If you own a family business, you likely poured your heart and soul into building it. Deciding to sell can be extremely difficult, both financially and emotionally.
But there comes a point when moving on is the best thing—both for you and the business. Transitioning properly takes wisdom and care, but when done right, your life’s work can help your family for decades to come.
In this guide, we’ll share some insider tips to help you make the tough choice to find a new owner for your business. With the proper planning and partners, the difficult goodbye ultimately leads to exciting new beginnings.
Here is a quick overview of the key steps:
Selling a family business takes thoughtful planning, difficult decisions, and trusted advisers.
Exitwise can connect you with specialized M&A experts to guide you through the process. Contact us to speak with an advisor about the best approach for your situation.
A good exit strategy should ensure a smooth transition of family business ownership while meeting the family's financial goals.
Follow the steps below to build an effective exit strategy:
Deciding when to sell your family business depends on personal, family, and business considerations:
Personal factors:
Family factors:
Business factors:
If multiple factors align, suggesting a sale is optimal for you and your family; it makes sense to at least explore the opportunity.
There are plenty of statistics that illustrate the real challenges of family business succession and why many founders choose to sell:
Given those daunting odds, many founders conclude that selling the family business is the optimal exit strategy.
Before you sell the family business, here are a few key financial considerations that can make or break the deal:
Once you decide to sell, finding potential buyers is essential.
Here are proven ways to spread the word that your family business is for sale:
Tap into your existing network by letting industry contacts, vendors, customers, and local business leaders know you are exploring a sale.
Discreet inquiries often uncover ideal buyers already familiar with your business.
You can place advertisements announcing the potential sale in industry trade publications and newsletters. This targets strategic buyers and investors focused on the space.
Industry events allow you to meet potential buyers face-to-face to share materials and gauge interest while preserving discretion.
You can list your business for sale on major online marketplaces, where potential buyers actively search for acquisition opportunities. These platforms offer national exposure and tools for buyers.
However, be aware these platforms often charge hefty fees, and buyers contacting you directly via the listing can reduce your leverage in negotiations.
Private equity firms actively seek investment opportunities in family-owned businesses, providing capital and expertise for growth and eventual exit.
In some cases, selling to your employees through an Employee Stock Ownership Plan (ESOP) or management buyout can be an attractive option.
Key competitors, suppliers, or wholesale customers are often keenly interested in acquisition opportunities to consolidate market share.
They see the strategic value in acquiring your business.
The best way to find buyers who value your family business appropriately is to work with expert M&A advisers.
At Exitwise, we simplify the process by introducing you to top specialized investment bankers, attorneys, and other experts in your industry who can advise you.
Here's how we can help you maximize interest and your eventual sale price:
Instead of leaving the buyer search up to chance, our M&A experts help you find the ideal buyers for your family business and can make all the difference in your valuation and legacy.
Schedule a call with an Exitwise advisor to discuss the best approach.
Not all buyers are created equal when selling your family business.
Here are essential criteria to evaluate potential buyers:
Vet buyers thoroughly and trust your instincts about fit. If you remain hesitant about handing over complete control, consider negotiating earnouts, equity rollovers, or retained stakes.
Find the right partner who will respect your family's legacy and position the business for continued success.
Once you've identified a qualified buyer, the next step is to navigate the sales process.
Follow this roadmap:
Get your records in order, including:
Also, optimize operations. Clean up bookkeeping records and retain a qualified accountant to review and compile the last few years of audited financials.
Address any liabilities or risks that may arise. You want to demonstrate the business is in excellent operational shape.
Consider preemptively conducting your own detailed reverse due diligence exercise to uncover any problems early.
Selling a business involves various complex legal, financial, and strategic factors.
You need to work with an experienced team of advisors to guide you through the process, including:
At Exitwise, we specialize in connecting you to deeply experienced, industry-specific M&A experts. Our global network helps assemble ideal teams that maximize the outcomes of selling your family business.
Get in touch with us to discuss your specific situation in detail.
Work with a professional business valuator to determine fair market value based on:
Benchmark vs. actual offers to set an optimal yet justifiable asking price. Use our valuation calculator to get a starting point for your negotiation.
Negotiate the key terms of sale, including the valuation and purchase price, with guidance from your M&A attorney and other advisers.
Determine the payment structure - whether payment will be made in a lump sum, installments, earnouts based on future performance, or other creative options.
Also:
Decide whether the sale will be structured as an asset sale, stock sale, merger, or hybrid based on tax considerations, risks, and other implications.
Work with legal and tax advisers to create the optimal structure for both the buyer and you.
Before preparing the final documentation, you will need to:
Retain business attorneys to prepare contractual paperwork, including:
Review all documents meticulously before signing.
Once you and the other parties are satisfied with the terms and all conditions have been met, complete the closing process.
This involves the buyer transferring funds, you handing over ownership documentation, and executing any remaining formalities to seal the purchase.
Remain involved post-sale, work closely with the buyer during the transition period to train personnel, provide consulting, introduce customers/vendors, and share any other institutional knowledge. Make it as turnkey as possible.
Clarify roles and responsibilities to set proper expectations on both sides for how the transition will work.
Throughout the process, maintain open communication with all stakeholders, including family members, employees, and the buyer, to ensure a transparent and successful transaction.
Again, the best way to navigate the nuances is by working closely with experienced M&A advisers and legal counsel.
Selling a family business isn't just a financial transaction; it's a complex legal process, which, if mismanaged, can derail the deal.
Here are some essential legal insights to keep in mind:
Not preparing for the future of your business can lead to conflict, confusion, or even the dissolution of your business after you're gone.
Follow the steps below to ensure your family business continues to thrive for generations:
Create a solid plan that outlines the future management and ownership of the company.
You will also need to consult with a certified public accountant (CPA) to understand the tax and legal implications of a transfer, helping you determine the best path forward based on your situation.
Collaborate with a lawyer to write an airtight will that includes all your assets, such as business shares, retirement accounts, bank accounts, investments, and anything else you own.
Planning your will ensures your heirs receive the portion of the family business you want them to have, avoiding any unexpected effects from state or federal laws.
In addition to a will, designate beneficiaries on your business bank, investment, and insurance accounts to bypass the lengthy and costly probate process.
This direct designation enables a swift and private transfer of assets, ensuring your beneficiaries have immediate access to funds for operating the business.
Finalize your planning by documenting all the decisions legally. Remember also to hold a family meeting to communicate your plans in detail.
This helps manage expectations and reduces the potential for conflict among family members in the future.
Despite careful planning, selling a family business poses some common challenges:
With patience and trusted advisers, these hurdles can be overcome for a win-win sale that will enable your family and business to thrive.
Selling a family business comes with many questions. Here are the answers:
The best places to list a family business for sale include:
Valuing a family business is part art, part science.
Key valuation methods include:
Industry metrics and recent comparables are also considerations. For best results, hire a professional business appraiser.
Benefits of hiring Exitwise to build your dream M&A team include:
Our expertise allows you to stay focused on daily operations during the process.
Some of the most effective tax strategies include:
On average, most family business owners take 6-9 months to sell the business.
A reasonable timeline should include 1 or 2 months for preparation, 3 months to market the company, and approximately 2 months for closing the deal.
Selling a family business marks the end of an era yet opens new possibilities. The key is finding buyer matches who will take your life's work to new heights.
This requires a methodical process aided by specialized M&A advisers.
At Exitwise, we simplify everything by introducing you to pre-vetted deal experts tailored to your vertical and goals.
These experts help you identify buyers who value your legacy, negotiate optimal terms, and advise you until the closing to ensure you make the right decision.
So when the time comes to transition your business, contact our experts to ensure a smooth exit process that will lead to the next exciting chapter.
Let Exitwise introduce, hire and manage the best, industry specialized, investment bankers, M&A attorneys, tax accountants and other M&A advisors to help you maximize the sale of your business.
