Family owned and operated companies have a way of becoming all-consuming. If your family happens to have a business, then you know the feeling. Vacations become board meetings while dinners and holidays become sales meetings.
Making the matter more complicated is the fact that many family businesses have been in the family for generations; however, there might come a time when the family, or a member of the family, no longer wants to be in the business.
For some entrepreneurs, they have spent their entire working life in the family business and it is time to retire and move the company into succession. For others, they are simply not excited by what the company does. For others, the family has grown so big that there is no room for them in the business.
Regardless of the situation, there inevitably comes a time when a member of the family wants to bid adieu. While this can be a contentious process in some circles, it doesn’t need to be. In fact, one can leave the family business without needing to cut ties with the family.
Now, much of this is assuming that an internal (or external) crisis hasn’t taken place. But let’s be honest, there are also situations where the relationship amongst family members has deteriorated to the point where an exit is probably the best course of action.
As you can see there are many reasons to leave a family business, the next part is figuring out the process so that you can still maintain contact with the family in the future.
It’s Not a Divorce
Ok, in some instances the reason for leaving a family business might be a divorce, but let’s set that situation aside for a moment. With that in mind, here are some tips on how to approach leaving a family business:
- Find a balance outside of the business. You probably thought we’d talk about dividing up ownership first and while that is important, even more, important is finding a way to maintain a relationship with the other family members.
- Create a goal for yourself. Maybe it is retirement, or maybe to carry on the spirit of your family of entrepreneurs and start your own business – either way you need to have a goal. Not only will this fill the time that used to be spent in the business, it will give you something to discuss with other family members.
- Be open about your reason for leaving. This can be difficult, especially when the younger generation doesn’t want to remain the family business; but honesty really is the best policy in this case as it will help to define the terms of the exit and aid in strategic planning moving forward.
- Work with the family to figure out a succession plan. Let’s face it, there might be situations where you can’t leave the family business right away. As such, you will need to develop a transitional business plan.
- Dollars and cents. You will need to be prepared for some horse trading when it comes to figuring out the financial terms of your departure.While some families can have these discussions internally, it doesn’t hurt to engage an independent third party to figure out terms. Granted, you might not get everything you want but bringing in a third-party will help everyone to get through the tough discussions without damaging long-term relationships.
If you want to exit your family business or prepare it for the next generation, then contact Beal Business Brokers and Advisors to learn how to make this happen.