Is It Time to Sell Your Family Business?
(What You Need to Know, and Questions to Help You Decide)
Are you considering selling your family business? If you aren’t, why not?
Don’t get me wrong — this isn’t about convincing you to sell your business. But I do want to tell you why you, the leader of both your family and your family business, ought to be asking yourself the question.
Asking if it’s time to sell your business is an uncomfortable, even daunting deliberation that compels you to further expand your vision of prospects for the future, exercise judgment in an honest light, and consider every option that is at your disposal for the sake of maximizing the value of your company.
In other words, just asking if it’s time to sell the family business gives you deep insights and centered expectations for the future.
In my experience as the former CEO of my family’s 107-year-old, fourth-generation publishing business — and today as a management advisor, confidant and consultant to family business owners — I know just how significant the burden of responsibility is that falls squarely upon your shoulders.
I know how it is to balance family interests with business interests; how many of the people around you don’t reach out for support because they assume that you have everything under control at all times.
I know just how deep senses of entitlement can run with family members who take a successful future for granted.
You have so much to balance; so many people and personal interests to consider.
It’s no wonder why the heads of most family businesses consider even the question of whether or not to sell like it’s a black hole: a big, scary, unknown, point-of-no return. If you go near it, you’re already in trouble, so the thinking goes. Maybe it’s best to just stay away.
One of the reasons why selling is such a troubling prospect is because your family business is not just a business. Selling is not just a financial question. There are other stakes involved.
Whether or not to sell your family business drums up questions about your legacy, and what it would mean for you to be the one responsible for ending what those before you have built.
There are real implications for all of the employees who’ve helped make your business a success in the first place. Will they feel abandoned, or cheated?
What about family expectations for those who anticipated inheriting the business — maybe a child who has been groomed for leadership, for years?
How will your own family relationships be impacted by your decision?
And, what will you do with your own career, and your everyday life, if you do decide to sell?
The Burden of Leadership Grows
Today, we’re talking about why it’s vital to consider selling your family business — as an extension of your responsibility as the leader of your company, and the leader of your family.
In my Part One of this essay series, The Lunch that Convinced Me to Sell My Business, we discussed why it’s crucial to keep your eyes open to various trends, disruptions and technologies beyond your industry and your direct competitors. We’re living in a time where fast innovations may be making a silent run for your business’s usual income streams before you even know it.
Asking yourself if it’s time to sell your business is the next, natural progression.
This question is a continuation of an owner’s responsibility to focus on the big picture and be truthful with oneself about the priority of business interests, first — and remembering the ultimate goal of your leadership is to maximize shareholder value.
So, what questions should you be asking yourself as you envision the prospects for the future of your company?
And, what can you do to break down this big, complex, even emotional topic of whether or not to sell into manageable reflections and assessments?
Break It Down: Separate Head from Heart
As leader of your family business, you have a responsibility to be honest about everything — particularly, with yourself.
Family business owners are not strangers to intermingling of personal matters with business matters, and it’s easy to get stuck in a state of internal conflict as your love of your family clashes with hard, cold business reflections.
To begin with, practice answering some questions to help separate your heart from your head:
- What’s really going on with your business right now?
- What is going on within your family unit?
- Can you keep both moving in a positive, growth-oriented direction?
Answer these questions honestly, and you’ll begin to distinguish the family from the family business. Of course, your legacy and your family’s legacy is important. But, for good or bad, the legacy is always going to be tied to the business. Your job is always to put the business first.
If this sounds easier said than done, it is.
My heart was telling me to never let go of my fourth-generation family business. Keeping the business alive and well was my entire legacy. It was my plan, and my dream, for as long as I could remember.
And yet, I knew I had a bigger obligation than my own expectations — bigger even than expectations that some family members had of me.
As I explained last time, the circumstances of my family business at the time were such that the arrival of Craigslist into the Boston-area market and the advent of free classifieds on the Internet that was poised to suddenly erode pay-for classifieds, which my family business relied upon — especially as newspaper subscriptions steadily fell for years.
I was lucky to have the help of an outside board of directors to help me distinguish family interests from my business actions.
(Explore the benefits of an outside board: click here to read my essay, Secret Benefits of Creating an Outside Board of Directors.)
Without my board, the decision to sell my company — in the face of a rapidly changing industry — would’ve been a lot more difficult, and a lot less successful.
My board was able to help me separate my heart from my head, and to focus on the right business decision. I knew it was time to sell when we did. But how can you know for sure? There’s a few crucial steps you can take.
Here’s how you can begin to break down the big picture and start to assess the state of your family business.
An 8-Step Action Plan (Or, How to Break It Down)
Your board is ideally a collection of experienced business minds of whose diversity, and explicit business focus, can help you objectively see and continually assess whether or not it’s the time to sell.
As you continue to distinguish your heart from your head in the matter of asking if it’s time to sell your family business, there are some really important business questions and steps that you can take with your board.
Step 1: SWOT Analysis
Present a high-level SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats) with a focus on your business and an examination of what’s happening in your industry. Pay very close attention to outside industries that have been disrupted recently, and assess what possible risks exist in your industry.
Don’t forget to consider how your customers could potentially be disrupted by shifts and trends within, and beyond, your industry.
Step 2: Past Performance, Future Projections
With your board, consider past performance of the company and analyze future projections. Are recent projections still realistic? Can you as the leader of your family business still continue to build the value of the company?
Step 3: Valuations
Identify the trend for valuations by researching recent history of sales of companies within your industry. You can expect to see a multiple of edita or revenue as a standard for calculating value. If the multiple is, for example, at an all time high, it’s critically important to calculate the effect on the value of your business should the multiple drop, because a drop could greatly outweigh your ability to grow your company to the value it currently has, ever again.
Step 4: Future Capital Needs
Explore the future capital needs of your family business, while considering your ability as leader to help the company meet those needs.
Step 5: Leverage
Look at your leverage both in terms of risk (current and future), and potential to fund future capital needs.
Step 6: Competition
What is your competition doing? How have they been behaving lately? Has growth been defined? Have they made layoffs? What insights do you and your board members have around what your typical — and atypical — competition has been doing over recent months? What evidence is available to you?
Step 7: Family Assessment
Take a long, hard look at what’s going on with the internal dynamics of your family members within the family business, from family expectations (especially with regards to inheriting the business, and liquidity).
Are certain family members reaching the “Magical Age of 40,” and starting to appear disinterested or like they’re questioning their identities, roles and value in the company? I wrote an essay on how roles and expectations of family members change, particularly around the age of 40.
Click here to read it as you observe how family members’ roles are changing.
Step 8: Be Honest About Everything
The final step is to be honest about absolutely everything: all your insights, perspectives, ambitions and even hesitations, with your board. Remember, the board has high expectations of you — and that carries its own weight of responsibility — but the board itself does exist to help you navigate a path forward, whether the answer is to sell the business or not.
At an absolute minimum, this 8-step action plan is a crucial exercise that every business leader should carry out on a yearly basis.
So, Is It Time to Sell Your Family Business?
Remember: while the conclusion you reach when you ask yourself and your board whether or not it’s time to sell the family business is important, the answer is just one component of a bigger, broader responsibility that you are charged with as the leader of both your family and the family business.
You really owe it to yourself have to sit down and be realistic about what the future of your company looks like.
And, while it’s a real challenge to add more to your plate, part of the responsibility of leadership is to try to keep a wide open vision that takes into account disruptive factors, competition, and whether or not the valuation of your company is at a high point that it may never reach again.
Although I sold my family business, the answer to this question is not always to sell.
And yet, an assessment like this will help provide you and the board with grounded, centered expectations for the business, which will guide whatever actions may follow.
This is about keeping a direct pulse on the realities of what’s happening within your business, your family, and the industry (and non-industry) influences that affect both.
Solid, visionary leadership is always proactive, not reactive.
And, in the end, that’s why I’m here.
You may not have an outside board of directors with diverse expertise and broad experience whom you can rely on as you take a good, hard look at the conditions that are affecting your business — and that may influence your decision of whether or not to sell.
You may instead have such board at your disposal, but could feel somewhat exposed or unprepared to host an in-depth dialogue on these topics without first having an open, constructive, nonjudgmental exploration with someone whom you can trust to understand your predicament while also providing you with earnest insights.
As a management advisor, confidant and consultant to family business owners, I come from a place of having first-hand experience in navigating my family’s history business during a period of significant challenges: from the sudden loss of our CEO, my father, to inheriting a Pulitzer Prize winning publisher at a time of industry disarray.
I specialize in identifying unique, complex issues in the family business, and help you think, prepare, and build for the future.
If you enjoyed the insights you learned in this paper, click here to learn more about how I can help you as you run your family business.
Next time, in Part Three of this three-part essay series, I’ll guide you forward with a blueprint for ease and success if you do, in fact, decide it’s time to sell your family business. Until then, explore more of my work at ChipRogers.com, and keep up the great work!