Selling a family business isn’t always an easy process…
You’ve worked hard to build your business, or to keep the family business you’ve been handed going, but what happens when it’s time for the next generation to take over? A family business, no matter how long it’s been in the family, has sentimental value that can make succession planning an emotional process. If you are running a family business, start early when it comes to figuring out your exit strategy. If selling a family business is in your future, talk to a professional in your area for guidance. As you are beginning to think about selling a family business, here are some challenges you should be aware of:
There are several challenges in selling a family business, including:
Emotional attachment: Family members often have an emotional attachment to the business and may find it difficult to let go, especially since the business isn’t continuing in the family. It’s hard to give up something that you’ve not only worked hard for, but has also provided for your family. Starting early with the process can help you wrap your head around what the future will look like.
Lack of objective decision-making: Family dynamics and personal relationships can cloud judgment and make it difficult to make objective decisions about the future of the business. Because you are emotionally invested in the business, it’s not always easy to make the hard decisions.
Disputes over valuation: Family members may have different opinions on the value of the business, leading to disputes and negotiations. Having a professional valuation can be helpful in this case.
Lack of professional experience: Family businesses may lack professional management experience and may not have a clear understanding of the steps involved in selling a business. This is where talking to a professional is really necessary. They can help you through the process and make sure you are both protected through the sale and going about it the right way.
Transfer of ownership and control: Selling a family business often involves transferring ownership and control to new owners, which can be a difficult transition for family members. Again, starting early in the process can give you time to come to terms with the fact that you are giving up control over something you’ve built.
Finding the right buyer: Finding a buyer who understands and respects the history and culture of the family business can be a challenge. This can take a lot of time and again warrants the warning to start early. Give yourself time to vet your options and make sure your business is ending up in the right hands. You want to be at peace with this decision.
Legal and tax considerations: Selling a family business involves complex legal and tax considerations that require expert guidance. Talk to a professional in your area, even if you aren’t ready to sell yet. You can at least get an idea of what needs to happen on your end so when the time comes you have a good understanding of the process.
It’s an emotional time letting go of something that’s been a huge part of your family’s life. Start early with your planning so you have time to feel good about your decisions. If you are a family business owner and are looking to sell anytime in the future, we can help guide you. Contact us to see what you need to know.
Disclaimer: This article is intended to serve as a general summary of the issues outlined therein. While this article may include general guidance, it is not intended as, nor is a substitute for, qualified legal advice. Your review or receipt of this article by Lexern Law Offices, Ltd. (the “LLG”) or any of its attorneys does not create an attorney-client relationship between you and the LLG. The opinions expressed in this article are those of the authors of the article and does not reflect the opinion of the LLG.