“Death waits for no man”. What would happen to your business if you die!
Victor accidentally shoots his own wife, Nicky, mother of his 2 children, and co-owner of the family business! What will happen to the business if she dies!
No, this is not an excerpt from Sell Your Business Your Way, “Getting Out, Getting Rich, And Getting On With Your Life, American Management Association, AMACOM, 2006, $27.95). It’s the plot from an episode of a popular soap opera, The Young, and The Restless. Nicky eventually recovers, but in reality, “Death waits for no man.”
What would happen to your business, when you die, or even better when you retire?
The authors of this book makes their point, owning a family business is like a soap opera’s drama, and implementing a succession plan, is even more dramatic!
Rick Rickerten is a managing partner at Pine Creek Partners, a private equity firm, which purchases small businesses. As a former investment banker, he has worked on many buying, and selling transactions, and offers an inside look at the process. He claims many family-owned small company entrepreneurs are unprepared for succession plans. He cites a 2003 American Family Business survey, which found that although 88% of business owners expected to keep the firm in the family, only a third of the businesses made it to the second generation. Two thirds were either closed, or sold. He attests that selling the business is a better option, then closing it.
But all analogies to soap operas aside, the question is, “Does Rick Rickertsen’s, and his co-author, Robert Gunther’s book present enough information to get the job done, that is enable the owner to sell his small business?”
Yes, they do, but not on your own. You couldn’t sell a small business based on their advice alone. They tell you who you need to hire to get the job done, and what you need to know to competently oversee your hired advisors.
Their guidelines include:
1. Set and define your personal, and financial goals for yourself, and your business. Don’t forget to watch the store, while brokering the deal.
2. Prepare for the sale as far ahead as possible, that is emotionally, managerially, and financially. Don’t forget to look through your predetermined buyer’s eyes.
3. Do what is best for both business, and family. Talk to family about succession plans. Sometimes, the authors attest due to family conflicts, family-owned succession plans, look unattainable but can be overcome! On The Young, and The Restless, Victor promised both of his 2 children, the rights to run the company. The siblings work it out, by trading off every 12 months, who is going to be CEO, and who will be second in command.
In the book, the authors discuss a real-life founder who promised all eleven children the primary leadership role in the company. But unlike the contrived soap opera plot, it didn’t work out so handily. It’s no coincidence that my favorite soap opera revolves around a family business!
4. Select your selling team with care including investment bankers, attorneys, wealth managers, business brokers, and accountants. They advise looking for competency, experience, reputation, chemistry, and availability in your advisors. A list of advisors to choose from are listed in the appendices.
5. Determine the financial worth of your business. Even though you have hired experts to do this for you, it helps to know enough about the process to oversee their work. This book gives you this knowledge.
6. After determining, the right buyers, locate, and approach them. Put out feelers in your own personal, and trade network, and among your newly hired experts.
7. Structure, and close the deal. He gives details in how to do this. This includes examples of legal documents, and checklists included in the appendices. He insists you are in control of the deal, not your experts. Although Rickertson, and Gunther compare running a family business to a soap opera, they compare closing the deal to directing a Hollywood film.
8. Invest in the proceeds of your sale wisely, with preliminary planning. Consult a good tax accountant, and wealth manager early, and plan your children’s inheritance, your future wealth, and charitable giving wisely. Like in any good soap opera, long lost cousins, will want you to “invest” in their schemes.
9. Pay attention to life management after the deal. Explore all of your options. Talk with your spouse. Setting personal goals won’t mean much if your spouse refuses to share them.
Rickertsen, and Gunther state that besides the death of a founder, the hardest transition in the life of a company is the sale of the company. You want your employees, customers, and suppliers to be happy with the change, and you want to leave a legacy. You, and your family also want to be happy with the results. Although no one can always guarantee smooth sailing in calm waters, I believe the authors help make that possible.
Don’t let succession plans take on soap opera proportions. Reading this book can help mitigate the emotions involved in selling any family-owned business, and give needed financial, legal, and investment advice, as well.