Maybe you’re an aging business owner with an eye on retirement.
Or you’re an entrepreneur who has been ready to sell the family business for a while, but you were waiting for signs of an improving economy.
In any case, you are considering selling the family business – perhaps now, perhaps a few years from now.
What should you do now to get ready?
You’ve already accomplished much by thinking along these lines, according to experts. You have been able to overcome the idea of parting from the business. And you are willing to sell to someone outside of the family.
“This might actually be the hardest part of the entire process,” says Walter Zweifler, a New York-based financial researcher who has been appraising privately held businesses since 1976 and has consulted many family business owners who have considered selling.
“Business owners do not think they will ever die, and have enormous trouble psychologically coming to grips with not owning or running the business.”
Now that you’ve gotten past that part, here are other things you should be thinking about to get ready:
• End the family perks. That means no more sports tickets, toys with motors, or nonworking family members on the payroll.
• Show some profits. Demonstrating strong earnings attracts buyers.
• Get inventory straight, accurate and current.
• Have an outside party audit your financials so the buyer can trust them.
• Strengthen management. Show that the business can operate without you.
• Get outside help in selling your business. Even lawyers don’t represent themselves. If you’re a small company, find a business broker through your local chamber of commerce. If you’re a larger company, go to a qualified investment banking firm for help finding a certified professional experienced in buying and selling businesses on behalf of people.
Once you have found an interested party, realize buyers and sellers may still have to negotiate to optimize the deal for both sides.
For example, perhaps the seller really wants to stay on for the next couple of years, but they found the buyer today. A possible answer to this is that the seller can reduce the price of the company, in exchange for staying on under a three-year salaried contract. That way, the seller is happy, and the buyer doesn’t have to pay as much up front.
It is every business owner’s dream to see their life’s work continue and grow within the family. But maybe, if you are honest with yourself and can overcome the emotional barriers, you will see that the intelligent prep and sale of the business will enable you to leave a financial legacy that will benefit your family for many generations to come.
Henry Hutcheson is a speaker and author and president of the consulting firm Family Business Carolina. Email your questions about family business to Henry@familybusinesscarolina.com
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