The decision to sell, or not to sell your business is a difficult one. There are many questions that need to be answered before an informed decision can be made. Is selling your best alternative? Will one of the kids want to take over the business? Timing is everything. Is now the right time? You do not have to sell or decide right now. You are quite busy so maybe you will look into it after. . .
Facing the issue of succession or continuation of one’s business is very much akin to addressing the need for life insurance. Neither subject is addressed with much enthusiasm by the average person. The prudent address the inevitable and prepare. Although only one eventuality exists for us as individuals, three exist for our business: Transfer to family, sell to outsider, or close down.
As with the purchase of life insurance, the decision to sell or plan a viable business’ succession can be continually postponed. Unfortunately, when a business must be sold it usually is too late. Few people are willing to buy a business that has to be sold. Of the hundreds of business transfers we have facilitated, less than a handful could be classified as sales for “desperate sellers.”
How have other business owners addressed the continuation of their business? Actually very little is known or documented regarding the succession of private and family businesses. The information available usually pertains to very large companies. Data regarding smaller business transfers and succession is generally not available.
What are business owners’ expectations regarding succession or the continuation of their businesses?
Massachusetts Mutual Insurance Company sponsored a telephone survey of 614 owners of family businesses grossing two million or more in annual revenues. The survey, conducted by the Gallop Organization and designed by Mathew Greenwald & Associates was completed in September 1994. Although the majority of private companies are considerably smaller than the sample (the companies had an average of 50 employees) the opinions of those surveyed should be representative of most business owners.
Questions related to succession expectations revealed: 65% plan to pass the business on to family members or other relatives, 24% do not plan to pass to family members, and 11% are undecided. Only 7% plan to sell or liquidate and 1% plan to pass the business to someone outside the family. Seventy-five percent do not have a written succession plan.
MassMutual reports that their survey is the largest of its kind ever undertaken and, since the report’s release it has been hailed as “the most comprehensive piece of information on family business ever produced.”