Services
How do you plan to EXIT?
Every business owner will face one of the most critical financial decisions of their life… A decision that is highly complex and involves dozens of interrelated variables. What to do with the family business if they live to the age they wish to retire or get hit by the proverbial “bus.” Knowing and understanding all the options is key to a successful course of action. It all boils down to three key factors – Keep it/ Sell it/ or Grow it.
Keep It
This means you want to keep the business in the family for the next generation of owners/operators
Just a few questions to consider:
- How capable are your children of owning and managing the family business?
- Who will be responsible for training them? And it better not be you!
- Have you discussed your plans for the future, and do they align with your children’s?
- Don’t make the mistake of downplaying the fact that a non-family member might be a better candidate to operate the family enterprise.
- How best to transfer the stock without killing the Golden Goose?
- Capital issues – How will the nextgen be able to afford to pay off their parents AND have enough “dry powder” to grow the enterprise?
Sell It
Sometimes, it may be best to sell the family enterprise to a financial, strategic buyer, or even your employees through an Employee Stock Ownership Plan – ESOP. Sometimes the family runs out of heirs who have the desire to carry on the enterprise, or it has simply grown too large for the nextgen to own and or manage. This is precisely why the current generation of ownership/leadership should look to non-family leadership. This can be a great way to keep the enterprise in the hands of family ownership while the next generation of family members can be trained appropriately, and the management team is strengthened to better your chances for a successful sale to family or a third party.
Grow it
When a family business owner says they want to keep the business in the family for the next generation to nurture and grow, McAlister Advisory Group wants to help plan and execute the strategy to make this a reality. It’s not as simple as saying, “my son Steven or my daughter Becky will take over when I’m gone.” Without a well-designed plan put in motion while the current voting shareholders are alive, keeping the business for your children may be a dream that never comes true. There are also a few questions you need to ask yourself as you prepare for the transition to the next generation:
- Have you executed a business transfer plan to include an estate plan, a Buy/Sell agreement, and a shareholder succession plan?
- How will the majority owners EXIT their shares while keeping the Golden Goose healthy?
- What are the future capital requirements of the enterprise?
- Have you introduced the next generation of ownership/leadership to your advisors and banking professionals?
- What about your management team?
- Do they know your future plans, and have they been “locked in” to the next chapter of the family enterprise?