Perspectives from ISB

“Should I sell the family business?” is a question that all owners ponder at various times. There are certainly situations where selling the family business is the best answer; in some cases, it may be the only answer. It is also important to avoid the viewpoint that selling the family business is in someway a failure. Unfortunately, statistics that measure survival rates of family businesses tend to equate selling the family business with its demise, but it can be positive.

While the business has not “survived” in terms of a given family’s ownership (although in so many cases it survives with new owners), sale of the business can be a great success for the founding family. It can provide financial freedom to accomplish other goals, allow family members to truly focus on family and promote application of the family’s talents in other arenas (e.g., philanthropy).

That said, many families consider selling their businesses at some point in their careers. For those who have invested years of work, financial capital and often their identities in the legacy of the business, letting go is very difficult. For many, the decision to sell may be laced with guilt of letting down the family or failing to fulfill the legacy as well as feelings of failure.

If you are an operator considering the sale of your family business, read on for a list of valid reasons to sell the business that can serve as a tool in facilitating the sale discussion with your shareholders. If you have never considered selling the business, but see your situation reflected on the list, you might want to give the option of selling at least some consideration.

Discovering the right time to sell the family business involves taking an honest look in three key areas:

Is the business causing destructive family dynamics: The first step is to identify the problem and discuss it as an ownership group. At that point, it may be appropriate to bring in outside help. If you have already used a family business consultant and have not been able to resolve the dissension or come to compromises the family can live with, sale may be the best option.

Are current conditions unable to support a viable business: Even if the family owners get along, it may be that preservation of the business is impossible under current ownership. If you believe that the next-generation owners are not capable of maintaining the culture and values of the organization, it may be best to sell to other owners who are. Or the business may not be able to compete in the current environment. If the shareholder group is not up to the challenge of changing the business to meet the current competitive environment, it may be time to sell. Requiring a capital infusion to remain viable is another challenge that can lead to sale.

Has the family lost passion for the business: The last but probably the most important reason to sell is if owners no longer have a strong passion for the business. Particularly for businesses that require a great deal of owners’ attention, such as service orientated entities, it is crucial that owners maintain enthusiasm for the business. If the owners’ commitment wanes, it is time to consider whether holding the business makes sense. At this point, the decision to sell becomes a purely economic one.

While sale of the entire business is one option to address the problems raised above, there are other options to consider such as buying out part of the ownership group, bringing in outside management or bringing in an equity partner.

Source: May 7, 2018,