The classic tension in a family business is the leading generation being focused on capital growth and wanting income, while the next leadership generation is less concerned with income and want to ensure money is invested in the business.
The generations behind that are often encouraged to pursue other ventures, which can result in them not being overly concerned with the future of the business itself, but happy to receive healthy dividends or a slice of the proceeds of a sale.
When this occurs you are either going to have to come up with strategies to meet all competing demands – perhaps an internal market within the family to buy shares so that cash is available, or to ensure that appropriate trust structures are put in place that will provide access to funds when needed for the family – or it is likely the business will come to point of conflict within the family and need to be sold.
- The challenge of taking a business in a different direction.
An industry might have to re-invent itself, a business may have to pivot, a sector may become unfashionable and in those circumstances sometimes the honest answer may be that a family business does not have the expertise, the energy or the desire to change the business to adapt. In this case, selling to someone who can might be the best option.
- It might just be the right time to sell.
A family may come together and realise that succession might actually be cashing in on the successful growth of the business, passing the business on to someone else and to take the proceeds and split it among the family to pursue new and different ventures.
It can be hard for a family to acknowledge, but the fact that a business has been a family business does not mean it always has to be the same family business, different generations and different dynasties can be started from the proceeds of a previous one.
Who to sell to
Having determined to sell the business the key challenge is then who to sell to? The market available will depend on the industry and the sector to some extent, but it is also fair to say that any successful business, particularly in the case of family businesses, which are often those with an interesting history and backstory, are likely to have a number of routes to sale.
