of the revenue is steady/requires less chasing.
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