LEGACY – Is All Business a “Family” Business? (part 2)

LEGACY – Is All Business a “Family” Business? (part 2)

from PART 1
In my experience, there are typically 3 reasons why an Owner/s is looking to sell:
1. PayDay
2. Freedom
3. Legacy

PayDay is where it all starts. It is after all the most tangible. How much is it worth? How much does the Owner want? How big is the gap? What can be done about it?

And sometimes, it can be where it ends. What is the deal? Terms and conditions? Is this the best we can expect/except? Time to move on…

However, what I’ve come to learn is that Freedom and Legacy definitely play a strong hand in the final outcome. It’s just that no monetary value can be placed on just how instrumental these are.

PART 2 (continues…)

Make no mistake, by going down this path, the Business Owner is starting to warm to the idea of how to Exit with Dignity…How this impacts all people (whether family or not) related to the business must also be taken into account. But ultimately, it is the Business Owners decision and no one else’s…

Whilst price, PayDay, is a primary deciding factor, what only concentrating on this cannot do is assist the Business Owner in determining “when is the right time to sell MY business?”. And all others around will have an opinion on this too.

Other factors outside of the business sale scope may influence this decision in relation to how personally ready the Business Owner is to move on. These are often the tipping point of which no monetary value can be attributed, summarised as “Freedom” to do other things and “Legacy” so the business continues, just not by the current owner.

In other words, how badly does the Business Owner want the:
• PayDay – to set themselves (and family) up financially?
• Freedom – to do other things, the next add-venture perhaps?
• Legacy – for the business to continue (maybe within family), without being at the helm?

To get to the heart of these is paramount, and begins to address Exiting with Dignity.
That said, asking direct questions such as these outright of a Business Owner may not result in the depth of answer required. Instead, there are a number of less targeted ones, which can decipher the clues of readiness. Depending on the depth of relationship of the questioner with the Business Owner will dictate which of these is more appropriate to use.

PayDay:
 Are you in a good place? Is the business?
 Is the worst behind you? The business?
 Who else needs to be included in this conversation?
 How much are you prepared to reveal about the true situation of the business? And to whom?
 Can you afford to sell?
 How are you replacing the cashflow you’re about to sell?
 Are you personally well-structured financially?
 How much money is enough?
 Is the business profitable?
 Is the Tax man coming?
 What is the asset, that is your Business, worth?
 What is this value based on?
 Are the business financial statements clean and clear?

Freedom:
 Are you excited about something else? The next thing?
 Is your luck going to continue?
 Do you have Freedom now?
 Can the business operate without you?
 Do you want to spend more time with family? Do they want to spend more time with you?
 What is the longest holiday you have been able to take?
 What happened to the business?
 Are you prepared to stay on for a period of time post sale? Family members? Key employees? How long?
 How will perceived risks be mitigated?
 What are your non-negotiables?

Legacy:
 Are you becoming less interested in fighting on?
 Do you want the business to continue?
 Does the business need to continue?
 Does the business have family, staff, suppliers and customers to look after?
 Will family care?
 Will customers care?
 Is there a steady flow of new customers? How is this happening?
 Do you need to be there?
 Is the business sustainable?
 Is the business unique or positioned favourably enough to survive?
 Lots of stock? Old or new?
 Lots of stuff? Old or new?

Or, to summarise, one question to ask to get the conversation started would be “what will you do if you don’t sell?”.

Amidst the aftermath of the pandemic, with some time left to play out, this type of personal reflection is well-timed given how for some Business Owners this prolonged uncertainty may have taken its toll on the individual and the family and those nearest and dearest to the business…  If you want to start talk to me, send an email

LEGACY – Is All Business a “Family” Business? (part 2)

LEGACY – Is All Business a “Family” Business? (part 1)

Having recently spent an afternoon engrossed in the movie “House of Gucci”, one particular word that I paid attention to throughout was “LEGACY”. The notion of leaving something (upon your Exit) to be proud of, for the next generation/s (whether this be family or not) to continue and build on, was certainly one of the key storylines. Even though the Gucci story, in particular, turned ugly and lethal, the notion of Legacy for many other Business Owners does not appear to get the level of consideration it deserves, especially if there is no family member willing to take up the mantle when the Owner will/can not.

In addition, during one of the 2021 Melbourne-style lockdowns, I spent some time catching up on the latest from Changethis.com, with Decoding Family Business striking a chord. Not so much in terms of the insights, it provided (which I also agree with) but more about the greater meaning and therefore impact of “family”, whether the actual family members work in the business or not. Working with many businesses of all shapes and sizes over 10 years of Business Brokering, my view is that all business is a “family” business.

“If you’re part of such a [family] business or working for one, the business’s uniqueness will be no surprise to you. But that doesn’t mean you always understand how and why the business operates the way it does.”

Or even how decisions are made. Or whether, as a long-term employee, you should be included in some decisions, especially when it impacts your future directly… like the Exit of the Business Owner for example.

As noted in Decoding Family Business “… family businesses have three defining characteristics:

  • Some individuals, especially owners, have a huge impact.
  • Family businesses are held together by relationships, which are multidimensional and interlocking.
  • Everyone’s behavior is shaped by system dynamics, some of which you may not even realise.“

Remove the word “family” in regard to these points, and you could be talking about most small businesses going about their work, possibly in silence, where individuals can also be long-term employees (as opposed to direct family).

To be able to really unpack the desires and feelings of the Owner and associated loved ones is paramount to a successful sale of the business when it comes to Exit. But, so is the importance of the impact on long-serving employees, and customers, and suppliers. Each of these may ultimately influence the Business Owner, whether explicitly or not, in the details of the deal being agreed and the subsequent signing of a Contract of Sale in terms of formalising the decision.

Where long-serving employees, and customers, and suppliers are not family, even though sometimes they may be referred to as such, they are nonetheless the community that keeps the business alive and ticking. And it’s highly likely that they do/will have a vested interest in what happens to the business when it’s time for the Owner to move on.

Part of the Art of being a good Business Broker (which you must be to last 10 years in this industry) is to fundamentally understand the driving forces behind the decision-making within the business context, especially at Exit time.

In my experience, there are typically 3 reasons why an Owner/s is looking to sell:

  1. PayDay
  2. Freedom
  3. Legacy

PayDay is where it all starts. It is after all the most tangible. How much is it worth? How much does the Owner want? How big is the gap? What can be done about it?

And sometimes, it can be where it ends. What is the deal? Terms and conditions? Is this the best we can expect/accept? Time to move on…

However, what I’ve come to learn is that Freedom and Legacy definitely play a strong hand in the final outcome. It’s just that no monetary value can be placed on just how instrumental these are. To not apply the respectful amount of consideration in regard to how the Exit will impact those closest to the business, and who it will impact can come back and bite the Owner, just when they’re hoping for smooth sailing…

(PART 2 continues…)

 

Top of the festive season to you and yours…

Top of the festive season to you and yours…

The day/s before you now
Treat her with love and joy
She is a fine strong person
This precious living day
She is young and old
She is warm and cold
She is here for you
She will hold you well
Make love with her
You’d be a fool to turn away
She is here, she is yours
She is wise, she is hers
She has dawned on you; this epic day
Do not underestimate what she can do
Give thanks for her as you make your way
Give thanks for the power and the kindness
Of this precious living day/s

Michael Leunig
Top of the festive season to you and yours…

 

SOLD: the word all very happy Sellers of a Business want to Hear!

SOLD: the word all very happy Sellers of a Business want to Hear!

SOLD: Just the word needed to confirm that the next phase of a Business Owner’s life is about the start, with the past add-venture coming to an end. As you can appreciate, the buyers need to be equally as pleased. Ready to explore the same?

This particular transaction took 12 months to complete, slowly chipping away through Lockdown and COVID restrictions over 2020, to be able to finally settle in January 2021. The business sold was a small consultancy, so very important that the chemistry of the people involved worked equally as well as the mechanics of the deal.

Happy Buyer, Happy Seller and Happy Broker.

#sellbusiness
#buybusiness

 

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