When you're in business with a family member, whether it's a generational concern or a simple partnership pursued by relatives with a mutual interest, selling a family business can be an interesting proposition. There is a wider range of issues that may need to be addressed and specific steps that will need to be taken. Here's a quick look at some of the basics you'll need to know to get started.
The Basics You Need to Know About Selling a Family Business
- Find out what everyone's expectations are: What does each family member want to do with the company? If only one part of the family wants to sell, can the other part afford to purchase the business? By starting the process knowing what everyone wants out of the process, you can move forward with these prospective issues in mind and the easier it will be to come to an agreement everyone can live with.
- Plan to have a plan: Poor decision making and lack of strategic planning can quickly bleed the equity out of your family business if you don't have a plan in place prior to beginning the sale process. Start by having a meeting with all concerned parties and some trusted advisors, such as an accountant, attorney, financial planner or similar professional. Take the time to develop an overall strategy on how to proceed with the process.
- Create a decision-making process: Because there are multiple people involved in the sale, you need to all agree on a process for making decisions. If your Uncle Joe has been the peacemaker and negotiator in the family for decades, he'd be a good option to consider in making decisions. If your sister Patty is difficult anytime someone else makes a decision that impacts her but otherwise makes great choices, make sure she's in the group that makes the decisions.
- Know what your company is worth and decide how to improve it: Getting a quality business valuation can provide you with a solid basis to determine what your company is worth. Even better, it gives you valuable insights into where your business is strong and where it's weak. This gives you an opportunity to decide whether or if you want to improve those weak points to boost the overall value.
- Make plans to aid the transition: Companies can lose significant value when they're sold to an outsider. This can make many entrepreneurs concerned about investing in the company unless there is a good transition plan in place to help make the change to the new owner. Determine which family member or members could be developed to act as a transition advisor or team to help make the overall process go more smoothly.
Selling your family business is never an easy situation, but by knowing what to do, you'll be able to make progress in the right direction. Though you'll need to look at other areas of concern, these basics should help you make a good start when selling a family business. If you need help determining your company's value, certified business valuation specialists are a good option to consider, as they are independent of any other parties in the sale and will provide an unbiased report of what the business is worth.