Exit strategies for your family business
We’ve talked a lot about growing your family business and achieving your goals, but where does it end – what’s the exit plan?
Business owners can get so bogged down in the day-to-day that they often don’t think about the point at which they will leave the business.
Exiting could mean handing the reins to another family member, selling up or simply winding down – whatever the case it’s likely to be a big, emotive decision, affected by many factors.
Let’s have a look at some of the options.
Succession Planning
If you’ve spent your life creating a legacy, maybe even one that’s been handed down from your ancestors, then you probably care a great deal about the future of the company. You might have a clear and natural line of succession in place that suits everyone and won’t cause any problems or grief – in which case, happy days!
It’s not always that easy though. There could be several potential successors, leaving you with a decision that’s fraught with friction. This may involve considering individual strengths and weaknesses and figuring out their life goals and how these could align with the needs of the business. Either way, this is a problem to prepare and plan for from an early stage and is something that needs to be regularly evolved and reviewed as circumstances change.
By having the conversations early, it enables you to find out who in the family even wants to take over the business and to get a plan in place for their training and development as they prepare for the role. You can find out more in our previous article about succession planning in your family business.
That’s assuming you have a potential successor. What if you don’t?
Selling up
For some family businesses, the most attractive and potentially lucrative option could be to sell up. This may mean giving your company over to competitors, which brings considerations around your existing employees and whether their jobs can be protected.
To get the most out a sale, you’ll need a long lead in time in terms of identifying potential buyers and getting your business in the best possible position.
Management/employee buy-out
If you don’t like the thought of selling your business to a competitor, or risking the jobs of your employees, maybe a management or employee buy-out is an option. This is where the existing management team or employees buy the business. You need to consider whether this is a viable option and if the management team could raise the cash needed.
This can be quite complex but could ultimately result in a smooth transition and some protection of your company values and family business legacy.
Winding down
In some cases, you may just have to call time on your family business. Perhaps there’s no-one to take over the reins and depending on demand and market forces, selling might not be an option either.
Simply closing and walking away can be the simplest and least stressful solution, especially if you’ve just had enough. After ceasing services and fulfilling existing orders or commitments, winding down could involve liquidating any assets, such as selling premises or equipment, and paying any outstanding debts. However, this may be easier said than done if you have employees to consider
In summary
There are various options to consider for exiting your business and each comes with its own legal and tax implications, costs and wider ramifications. Ultimately, it’ll be for you to decide what is possible and what the options are. It does make sense though to give this some thought and get a plan in place so that you have lots of time to prepare for the eventuality.
Contact Gary Wagstaff ActionCoach for more help with your exit strategy planning.
