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Under certain conditions, selling the family business can be the smartest thing

you will ever do to succeed as an enterprising family. And it may be the best thing you can do for the business.

If a family cannot own and manage its business in a way to make it productive, valuable and satisfying,

the family should consider selling this business to others who could do a better job

with it and allow the family to focus on other activities.


Succession planning can be one of the most challenging aspects of owning and operating a family business. And while many family business owners may dream of passing ownership of the business onto future generations, keeping the business within the family isn’t always a viable option. When a clear successor within the family doesn’t exist, family business owners are faced with the difficult decision of who will take over the business when they are ready to step aside.


  • Is the family the best manager of this business? If not, find others who have the skills and values to manage it well. The family can continue to own the business and will probably serve usefully as board members and in other key roles.

  • Is the family the best owner of this business? Do we have the resources (capital, alliances) to support the development of this business and the skills and attitudes (perseverance, quality focus, risk-taking, sacrificing) needed to be successful in this industry? If the family clearly can’t support the business in the next stage of the game, it needs to consider partnering with others that have the needed skills and resources. Or it should exit this industry.

  • Is this business producing adequate returns for the family? Owning (and especially running) a business has costs and benefits for a family - financial, psychological, and relational. To remain in a business, the benefits of owning and running that business should outweigh the costs over a reasonable period.


  • While selling your business may take as few as six months to close, positioning the business for sale - not to mention preparing yourself and your family emotionally - may take much longer. For many family businesses, beginning the process at least three years in advance is often necessary.

  • From an operational perspective, you may need time to clean up your balance sheet or lock down contracts with key vendors or strategic partners. If your business requires real estate to operate, long-term leases may need to be in place prior to sale. Additionally, you may need to secure agreements with essential employees and key management. Taking these preparatory steps can add value to the business when the time comes to sell.


  • There are numerous ways to structure the sale of a closely held business - a lump sum sale, an installment sale or an earnout sale based on a percentage of future profits. Determining your desired “end result”- as well as the potential tax implications of each of your options - will help determine how to best structure the sale of your business.

  • Selling a business often requires a team of advisors, including investment bankers, attorneys, business accountants and financial advisors to work through the various complexities. Making sure you have the right team of specialists in place can help avoid the common pitfalls.


  • A large liquidity event is a major life development for a business owner. Selling a business can create issues related to cash flow, investment portfolios, how family property is held and how to set up trusts, among other things. A new approach may be needed to preserve your family’s new found wealth, which usually includes diversifying your assets across industries and markets. As you plan the sale of your business, considering how to manage your windfall of cash and other assets may better prepare you for what lies ahead.

  • Beyond these technical considerations of wealth management, former business owners often go through an identity crisis following the sale of a business as they face challenging questions about lifestyle, how to raise their children and how to navigate the personal, familial and social complexities wealth creates. Working through all of these questions with a trusted wealth advisor can help eliminate many of the unanticipated anxieties you may feel leading up to the sale of your business.

  • Like all business decisions, selling the family business has its pros and cons. While a liquidity event gives you the opportunity to diversify your assets away from previously concentrated wealth and makes the estate planning process easier, giving up control of the business can also create emotional stress and upset family dynamics. When creating your own succession plan, it’s important to give yourself enough time to adequately plan for these challenges. Additionally, you may want to consult with a diverse team of specialists to ensure that you have as much information as possible prior to making a decision.

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