There comes a point in every family-owned business when it’s time. After years of building a successful business, you’re ready to move on and retire. You’ve dreamed of one day turning it over to your kids. After all, they grew up in the family business. But what if your children have other plans? That’s when you may need to look at other options—like selling the business. Here are some factors to consider.
Decide What “Selling” Looks Like
Start with this question – What do you want the sale to look like? It’s important to think about the answer to that question because it will help you develop a plan. Then write it down. It may change over the years, but at least you’ll have a foundation. Share it with your family and staff, as appropriate.
Here are some questions to consider as you map out your vision:
- Do you want your employees to keep their jobs?
- Will commitments to existing customer and suppliers be honored?
- Are you committed to the neighborhood/city where you do business or could it be relocated?
- Can the new ownership continue to use the name of your business?
- What role, if any, will you play in the business?
Separating the Business from the Owner
How important are you to the ongoing success of the business? If the business can’t survive without your day-to-day management, it may not have much “curb appeal” to potential buyers. They want to know that the asset they purchase has a good chance of returning a profit, without you.
Think about it this way. What would happen if you took a month-long vacation and didn’t call in or check emails? Buyers hope the answer is: “The business just kept running like it always does.”
That’s why it’s important to gradually separate yourself from the operational aspects of the business. That can include the following activities:
- Develop your staff to assume leadership positions. If it’s not a family member, then consider a key employee. Start with smaller tasks, and then increase responsibility. That can be very motivating to your star employee and can help with retention.
- Outsource functions you currently handle. For example, you might go outside for human resource functions like payroll and government tax reporting. Some owners outsource parts of the marketing function, like social media or search-engine advertising.
- Diversify your contact with key customers. Do customers buy because of you or the products/services you offer? If it’s because of you, that may hurt the buyer’s chances of continued revenue. Look for other ways to service your key accounts. Take your key employees along on sales calls. Consider giving customers more opportunities for self-service by allowing them to order online.
Start with a Team
There are a number of professionals who can help create your plan. It needs to take several aspects into account—legal, financial, talent management. So, it makes sense to take a team approach. The team might include your accountant (CPA), tax advisor, attorney, financial advisor, and management specialist. Some financial planners can serve as a coordinator of the team.
You may also want to look at the Small Business Administration’s “Plan Your Exit” tool on their website.
If you decide to sell your business to an outside buyer, you need a plan in place. Consider these factors and gather your team so you’re ready when that day arrives.