Before You Sell: 3 Insider Secrets Every Family Business Owner Should Know
“I am happy.” – Meridian Client & Family Business Owner
As M&A advisors, the goal is not ONLY to get to the finish line, but getting to the finish line with the family business owner happy. This is what we live for.
After recently completing a transaction, I received a phone call from the Family Business Owner and he said, “I am happy.”
He explained he is most happy about spending even more time with his family and no longer having to get in the truck on Saturdays to make deliveries.
As someone who wants to bring even more value to future customers, I asked him, “What are the 3 things you feel are most important to tell another family business owner before selling?”
Here is what he had to say.
1. Remain patient in the process
Depending on the location, deal size, and industry, the time at which it takes to go from initial conversation to close can range from nine months to year. Family Business Owners often ask, “Isn’t the process just find a buyer, sign a purchase contract, and collect the money?” On the surface, but there’s much more involved.
Think of the advisory transaction like driving on a highway.
You slowly merge on the highway, begin to pick speed only then to see traffic, so you slow down because people are “rubber necking” looking at an accident, resulting in traffic backing up. You get through it, speed up again, only to find yourself slowing down again as the lanes merge to one lane for construction.
This highway analogy is very true for an advisory transaction. When you start the process, it starts off very quickly but at certain points in the deal process things slow down.
As M&A advisors, we recognize these slow down points and immediately pick up the phone to have real conversations versus hiding out in our e-mails. An actual conversation goes a long way when you work with family-owned businesses.
The advisory process can get frustrating, but when you have experts in your corner, you receive consistent updates and know exactly what is being tackled at any given time.
2. Know what you want
As M&A advisors, we understand everything matters in the advisory transaction, but we also understand that you value certain details over others.
If you have not thought about what matters to you the most, here is a list of some common “hard lines” for family business owners:
- A Specific Purchase Price
- No Seller Financing
- Date for transaction completion
- Timeline on owner transition
- Contract of employment for family members
- The entire company is sold together (no breakouts)
Now, this is a very brief list because as you get deeper into the transaction, the purchase agreement will present additional opportunities for both sides to further negotiate.
If you go back to my analogy of the advisory transaction being similar to driving on the highway, being clear about what you want from the transaction is your GPS. When you are clear about the outcome(s) you want it allows you to maneuver through the details to answer the question, “Does this improve or takeaway from what I want?” Ultimately, speeding up the process and giving you clear decision making.
3. Surround yourself with valuable advisors
I am sure you can agree, that getting a “pat on the back” from a customer is the best form of payment you can receive because it confirms what you are doing matters.
A recent client told me, “Having you on my team was so valuable, there are just so many pitfalls.” And he is right!
Let’s face it, business is a team sport! Surrounding yourself with a trusted team, who has you back, is a major key to success. Besides an M&A Advisor, there are three key people I want to discuss:
- Internal Team Members: You want to be as a confidential as possible throughout this process, but at the same time you need someone else on the inside of your organization who can help you with collecting documentation and answering questions. These conversations need to be handled very delicately, especially when they are not family members. What happens if they say “okay” to helping you but then quit due to fear? We have walked countless family business owners confidently through this process successfully. This key person takes stress off of you and helps allow you to run the business as if it weren’t being sold.
- Attorney(s): As M&A advisors, we will walk with you through all aspects of the advisory process, but we encourage you to obtain trusted counsel who knows local laws and nuances that are specific to your area and industry. Attorneys are there to protect your interests and reduce risk, but they should also have the heart of a teacher so they can decipher the legal jargon. It is critical that you maintain clarity with him/her on what is most important, so they successfully help achieve the outcome you are seeking.
- Accountants/CPA’s: Again, as M&A advisors, we will walk with you through all aspects of the advisory process, but your accountants know the ins and outs of your books and personal financials. One of their greatest contributions to the transaction will be toward Asset Allocation. There are seven different asset allocation classes, each one having different meanings and preferences to each side. To reiterate It is critical that you maintain clarity with him/her on what is most important, so they successfully help achieve the outcome you are seeking.
There you have it! Great wisdom from a Meridian M&A customer on selling a family business: Remain patient in the process, know what you want, surround yourself with valuable advisors.
As M&A advisors, we know that around every corner of a transaction there could be a pothole to swerve around. We would be honored to partner with your family business to get you from point A to point B.
