Option 3: Sell to Your Family

Advantages

  • Familiarity and ease. You know, love and trust your family. Keeping it all in the family can give you a sense of comfort. Plus a healthy, thriving business could become a family legacy.
  • Continuity. If you have a strong bond with your children and they agree with your way of thinking and operating the business, this can provide the smoothest transition. You could plan for this – and groom them – years in advance.
  • Flexible terms possible. There are many ways to structure this type of sale. For example, you could receive a stream of income spread out over many years through an installment sale or a private annuity.

Disadvantages

  • Family jealousies or rivalries. If your family members, particularly children, don’t get along or can’t see eye to eye, this could be a dangerous and risky situation. If you leave the business to children who don’t get along well, it could be a recipe for frustration, resentment and possible business failure.
  • What if your children aren’t interested or qualified? Try to be objective. Are your children qualified enough and interested enough to take the business to the next level? Do they deserve this opportunity? What’s best for the business? Are your family member’s best qualified to take the reins or is an outright sale to another firm or a sale to the company’s employees the smarter move?

Deciding Factor

Do you have family members who are capable of running the business – and have the knowledge and desire to do so? Also, consider how this business sale may change the dynamic among your loved ones.

Game Plan

  • Sit down with your family and discuss your intentions and invite honest responses. Gauge everyone’s level of interest.
  • Spend time with your children and bring them up to speed about running the business.
  • If passing on the business to your children or keeping it in the family is likely to be seen favorably by customers and the community, plan to promote and advertise it.
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