Between 80 and 90 percent of all U.S. companies are family businesses, according to the Family Business Review. Over the course of the next decade, more than 40 percent of those companies? top executives will retire, making family business succession a major issue for thousands of enterprises and thousands of families.
With this massive change on the horizon, it?s safe to assume many of these companies will address succession by selling the family business or transitioning to the next generation. In addition, many family businesses contemplate a sale for myriad other reasons besides succession. Regardless of the motivation, selling may not be the right choice. And for those business owners who choose to sell, the process can be a source of great stress and family conflict.
Here are five questions to help your family-owned company navigate the prospect and process of selling.
1. Why are you considering a sale?
It?s important to identify the reasons why you want to sell the business, because the motivation for a sale can have a large impact on the best course of action to take. For instance, if there?s not another family member or generation in line to take over the business, then a sale may be the best way to monetize your asset. By contrast, market opportunities may be the driving force, making the urgency for a sale more present. Other criteria could include divorce, death, family members? seeking alternative career directions, or tax and estate planning considerations.
2. Is an outright sale the best choice?
Before hanging the ?for sale? sign, consider strategic alternatives. In this regard, consult with your accountant, your attorney, or an investment banker. Depending on your goals, there may be a number of other options available to meet your family?s objectives.
For instance, recapitalizing the company could provide cash to the exiting generation (or exiting family members) while allowing the remaining family members to continue in management roles. If liquidity is not an issue, then identifying non-family members for executive management positions can address succession issues while allowing the family to retain ownership (and therefore the cash flow). And of course, if a sale does make sense, then be certain to engage the appropriate professional advisors to ensure you realize the greatest possible value from your family business as early as possible.
3. Are your decisions driven by emotions or good business sense?
Despite the prevalence of family members that work together, few can avoid the potential divisiveness that money and business dealings can have on their relationships. Whether it?s a case of siblings facing off with each other, cousins in conflict, or parents and children disagreeing, the emotions of a family quarrel can lead to bad decision-making that can have catastrophic economic impact on a family business. I have seen this more than once: As a result of ego clashes or a lack of common sense, much money is left on the table. And once again, one of the best defenses a family can take is to engage the right assistance. A corporate psychologist, family therapist, or professional mediator can often prevent emotions from hijacking a family business? potential and ensure that equity and ?cool heads? prevail.
Emotions can also affect owners? sense of what a business is worth. While your business is your baby, prospective buyers are often uninterested in the characteristics you consider most significant. Many buyers are extremely disciplined in their approach to value. Look to your advisors to provide an accurate valuation and to negotiate without bias.
Article source: http://www.miamiherald.com/2012/04/15/2747122/family-business-sales-can-be-emotional.html