Aspects of Selling a Family Owned Business – From Jordan Zwiegoron
Family owned businesses are a unique breed. Each family business has its own culture, which always include both pros and cons for family members, employees, and prospective buyers alike.
It’s estimated that as many as 80% of all businesses are family owned, yet few are planning for the eventuality of selling the business; in fact, as many 72% of family businesses lack any form of a developed succession plan. This is complicated by the fact that family members are often in conflict regarding a potential sale. Some family members wish to remain in the business, and others envision passing the business down to future generations.
Let’s look at some key points that family business owners should consider when selling a business:
- – First and foremost, have a family meeting and seek a common understanding regarding a business sale. It’s important that all owners/shareholders are in agreement before starting down a potential sale path.
- – Appoint one family member to speak for the family in the negotiation and sale process. This designated member will need to be a n exceptional communicator, ensuring that needs are met on all sides throughout the sale process.
- – Keep it confidential. With multiple family members aware of a prospective sale, it’s important to keep this information confidential from other employees, partners, vendors, and anyone besides family members.
- – Define family member roles. Deeply consider the roles that each family member plays in the business. Are roles overlapping? Are they well defined? Will a new buyer be able to fill these roles without reinventing business processes? Ensure that each family member’s role is outlined in detail with job descriptions.
- – How many cumulative hours are family members working? Consider how many hours is each family member contributes to the business. Keep in mind that a new owner is assumed to be an individual – who will contribute 40 hours of time to the business. If your company has 4 family members contributing 120 hours per week, financial adjustments will be required to account for the buyer’s need to hire additional staff. Consider how to streamline the hours contributed by family members now.
- – Will any family members remain after the sale? Family members who stay on after the sale of the business will no longer be in charge. And depending on the buyer’s situation, this may not even be an option.
- – Family members will want to appoint one family member to speak for them in the negotiation process. A failure to appoint a family member could lead to confusion, and poor decisions.
Working with an experienced Business Broker is extremely important when it comes to selling a family business. Business brokers know what it takes to close the deal, ensuring that all family members, as well as the buyer, are happy with the outcome. Make sure to choose a reputable business brokerage firm, with deep experience, certifications, and resources to get the job done right.