Making the decision to sell your family business is a difficult one – the ramifications of which can be life changing. Adequately preparing and pre-empting the sale of your business can go a long way to securing the continued success of the company, and can ensure that as the owner (or founding entrepreneur) you reap the rewards you are after.
Clarifying your exact plan for selling the family business is critical, and your exit strategy should be watertight prior to any kind of sales activity taking place. The significance of forward planning in this context is tremendous: it’s important not to sell yourself short by failing to adequately plan. There are a number of complexities involved in the sale of a business.
Taking time to consider the various options available to you is essential, as the sale process can be both stressful and multifaceted. No two businesses are the same; each is imbued with characteristics and traits drawn from the owner/founder. As a result, each business sale can vary, making it difficult to define a set of concrete rules to follow.
It’s interesting to note the significant role that the owner or entrepreneur has to play in the perceived value of the business. In a Forbes article by Holly Magister titled, The 5 Things Entrepreneurs Must Know When Selling A Business, the author notes how businesses, where the entrepreneur plays a fundamental role, tend to sell for far less. She states:
“A business for sale will have a higher valuation, and ultimately a higher sale price, when the entrepreneur is not an important part of its day-to-day operation. Buyers want to purchase a business where the entrepreneur is not an important part of the business. This truth is counter-intuitive to many business owners. Many of them simply cannot pull themselves away from their businesses. For many entrepreneurs, their business is an extension of their being.”
Understanding this complex ‘truth’ is an important part of your exit strategy, as it calls for an acknowledgment that skills-transfer is a pre-requisite for a successful and bountiful sale. This is not to say that there is no place for the founder or owner in the business, it merely highlights a valuable point for consideration.
Finding the right broker or consultant to represent your business throughout the sale process can be quite tricky. Debbie Allen, a business and brand strategist, suggests taking time and weighing-up options is an important part of the sales-preparation process:
“Often business owners go with the first person they meet just to list their business and get the process going. This can cost you time and money in the long run. Within a few months, you may see no results and have to go on the search all over again. Taking time to interview many brokers and looking at a realistic outcome of what is expected will get you started in the right direction.”
While you may elect to make use of a broker’s services, it’s important to acknowledge the significant role that the owner/entrepreneur has to play in the actual sale process of the business. “You are the best promoter for your business. Who knows your business better than you? No one is more motivated, passionate and knowledgeable about your business than you,” says Allen.
Pricing and choosing the right buyer for your business are two additional complexities. Over-valuing your business can stunt leads and progress, while an under-valuation may leave you feeling like you’ve lost out. Ensuring that you have an accurate and feasible evaluation of your business will facilitate better lead-generation, and will ensure that as the owner you garner the rewards for your years of hard work.
Selling to the right person is equally important and plays a vital role in securing the legacy of your brand. You’ve undoubtedly worked hard to establish the name and identity of the business, and have done everything in your power to create longevity for the company.
Selling to someone who’s passionate about your business and brand will make a difference, and should also leave you feeling better about the decision. Selling a family business is not a spur-of-the-moment decision, and requires significant planning and thought. Taking your time to make key choices and to adequately prepare your exit strategy is critical to a successful sale.
In addition, understanding your role as owner of the family-run business and how you can add and subtract value is an important part of the overall process.