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Started By
Message
Small family business grossing over 500k/year
Posted on 12/15/18 at 3:04 pm
Posted on 12/15/18 at 3:04 pm
Mother has a small business for the past 15 years that grosses over 500k/year. She still works every day in what she feels to be a stressful environment. She feels the need to be present for "quality control". Shes brought up concerns lately that she is feeling the want to look towards retirement but knows my sister and her family is completely dependent on her income with no signs of anything changing. The business has not grown in the 15 years and never have pursued more work.
I live and work in NYC but have tried going through her finances over the past few months. (I'm not an accountant) Snapshot of what I have found.
Business has contracted around:
Gross- 500k/year + "extra jobs" maybe $100k/year
Overhead - $20k /year
Labor- $150k /year + "25% of any extra jobs"
Salaries- $350k /year
$218k/year to her...which goes towards her personal expenses and investment properties she owns
$130k/year to my sister. House, cars, kids schools, + salary all from the business. She's married, 5 kids, Husband doesn't work, sometimes as a "contractor" for my mother, but hasn't been the best source. She is supposed to be the bookkeeper but has never done much beyond for submitting invoices and payroll.
Profit: ($-25k) /year (without extras)
basically her rental properties and any profit from the "extra jobs" is what keeps her at float.
She just bought my sister's oldest child, 15, a 2019 JK Sahara.
What's your advise?
I live and work in NYC but have tried going through her finances over the past few months. (I'm not an accountant) Snapshot of what I have found.
Business has contracted around:
Gross- 500k/year + "extra jobs" maybe $100k/year
Overhead - $20k /year
Labor- $150k /year + "25% of any extra jobs"
Salaries- $350k /year
$218k/year to her...which goes towards her personal expenses and investment properties she owns
$130k/year to my sister. House, cars, kids schools, + salary all from the business. She's married, 5 kids, Husband doesn't work, sometimes as a "contractor" for my mother, but hasn't been the best source. She is supposed to be the bookkeeper but has never done much beyond for submitting invoices and payroll.
Profit: ($-25k) /year (without extras)
basically her rental properties and any profit from the "extra jobs" is what keeps her at float.
She just bought my sister's oldest child, 15, a 2019 JK Sahara.
What's your advise?
21
Posted on 12/15/18 at 3:13 pm to Papasteve
pretty obvious where the issue in that is, and you see it also.
Posted on 12/15/18 at 3:20 pm to Papasteve
What is the husband doing during the day?
Posted on 12/15/18 at 3:55 pm to Papasteve
The only thing your sister should get is the salary from the business that she works at. Maybe a car allowance if she travels for work. The mileage can be written off as well if she travels.
The house/cars/school should be her responsibility and your brother in laws responsibility.
Does your sister have no knowledge or guilt about what she’s doing to the family business or her mother?
Deadbeat BIL needs a job and some tough lives needs to be given to your sister.
The house/cars/school should be her responsibility and your brother in laws responsibility.
Does your sister have no knowledge or guilt about what she’s doing to the family business or her mother?
Deadbeat BIL needs a job and some tough lives needs to be given to your sister.
Posted on 12/15/18 at 4:22 pm to Papasteve
I dunno, if your Mom bought her niece a brand new car, I’d say she’s making her choices loud and clear. For whatever reason, she’s choosing to bestow material things on her sister’s family. You may not like it, but if no one is coercing Moms to buy things/keep Sis on the payroll, then she’s entitled to throw her money away however she likes. If she has the mental capacity to understand how much she makes, and how much of it goes to propping up her sister’s lifestyle, then it truly is her choice.
Family dynamics are difficult. Is she providing her own children (you & any others) with as much support as her sister’s family? Why does she think her niece needs a brand new car?
Has she told her sister, point blank, that she plans to retire in X months/years and asked her what her plans are to assume the business? Or has she offered to sell the business to them?
Family dynamics are difficult. Is she providing her own children (you & any others) with as much support as her sister’s family? Why does she think her niece needs a brand new car?
Has she told her sister, point blank, that she plans to retire in X months/years and asked her what her plans are to assume the business? Or has she offered to sell the business to them?
Posted on 12/15/18 at 4:50 pm to Papasteve
I'm confused about this part:
Are you telling us that this is self-salary, legitimate business expenses, or owner's profit?
She could always just sell the business to more efficient owners, and set up annuities for herself and for the sister.
It's unclear what your mom is even asking you to do. If she's just expressing concerns, then it's not really your duty to do anything about it. Since it's your mom, you can gently nudge her toward the benefits of selling the business, but ultimately it's her decision. Maybe she likes the idea of being present as quality control because she doesn't know what else she would do with herself. Maybe she likes the idea of your sister being involved in the business because she doesn't know what else your sister would be doing otherwise. So my advice would be to give your mom reasonable options if she asks for them, but otherwise to just let it go. It's not your call.
FWIW, it sounds like a nice business, whatever it is, despite the lack of growth.
quote:
$218k/year to her...which goes towards her personal expenses and investment properties she owns
Are you telling us that this is self-salary, legitimate business expenses, or owner's profit?
quote:
Shes brought up concerns lately that she is feeling the want to look towards retirement but knows my sister and her family is completely dependent on her income with no signs of anything changing.
She could always just sell the business to more efficient owners, and set up annuities for herself and for the sister.
quote:
What's your advise?
It's unclear what your mom is even asking you to do. If she's just expressing concerns, then it's not really your duty to do anything about it. Since it's your mom, you can gently nudge her toward the benefits of selling the business, but ultimately it's her decision. Maybe she likes the idea of being present as quality control because she doesn't know what else she would do with herself. Maybe she likes the idea of your sister being involved in the business because she doesn't know what else your sister would be doing otherwise. So my advice would be to give your mom reasonable options if she asks for them, but otherwise to just let it go. It's not your call.
FWIW, it sounds like a nice business, whatever it is, despite the lack of growth.
Posted on 12/15/18 at 5:24 pm to Papasteve
What type of business is this? Is she able to sell her portfolio/book of business?
If the circumstances were right, I’d look to sell the business and negotiate to keep mom on staff as consultant for a transition period. If buyer thinks they can improve margins and do more with the same company, negotiate for Mom to earn some agreeable % of revenue for first year or two. Keeps her employed and money coming into the door for a bit while sister gets weaned off the teet.
If the circumstances were right, I’d look to sell the business and negotiate to keep mom on staff as consultant for a transition period. If buyer thinks they can improve margins and do more with the same company, negotiate for Mom to earn some agreeable % of revenue for first year or two. Keeps her employed and money coming into the door for a bit while sister gets weaned off the teet.
Posted on 12/15/18 at 5:40 pm to Papasteve
quote:
Profit: ($-25k) /year (without extras)
This is kind of disengenous. IF she's taking $218k and sis is getting $130k, then that's the profit. You fix the -25k by Mom taking less. She's clearly choosing to work until she dies.
If she really wants out and doesn't just "feel" like she wants to retire (women, right?), then she needs to sell the business to your sister. Basically, flip the script - sis buys the business for $1 million. Mom holds the note, gives a reasonable interest rate and takes roughly $125k for 10 years (doing nothing, mind you). She takes that and the investment properties and makes it work.
Sis gets all the work and double the income. Or she can bring in a junior partner to help at say, $60k and makes a little more until she sorts it all out.
Posted on 12/15/18 at 9:29 pm to Papasteve
So they could double their profit if they cut your monthly allowance that you don't earn in the first place? Seems like that's a good place for them to start
Or does your mom basically admit that the biz is paying for you to live in NYC with the 2 grand per month?
you say you don't make $130k yet NYC is expensive as hell so that seems to be pretty straightforward
Or does your mom basically admit that the biz is paying for you to live in NYC with the 2 grand per month?
you say you don't make $130k yet NYC is expensive as hell so that seems to be pretty straightforward
This post was edited on 12/15/18 at 9:33 pm
Posted on 12/16/18 at 6:40 am to Papasteve
First of all OP you are jealous and need to get over that.
2ndly, you need to separate income and expenses. It’s absurd they are not. Everyone should be paid for their work and that kept
Separate from the business expenses. You need to talk to an accountant and get that cleared up. Certainly sounds like a lot of personal use here that an audit could catch and force $1000s in unpaid taxes.
Lastly, your mom could hire a GM. Run the business and everyone makes less.
2ndly, you need to separate income and expenses. It’s absurd they are not. Everyone should be paid for their work and that kept
Separate from the business expenses. You need to talk to an accountant and get that cleared up. Certainly sounds like a lot of personal use here that an audit could catch and force $1000s in unpaid taxes.
Lastly, your mom could hire a GM. Run the business and everyone makes less.
Posted on 12/16/18 at 10:56 am to Papasteve
Mom needs to sell the business and enjoy retirement. Sister and brother-in-law can then join the real world and grow up.
Posted on 12/16/18 at 10:57 am to Papasteve
Sounds like mom mad her bed and now she has to sleep in it. Nothing you can do.
Posted on 12/16/18 at 8:22 pm to Papasteve
quote:
What's your advise?
CALL MARCUS LEMONIS
Posted on 12/16/18 at 8:47 pm to Papasteve
What's the value-add you and your sister provide? So far I've gotten your sister is an accounts payable specialist making way more than the market value for that position. Still not sure what you provide for 2k per month either. The whole thing sounds like potential tax evasion unless you're leaving out a lot of details.
Posted on 12/17/18 at 7:13 am to Papasteve
That is way too much on your mom. Good lord she's funding their adulthood which is ridiculous when you're not making millions. Even then, I wouldn't be funding this much shite.
I'm not sure how the husband lives with himself being granted in as a spoiled brat into the family.
I'm not sure how the husband lives with himself being granted in as a spoiled brat into the family.
Posted on 12/17/18 at 9:02 am to Papasteve
Buy the business. Kick deadbeat sister out and hire your own people.
Posted on 12/17/18 at 9:27 am to Papasteve
quote:
basically her rental properties and any profit from the "extra jobs" is what keeps her at float.
$218k is a little more that keeping her afloat. Sounds like it is a good job for her and your sister, but your sister will lose it once she takes over. Your mom knows that, which is why she is still working.
My advice is that there is nothing you can do about it.
Posted on 12/17/18 at 9:35 am to Papasteve
I'm really curious what kind of business this is. When almost half of the cash flow is to owner pocket, usually it's professional services of some sort.
Posted on 12/17/18 at 12:41 pm to Papasteve
Have your sister take over and buy you out. It will force her to work or fail.
Posted on 12/17/18 at 7:45 pm to Papasteve
I feel like I am going through the same thing with my in-laws.
They have a business that grosses 1.2 MM. Profit on this is about $750k.
They pay themselves $200k, and I do not have an issue here.
They have about $400k of additional essential payroll - a little high, but some of their employees have been with them a long time.
Their problem has been that they have about $150k in family payroll. Two family members that couldn't make a third of what they make in the real world. My FIL knows this but these are my MIL family members and she won't budge.
One of them, which makes about 90k of the 150k - literally runs errands. Gets lunch, goes to the bank, answers the phone. The guy that makes 60k is their bookkeeper - over paid, but at least does something.
So they are down 50-100k every year and their business is struggling even though it makes money. Really frustrating.
They have a business that grosses 1.2 MM. Profit on this is about $750k.
They pay themselves $200k, and I do not have an issue here.
They have about $400k of additional essential payroll - a little high, but some of their employees have been with them a long time.
Their problem has been that they have about $150k in family payroll. Two family members that couldn't make a third of what they make in the real world. My FIL knows this but these are my MIL family members and she won't budge.
One of them, which makes about 90k of the 150k - literally runs errands. Gets lunch, goes to the bank, answers the phone. The guy that makes 60k is their bookkeeper - over paid, but at least does something.
So they are down 50-100k every year and their business is struggling even though it makes money. Really frustrating.
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