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Calabasas Capital regularly advises family businesses on the potential sale of their business. In fact approximately two out of every three deals we work on are family businesses. A sale however is not always the right answer. We provide objective advice even if that means no transaction in the near term.
Family businesses are critical to the success of the U.S. economy. In the United States:
The average life span of a family-owned business is 24 years (familybusinesscenter.com, 2010).
According to the statistics from the Harvard Business Review, about 70% of these companies won’t make it to the second generation at all. They’ll fail or be sold off. That just leaves 30% of them in play. When you look at the third generation, a mere 10% continue to be passed down.
Succession planning can be one of the most challenging aspects of owning and operating a family business. And while many family business owners may dream of passing ownership of the business onto future generations, keeping the business within the family isn’t always a viable option. When a clear successor within the family doesn’t exist, family business owners are faced with the difficult decision of who will take over the business when they are ready to step aside.
According to the Family Business Institute, two of the ownership succession issues that most often plague family businesses are technical mistakes and planning in a vacuum. If you are contemplating selling your family business to an outside buyer, a comprehensive succession plan that addresses a few key considerations can help ensure that you don’t make these common mistakes.
While selling your business may take as few as six months to close, positioning the business for sale—not to mention preparing yourself and your family emotionally—may take much longer. For many family businesses, beginning the process at least three years in advance is often necessary.
There are numerous ways to structure the sale of a closely held business—a lump sum sale, an installment sale, an earnout sale based on a percentage of future profits or a sale to a charitable trust. Determining your desired “end result”—as well as the potential tax implications of each of your options—will help determine how to best structure the sale of your business.
Selling a business often requires a team of advisors, including investment bankers, attorneys, business accountants and financial advisors to work through the various complexities. Making sure you have the right team of specialists in place can help avoid the common pitfall of planning in a vacuum.
Customized Investment Banking for Lower Middle Market Family-Owned Businesses
The information contained herein is believed to be reliable, but is not guaranteed as to its accuracy or completeness. This website is provided solely for your information and convenience. This material does not constitute an offer to sell or a solicitation of an offer to buy any security.
An offer can only be made by a prospectus that contains more complete information on risks, management fees and other expenses. In order to fully understand all of the implications and risks of investing, investors should carefully read a prospectus before investing.
Investment Products and Services Are Offered Through Fallbrook Capital Securities Corp. (Member FINRA and SIPC). You may contact Fallbrook Capital Securities Corp. by calling (818) 657-6130 or going to www.fallbrookcapital.com