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Common reasons to sell a family business

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Should I sell my family business?

The process of selling a family business varies to an ordinary sale due to the long history of the company, the weight of the family brand and company legacy. The opportunity to buy a family business occurs less commonly as businesses of this calibre rarely reach the open market, however, when this does occur, it can reap returns for the company owner and invite competitive offers. There may be a genuine reason behind the sale of a family business, such as retirement, limited succession options or because the business has reached the end of its lifetime.

Common reasons for the sale of a family business

There are countless reasons why a family business may be put up for sale, from enabling company growth, accepting an acquisition offer, to conducting a retirement business sale. We round up the common reasons why company owners may break away from this ownership style.

No successors – If the business owner has no children, family relations, heir/heiress, or suitable next in line to inherit the business, the company director may look to sell the business. If the existing proprietor is approaching retirement, experiencing health concerns or no longer has the appetite to continue operating the family business, they may decide to begin the search for a new business owner.

Family disputes – Due to the structure of family businesses, a variety of family members may be involved in the management of the company, with devolved powers to less senior family employees. Although this operational structure can be beneficial in establishing brand identity, it can work against the favour of the business in the event of a disagreement concerning the future of the company.

By continuing to operate a family business under revolt, it could jeopardise company operations, hinder progress and slow down company growth. As a result, family members may unanimously decide to depart the company to diffuse the situation and source a new owner to act in the best interests of the business. In some cases, family members may continue to work for the business under the request of the new owner to preserve brand identity.

Natural end - Due to the longevity of family businesses and the passing of the company through generations, the operational structure may be outdated and require restructuring. Attracting a new owner outside of your family circle can help the company adapt to modern standards and serve new trends. If your business has reached the end of its lifetime as the services on offer are no longer in demand, selling your family business may be your only option to generate returns. If your services are redundant to new customers, but your brand identity continues to hold weight with existing customers, your business may hold value and financial worth to prospective buyers.

Economic uncertainty – If your business is experiencing financial strain and operational struggle due to economic uncertainty, you may choose to sell your family business to a buyer better placed to withstand these pressure. Key industries in the UK are on course to experience disruption due to Brexit and the landmark Brexit deal. As a result of operational revisions, changing guidelines and the associated financial repercussions, you may conclude that it is no longer cost-effective to continue your company.

Acquisition opportunity – If your family business has received a lucrative acquisition offer which represents market value and generates a substantial return for the company shareholders, you may decide to seize the opportunity and sell your company. If the prospective owner can help your business increase growth potential and multiply profits due to brand association, you may decide to accept the best offer and exit from your family company.

Change of hands – If your family business requires direction from an individual with a distinguished skill set, vast industry connections and greater financial backing, you may choose to sell your business. If marking your business for sale can attract reputable buyers with extensive track records, you may take your chances and begin the sale process for your business.

Financial difficulty – If your family business is struggling to maintain company overheads and essential financial commitments, you may consider selling the company before it enters serious financial difficulty, tarnishing an otherwise outstanding track record. If your business is already showing signs of financial distress, you may still be able to sell your insolvent company. Continuing to operate a loss-making business due to financial challenges as a result of the current trading climate could result in risking the future of your company.

Selling a family business can be a complex and demanding process due to involvement from multiple parties and serious considerations for the future of the brand. Turning to a skilled business transfer agent can help open the door to several actively searching buyers with the relevant skillset, experience and reputation. A renowned business transfer agent can help secure a prosperous future for your family company by attracting genuine buyers.

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