Selling your family’s business can be a uniquely challenging chore. Unlike other business entities, family-owned entities often entail emotional connections among brothers, sisters, parents, children, couples, and other relatives who have devoted a significant amount of sweat equity to make the organization a success. It’s important to avoid complications before, during, and after the sale by following some dos and don’ts.
Do Communicate Honestly With All Parties
Let all participants in the business know about the upcoming sale. This list of people should include those who have no ownership stake but who rely on their job in the company for their financial livelihood.
Don’t Rush the Sale
Never sell a business, family-owned or not, if you are feeling rushed to get the deal done. Rushing invariably leads to missed financial opportunities, fewer prospective buyers, and undervaluation. It might be tempting to be done with the deal, but by rushing the process, mistakes will be made.
Do Get Expert Assistance
Few people sell commercial property or even a private home without getting professional advice. The same goes for selling a family business.
Leveraging the power and connections of a reputable business broker is the smart way to go. Experienced brokers know how to navigate the entire process, which includes qualifying buyers, getting financing for buyers, protecting the confidentiality of both parties and maximizing exposure for the seller in order to attract the highest price.
Don’t Ignore Due Diligence
Prospective buyers will want to complete their due diligence, which means combing through all the financial and other official documents related to the company. Be sure to have everything in order before listing the business for sale. That way, when potential buyers ask for the full packet of financial statements and legal papers, there won’t be a delay.
Do Get Consensus of All Owners
Spend the necessary amount of time discussing the potential sale with everyone who has an ownership stake, no matter how small. Family-owned companies often have multiple owners, even though just one or two are the primary or majority owners. You can’t sell something you don’t have, so be certain that all owners are in complete agreement about the sale. Have a legal expert review the original business agreement to see if majority owners can override minority owners‘ decisions in such matters.
Don’t Ignore Tax-Related Issues
Selling any type of business can have substantial tax repercussions. Get the advice of a qualified expert to find out how the sale of a family business, no matter how small or large, will affect your financial situation.
Planning Makes All the Difference
Deciding to sell a family business is a complex event that calls for planning and getting the right kind of advice. Plus, it helps to be emotionally ready to make such a major life change. However, owners who follow a few simple rules can get the job done and enjoy a satisfying result. It’s imperative to seek not only fair monetary compensation but also to honor the many years of hard work the family members have devoted to making the enterprise a success.
