Thoughts on Selling a Successful Family Business

Posted by Ed 3 yrs ago

Thirty-eight years ago, friends went on a day hike near Yosemite. The couple took the wrong fork up a dry creek bed and, instead of the picnic spot they sought, soon found themselves bouldering ever higher against a steepening slope. Finally, the alarmed woman insisted they stop and await help.

Embarrassed by his faulty wayfinding, her boyfriend ignored her pleas, and started down the mountain. He fell to his death within minutes. She spent two nights shivering in the wilderness awaiting a helicopter rescue.

Only 15% of Mount Everest’s 212 climbing deaths between 1921 and 2006 occurred on the way up. Almost all happened on the descent. British Medical Journal 2008

No better metaphor for business exists than mountain climbing. Both are challenging, exhausting and, on occasion—say, cresting a ridge—exhilarating. And if you don’t pause every so often to smell the edelweiss, to admire how far you’ve come, you’ll miss the magic of both endeavors.

As with mountaineering, the way up in business is grueling, but it’s also satisfying and often enjoyable. Going down—selling a successful family company—isn’t much fun and can be dangerous. Three basic routes lead off Biz Peak: a sale or gift to heirs, a sale to key employees, and a sale to a third party. Naturally, there are countless variations on those three descents.

A family transfer may be ideal…if you happen to have bright heirs who are interested in your business. The catch is that, for the sake of those bright heirs’ sense of self-worth, they should learn the business elsewhere, to know in their hearts that they could succeed without being handed the combination to the company safe.

That takes time. Paraphrasing Eric Clapton, it takes 10,000 hours to learn any job worth having. This means your heirs should spend five years working elsewhere. And, once they start working for you, you need to stick around for another handful of years while—here’s the hard part—letting go of the steering wheel.  

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