Family Members as Business Buyer

It’s many a business owner’s dream, “Someday my son (or daughter) will own all this.”  Wanting a child or other family member to take over your company is a lovely idea, but it should come with much fore-thought and sincere preparation.  Without many conversations between the owner and the “heir apparent,” without an understanding on both sides of how the transition will take place, and without a objective analysis of what the business is worth, conflict and hard feelings often occur.

There are many examples of family members purchasing a family business that have worked and many examples of those that have failed.  Here are five questions an owner should ask before moving in that direction:

  1. Does the perspective buyer (family member) have the right skills and knowledge to run my company? Is it the right fit?
  2. Does the perspective buyer (family member) actually WANT to buy the business, or is that just “my” idea?
  3. Does the perspective buyer (family member) have the financial resources to buy the business or will they be financially strapped for too long? Can I, the owner, provide some creative financing?
  4. Do I, the seller, want to stay involved in the business? For how long?  When it’s time for me to exit…will I be able to?
  5. Are other family members O.K. with the arrangement? How should I break the news to them?  Could there be conflicts?

Bringing in a business broker early in the process can help you think through issues, and they will also provide a professional evaluation of your company.  The decision should be made whether to go ahead with the sale to a family member or begin marketing to outside buyers. The broker can facilitate the transaction in both cases.

Call me, Gary Van Sistine, 920-621-2990, if you are thinking about this sort of transaction.  We can talk through it together.