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Selling a Business That Dad Built

By John L. Ward

Almost inevitably, long-lasting family businesses eventually face the decision to sell a division, product line, or business unit. The reasons for selling vary: To focus resources on other businesses with more potential or of more interest; to take advantage of a unique offer; or to create liquidity for shareholders in order to meet their needs and harness their commitment for the remaining businesses.

Regardless, the decision to sell is difficult, particularly the first time a family confronts the question. If the business unit being divested was built by a previous generation, more trauma may result due to family considerations:

Business Perspective Family Perspective
We feel that this is a good time to sell the Graham division. It's not central to our future and it has good value now, and... It will be tough on Mom and Chris. They know this was a business that Dad poured his soul into and was very proud of.
...we need to create some liquidity to build individual nest eggs so retirement and security concerns don't distract from committing to the business for the long haul. I think that reasoning can be persuasive to the family members. But a real concern is what others will think. There's social stigma to selling something that was inherited.

 

It takes a lot of leadership and family courage to sell an asset, especially for family liquidity reasons. Employees might think the family is focused on money, not the business. Neighbors might look down their noses, assuming greed is overcoming tradition.

There is no easy way to avoid these problems and perceptions. Making the right decisions despite others’ perceptions and opinions about privilege is a challenge quite unique to business families. Family business leaders need a thick skin, confidence and conviction in their decisions and actions, and the family/owners’ support.

The situation will almost certainly arise someday. Selling is no disgrace. Indeed,having a dynamic portfolio of businesses over time is usually required to provide the financial security to family owners necessary for their continued commitment to being in business together.

 

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