{"id":4051,"date":"2022-04-09T03:08:14","date_gmt":"2022-04-09T03:08:14","guid":{"rendered":""},"modified":"2024-03-26T17:09:04","modified_gmt":"2024-03-26T17:09:04","slug":"what-you-need-to-know-about-family-businesses","status":"publish","type":"post","link":"https:\/\/www.sunbeltcanada.com\/atlantic\/what-you-need-to-know-about-family-businesses\/","title":{"rendered":"What You Need to Know About Family Businesses"},"content":{"rendered":"
\"\"<\/p>\n

Family businesses are critical to both the US and World economies. In fact, in the US alone, there are approximately 5.5 million family owned and controlled businesses.[1]<\/span><\/a> \u00a0While much of the world\u2019s wealth is a byproduct of family-owned businesses, the fact is that most are not actually prepared to sell in a way that will profit the owners for their life\u2019s work.<\/p>\n

Many owners of family businesses care deeply about the legacy that they built and want it to remain in their family or with someone that will continue it with the same mission, vision, and values on which it operates. This is often difficult as the owners lack an established succession plan or exit strategy.<\/p>\n

Studies show that about one-third of family owners never even plan to retire. As a result, they have no succession or exit plan in place. In some cases, the business is forced to form a strategy by default when the business owner becomes burned out, disabled or worse, passes away. This is clearly not the best path when it comes to maximizing profits.<\/p>\n

Pros and Cons of Conveying Your Business to Family Members <\/strong><\/p>\n

According to Businessweek.com, the average lifespan of a family-owned business is 24 years.\u00a0 About 40% of family-owned businesses are successfully passed down to a second-generation with only about 13% passed down to a third generation. [2]<\/span><\/a> With the fourth generation and beyond, the survival rate is 3% or less.\u00a0 Regardless of whether a family business owner intends to convey their business to a third party or have it remain in the family, it is important to maintain confidentiality and have the proper documentation in place for a successful transition.<\/p>\n

There are disadvantages that need to be considered if you plan to sell your business to a family member. One key disadvantage is that a family business owner will typically receive less value for their business than engaging the sale with an independent third party.\u00a0 Selling to an independent third party can often force a family business owner to also paradoxically agree to a lower value in an effort to negotiate the retention of jobs and incomes for the family members they wish to remain with the business after the sale.\u00a0 It is important to prepare the remaining family members that they will have to accept the fact that they now answer to new ownership and management with the business.<\/p>\n

Handling Multiple Owners and\/or Decision Makers<\/strong><\/p>\n

If there are multiple owners and\/or decision makers in the family-owned business and the business is being sold to a third party, it is important to appoint one family member to represent the negotiations. Having multiple decision makers at this critical step in the process of conveying the business to a third-party owner can lead to numerous issues and headaches for both the buyer and seller. Many times, multiple decision makers cause failure in the ability to transition the business to third-party ownership, as the parties involved have competing priorities with the sale of the business that prevents satisfying everyone involved in the process.\u00a0 Keep in mind that all family members must be in consensus with the price, terms and sale of the business or it will never happen. This fact can be true even if the family members involved are just employees or active\/passive investors in the business. Disagreements among family members often derail the possibility of a deal happening.<\/p>\n

Obtaining Outside Assistance <\/strong><\/p>\n

To increase your probability of success with conveying a family-owned business to future generations or new independent ownership, having a third-party guide you through the process who is not emotionally involved like the various family members involved, can be critical in making the deal happen. That\u2019s why a variety of professionals including business brokers, M&A advisors, lawyers, and accountants should be brought in to help.<\/p>\n

This article highlights just a few of the myriad of issues and process involved in conveying your business to new ownership once you decide it is time to retire or move on to a new venture.\u00a0 If you are just beginning or actively considering transitioning your business to new ownership, please do not hesitate to reach out to us for advice and assistance.<\/p>\n

[1]<\/span><\/a> https:\/\/www.gvsu.edu\/fobi\/family-firm-facts-5.htm<\/a><\/p>\n

[2]<\/span><\/a> https:\/\/www.johnson.cornell.edu\/smith-family-business-initiative-at-cornell\/resources\/family-business-facts\/<\/a><\/p>\n

Copyright: Business Brokerage Press, Inc.<\/span><\/a><\/p>\n

Mangostar\/BigStock.com<\/span><\/a><\/p>\n

The post What You Need to Know About Family Businesses<\/a> appeared first on Deal Studio – Automate, accelerate and elevate your deal making<\/a>.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Family businesses are critical to both the US and World economies. In fact, in the US alone, there are approximately 5.5 million family owned and controlled businesses.[1] \u00a0While much of the world\u2019s wealth is a byproduct of family-owned businesses, the fact is that most are not actually prepared to sell in a way that will profit the owners for their life\u2019s work. Many owners of family businesses care deeply about the legacy that they built and want it to remain in their family or with someone that will continue it with the same mission, vision, and values on which it\u2026<\/p>\n","protected":false},"author":105,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[9],"tags":[],"class_list":["post-4051","post","type-post","status-publish","format-standard","hentry","category-seller-articles"],"blocksy_meta":"","yoast_head":"\nWhat You Need to Know About Family Businesses - Sunbelt Canada Atlantic<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What You Need to Know About Family Businesses\" \/>\n<meta property=\"og:description\" content=\"Family businesses are critical to both the US and World economies. 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