Deciding to sell a family business can be very difficult. The idea of passing ownership on to the next generation is comforting, knowing that the legacy of the company will continue for years to come. However, for some owners, keeping a business in the family is not always the best option and for others it may not even be an option at all. Even though emotional attachment is always a big factor with a family business, you must also consider your family’s future and financial health. In the end, selling your business for a profit might make more sense than finding a family successor.

If you are someone who is considering passing a business down to your next of kin, or other family member, consider if they have the skill and the ability to run the business. Gauge their interest in doing it, and how much of their time they plan on investing in it. If you are a hands-on owner, transitioning to having someone else run the business while the family resumes ownership could be a viable alternative to having another family member assume the role of owner-operator. If family succession is not the answer, consider selling the business and allowing a new owner to continue its legacy.

Before planning the sale of a business, you must know how much it is worth. Having a business valuation estimate done by an experienced business broker can help you figure out the value of your business in the current market. Consult with an accountant or financial advisor to figure out your net profit, after taxes. A high or low potential profit can help make the decision or whether to keep or sell the business easier. Compare the loss of income from the business to what you would earn if it sold. You might find that the amount of money you make from the business sale could benefit your family more than owning it would.

Finding the right time to sell a business is always an important consideration. Ideally, you don’t want to wait until you have to sell, based on your circumstances or needs. A business owner who waits until the end of their career or until they cannot find a worthy successor may not be able to sell their business for as much as they had hoped, or as quickly as they had hoped. For this reason, have a succession plan laid out far in advance. This will help you to figure out if you do have a worthy successor and allow you the freedom to strategically time the sale if you don’t. This way you can focus on selling when the market for business sales is good and your business and industry are performing well. Selling your company only when you have to puts you more at the mercy of external factors such as the economy and buyer demand.

If, after considering your circumstances, you decide that selling your business is your best option, figure out what you will be looking for in a buyer, and how important the legacy of your business is. Identify any non-negotiables, meaning commitments or promises you would like the purchaser to make to preserve certain aspects of the business. This could include protecting jobs, the name of the business, or its location. This helps to map out your best possible outcome, but be prepared to concede on some of these things if they cause too big of a gap in negotiations.

To determine if a particular buyer is right for your business, do your diligence on them. Figure out if they have owned or purchased a business before, and how well they ran it. Find out if they are someone who delivers on their commitments, and decide if they are someone who you can trust. This information can carry extra weight if preserving your family legacy is important criteria for finding the right buyer.

Planning for life after your business sells is as important as planning the sell it. Take enough time to do proper financial planning for yourself and your family. Decide how to manage your income, and whether or not to set up a trust. Also make plans for your personal life and how to handle your free time. If you no longer going to be running a company it is important to find something to fill the void.

When running any business, you need to always have one eye on the future. This is especially true with a family business. Planning for the future of your company will help you decide on how to prepare for the day where you can no longer run it. This includes formulating a succession plan and an exit strategy. Both can make your decision of whether to sell your business, or keep it in the family and easier one.

If you own a family business in Southwest Florida, make sure you have a succession plan in place. If you don’t, allow CIBB to help you get started. We van provide you with a free, no-obligation business valuation that will give you a clear idea of the true market value of your business. Knowing what your business is worth is the first step in deciding its future.