I recently talked with a couple who’ve owned their business for over 30 years and have been contemplating selling for the last 10. Like many family-owned businesses, they have some complex decisions ahead.
One of their children might like to purchase the business; the other does not want to buy in. So, what’s a family to do? What’s a fair price for the child who wants to take over? What’s fair for the other?
How is their daughter going to make the acquisition, financially? Will their retirement be secure? And how will their daughter feel if they decide to sell to a third party after all?
All over the country, family-owned businesses are struggling with these very questions. And the answers they choose can substantially affect the value of the business. Even more importantly, I’d say, is that the outcome can directly impact how many places they’ll set at their Thanksgiving table next year.
I’ve seen families broken apart by these very issues. I’ve seen brothers who refused to talk to each other for decades because disagreements arose over how mom and dad decided to exit their business.
This couple has a lot going for them. They’re taking the time to reach out and find out how much their really worth. And they’re having those tough conversations with their kids about selling the business.
Right now, they’re probably leaning toward selling to a third party. That way, the parents can be assured of their retirement income. They won’t be reliant on their daughter to maintain and pay them out over a seven to 10-year period—a proposition that’s always stressful for all parties involved.
After the sale, they can shape their family legacy in other ways. They figure they’ll help their children do something else on a smaller scale, something they’re truly passionate about.
I commend this couple for learning about the process and exploring their options. If I could have asked for more, I would have wanted to talk to them two, three, even ten years ago. That way, we could have spent some time making small adjustments that would increase the value of their business. As it is, after 30-plus years in the business, they’re anxious to be done.
Truthfully, I think every family business should talk to an M&A advisor every year, even if they have no plans to sell their business. Talking with an advisor can help educate you on what buyers value and what it will take to sell your business when the right time comes.
Talk to an advisor. Take up 20 minutes of their time. Ask what are my different options to exit my business, what is the process, how long does it take? Find out where the market is trending. Do some pre-planning. You, and your family, will all be thankful you did.
