Have You Really “Sold” the Family Business if You Sell the Family BusinessBondBeebe
Posting by Geoffrey D. Brown, CPA
Members of the Greater Washington DC Family Business Alliance spend most of our time talking about how best to preserve the family business for the next generation or generations; however, there may be times when the absolute best decision might be to sell the family business. Perhaps there is no one in the succeeding generation who has any interest in operating or managing the business or perhaps there is so much rancor and distrust among family members that the only remaining alternative may be to sell the business. There are certainly many other reasons why it might have to be done.
As family business advisors, our job is to help the family make the best decision and it may be that selling the family business is the best way to protect family wealth. The family, of course, has to deal with how best to protect and perpetuate the family capital that has been created.
Current Compelling Reasons to Sell the Family Business
At the most recent Family Firm Institute (FFI) conference in Chicago, I purposefully attended a couple of breakout sessions regarding either the sale of the family business or other financing alternatives. Perhaps it’s the economy, perhaps not, but I’ve had more discussions and questions concerning the marketplace, what is out there in the way of financing and investors, what is the real value of my company and the list goes on. The moderators at the conference pointed out that there are plenty of opportunities and options for family business owners, more than we might think. There is plenty of cash on the sidelines right now as potential buyers/investors have been biding their time and waiting for the right opportunities.
The End of the Family Business May be the Beginning
If there was an overriding theme, it was that there are opportunities to sell now and they are likely to continue into the near future. My takeaway is that selling the family business doesn’t necessarily mean that you’ve given up on the notion of family business. If you view the business as the means by which you create and maintain financial capital, selling the business may be the way that you effectuate transition of that capital into another family business. We talk a lot about transition and succession planning in the family business as it relates to the next generation, management of the business, etc. View the financial capital as the family business. If you do, then it has the ability to take on many forms. There are many family businesses that exist today whose business has nothing to do with the original business started by the grandparents or great-grandparents. In those cases, someone with vision was able to transition the financial capital so that the family business created the best opportunity for success of the overall family enterprise.