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Dear Oaklyn Consulting,
I’ve been running our family’s small business and have been for the last 5 years. While we are an established brand who has been successful in business for over 20 years, this year is hard. Sales aren’t growing as projected. Profits are down. Our customers are taking too long to pay us, which is causing us to take on more debt than we should. It doesn’t help that my parents are thinking about retiring which would leave me running the business alone while my siblings collect a check.
This is causing a ton of stress for me and I’m thinking about selling the business.
How can we all see eye-to-eye on what the numbers mean? And how can we make a decision together without causing a rift within the family? I’d really appreciate your help in getting the first steps outlined so we can start the conversation on the right foot.
From Oaklyn Consulting
Family businesses can be both wonderful and hard because of what they are: a shared family responsibility that doubles as the family’s livelihood. Business results go up and down, and growing a business is a challenging job in itself. Combining the hard work of running a second-generation business with the dynamics of sibling and parent-child relationships is complex even in the best times.
When we work with business owners to start evaluating the sale of a business, we ask these 3 questions, which might be helpful conversations for you and your family to consider about the business:
- When you’re considering a big decision, like selling the business, what are all the alternatives that might be available to you? We ask this in the spirit of brainstorming, in which we’re not evaluating the responses, just airing people’s ideas. Often, a new idea shows up in the conversation that the owners of the business had not thought of before and that will shape future action.
- Of the sell-the-business alternatives, who specifically would you sell the business to and what about the company’s future (after the deal) would make them want to own it? We have found that many business owners think that there is an unknown or generic buyer for their business, but this generally wishful thinking. In reality, buyers of businesses are specific companies or investment firms with their own particular interests, skills and perspective about how to operate the business in the future. Often, the best buyer is someone the business owners already knows — a supplier, customer, competitor or industry partner — who has a specific idea of how combining the business with their own operations will create a better future for everyone involved.
- As we evaluate our alternatives, what will your criteria be for making the decision? This isn’t asking which alternative someone will choose. It’s asking a less heavy question: “What’s important to you that we should consider when the time comes?” Asking this question early helps any group make decisions together, and we have found that it’s even more valuable in family/business decisions than in other areas, because there are so many different things that different stakeholders — you, your parents, siblings, key employees, customers, suppliers, etc. — might value differently. It helps everyone when the scorecard is openly discussed before too much happens.