American Business Brokers & Advisors - March 2022

American Business Brokers & Advisors - March 2022

American Business Brokers & Advisors Founder & President MERGERS & ACQUISITIONS SUCCESSION & BUSINESS ADVISORY BUSINESS VALUATIONS

6 Signs That It May Be Time to Sell the Family Business WWW.TERRYMONROE.COM MARCH 2022

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Perhaps you have started to suspect you may need to sell your business rather than hand it down to your children. Here are a few indicators as to why you may want to do that. 1. YOUR CHILDREN ARE NOT INTERESTED IN THE BUSINESS. If you run a profitable small business that put your kids through college, chances are they have their sights set on bigger goals when they graduate. Even though the company is big enough to warrant their joining the business, they are not interested. There is nothing wrong with laying out the facts regarding the opportunity the family business presents to them. But forcing the company on your children will only result in resentment or poor performance, or both. 2. YOUR CHILDREN ARE NOT CAPABLE. The reality of the matter is that not everyone is capable of running a business, and just because they are your children doesn’t automatically make them capable of operating and managing a business. Sometimes it takes a lot of courage and mental fortitude to realize this, but it is reality. I have met many clients whose children, despite their parents’ hopes and dreams, were not cut out to run the family business. 3. OWNERSHIP HAS BECOME TOO DILUTED. Unless the company is always growing, it is hard to support a growing number of owners. This is true whether they work in the business or not, because the company can’t keep paying salaries or dividends or bonuses to those not in the business or individuals who are not working full time in the business. Basically, we have too many people feeding from the same trough, and unless you are growing at an exceptional rate, the out-go of money will outstrip the income of the company, which will eventually bankrupt the company and cause great dissension among the family.

you should always know the market value of your business in your industry. Why not sell your business at the top of the market? Don’t try to convince yourself you are keeping the company for your kids unless they understand the money involved and loudly declare their desire to run the business — and have a credible plan that makes financial sense. Otherwise, take the money being offered. 5. MEMBERS OF THE NEXT GENERATION DON’T LIKE WORKING TOGETHER. Here again we need to apply the Theory of Reality, which is that maybe all your kids are capable, but they can’t seem to get along with each other or with their spouses. If they are not getting along now, it will only be worse once they are in business together. Turning the business over to them will impact your retirement plans, affect their lives, and possibly destroy the relationships they have between each other, which will definitely spill over onto the parents. And if this happens, you can forget the big family gatherings at Thanksgiving and Christmas. 6. THERE ARE MAJOR CHANGES IN YOUR INDUSTRY. Markets and technology changes can alter the business landscape in such a way that it requires massive reinvestment to reposition the company. Customers tend to migrate to new places and things. And to keep up with the trends and desires of your customers, you may need to invest large amounts of time and money, which you are not certain will pay off in the future. The business is at a crossroads, and one must decide whether to take on additional debt and grow the company and attempt to take the company to the next level or sell the business. This means taking your hard-earned equity out of the business at the present time rather than taking the risk of losing it all. The Bottom Line: We call it a family business when ultimately it is our livelihood. Look beyond the emotional part and focus on the reality of what is good for you and the family now instead of in the past. To learn more about family businesses, send me an email at [email protected]. I will send you a FREE copy of my book, “Hidden Wealth: The Secret to Getting Top Dollar for Your Business,” which is affiliated with ForbesBooks. Include your mailing address, and I will have one sent to you. –Terry Monroe

4. YOU RECEIVE AN OFFER YOU CAN’T REFUSE. This doesn’t happen very often, but when it does, you should know it is a great offer and you should take it. Markets go up and markets go down. Regardless of what kind of business you are in,

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