Preparing your business for sale involves many parties if done properly. Sometimes the business owner chooses to involve his or her spouse/significant other in the planning process. And in certain cases, additional family members are also part of this important process and conversation.
For the business owner who desires a great outcome, the inclusion of his or her family in the exit planning process, as well as the decision to sell, is vital.
Today, I sat down with one of our Featured Advisors, Paul Visokey, to learn about his perspective on how to prepare for the business’ sale and how they include the business owner’s family in the exit planning process. Paul is a Business Broker with extensive experience working with business owners who undergo exit value planning.
Paul shares his insights and advice with me on this important, and often overlooked, topic:
How do you find the inclusion of the business owners’ family members in your planning process most beneficial?
Paul points out that It is very important for the spouse especially to be involved in the decision to sell the business.
If it is a family business with multiple family members they will all have some input. In some cases with multiple family members having a financial stake I will recommend a business/family psychologist.
When working with a business owner and his or her spouse, significant other or family members, and they are seriously considering the sale of their business, what do you find to be the issues that present the most difficulty for them?
Paul suggests that the two primary issues include:
1) after transition what will the majority owner and CEO be doing for maintaining his “mental” health; and
2) what are the financial interests of the family members and do they support the decision.
When these issues are raised, what are a few of the steps you recommend to business owners and their families to take?
Paul emphasizes that communication is key. Everyone should be heard.
Many business owners begin to think about selling their businesses many years in advance of actually doing so. When should the steps you’ve identified be taken?
Paul questions the predicate that many business owners think about selling many years in advance. Business owners should engage trusted advisors such as their attorney and accountant and an expert in exit planning to help them prepare. It is a multiyear process.
When a business owner chooses to exclude their spouse, significant other or family in the exit planning process, what typically happens when the business is sold? Do you see a recurring issue surfacing?
This issue is unpredictable comments Paul. The exit planning process should include the spouse and family members to at least set expectations on the timeline. If the process is a surprise to them it can cause an unhappy conclusion to the owner’s career.
How do you (or your firm) assist business owners with some of the soft or non-financial issues a business owner faces when planning to sell? Issues such as the challenge to fill the business owner’s calendar after the business is sold with something to do comes to mind.
The question of what the owner plans to do in the future is a critical early question in the process. Just like it can take years to prepare the business for exiting it can take years to prepare the owner for exiting. Paul notes that the financial aspect should be discussed with their financial advisor.
It’s likely you’ve been brought in to work with a business owner who is actively selling his or her business and no exit or business transition planning work has been previously done. What are a few of the challenges this situation presents?
The primary challenge when there has been no exit or business transition planning is achieving the desired equity from the business. When a business owner fails to prepare the business for exit, there is usually a value gap between what the business is worth and what the owner wants.
Also, Paul points out that it takes much longer to find the right buyer and ultimately close the deal because the due diligence process becomes a business interrupter.
I wholeheartedly agree with the insights Paul shared with me about the importance of including the spouse and certain family members in the exit planning process.
And unfortunately for the business owner who chooses to skip the exit planning process altogether, he or she will likely bear a financial and emotional cost. They may not realize this reality until it’s too late.
Holly also founded ExitPromise.com and to date has answered more than 2,000 questions asked by business owners about starting, growing and selling a business.