Should You Sell Your Family Business?
When the complicating variable of family is added to the equation of selling a business, the situation can get rather messy. Family usually complicates everything and businesses are, of course, no exception. Ken McCracken, a family business advisor with KPMG in Ireland, recently explored the complexities so often associated with family businesses in an article for the Irish Times. In the article, “Family business: to sell or not to sell?” 6 questions to help you make the right decision,” McCracken notes that “There’s so much emphasis on the notion of a family business continuing for generations, that the idea of selling could be seen as a failure, which of course is not true.”
Here’s what he suggests family business owners consider.
Is now a good time to sell?
The market will determine whether it’s a good time to sell or not. Are members of the next generation interested in running the business? If not, maybe you could transition into a business owned by your family, but not run by family members. Can you harvest wealth from the business without selling it?
What’s my business worth?
Determining how much your business is worth is a key variable in any decision to sell. The best way to determine the worth of your business is to have an outside party, such as a business broker or a professional business valuation expert, evaluate your business. What you believe your business to be worth and what the market dictates could be, and often are, very different. You may discover that your business does not have the value that you hoped for. If this is the situation, then selling may not be an option.
What are my non-negotiables?
Do you want the new owner to keep all your employees? Must a new owner keep the company name? Is relocating the business off the table? These things are often part of the negotiations, but McCracken says: “Always remember to start out by identifying your best outcome.”
What’s next for me?
What will you and any family members who work for the business do after the sale goes through? You may discover that the sale could be very disruptive for you personally. All too often, people fail to recognize the emotional and mental stress that comes along with selling a business. Many owners begin the selling process only to discover that they are not emotionally ready to do so. While everyone wants to be unemotional in making their business decisions, this is not always the case.
Have I done my Due Diligence?
Not only will prospective buyers investigate your business, you may want to vet prospective buyers ahead of time, which can save you a great deal of aggravation and wasted time. Working with a business broker is an excellent way to handle the due diligence process.
McCracken believes business owners should investigate how the prospective buyer handled previous acquisitions. How well did the prospective buyer honor previous commitments? Do you trust them?
Who will negotiate the sale?
Finally, McCraken believes it is essential to know who will oversee negotiations. Many deals that might otherwise have been successful, fall apart due to poor negotiations. A business broker is experienced in negotiating the sale of the business, with dozens, perhaps hundreds, of successful transactions.
“Whether or not to sell the family business is one of the most important decisions an owner will ever make,” McCracken says. These questions will guide you to make the right decision.