Jessica and I are members of Northwest Family Business Advisors, a group of people who do what the name implies, help family businesses and their owners.
So, it caught my attention when the Wall Street Journal had an article with the headline, “The Family Feud Rocking A Hotel Dynasty.” It had many of the necessary cast of characters:
- The aging founder
- The CEO son
- And the mysterious female “advisor”
Not to mention a $1.4 billion write-off of a bad deal
Not quite the drama with the businesses we all work with, luckily. But there often are conflicting points of view and it’s an advisor’s job to offer options and advice. When it comes time for a business’ transition, the options may include:
- Pass it on to the next generation, at a fair market or discounted price. (Depends on how much mom and dad need for their next great adventure in life.)
- Sell to management. (Best to have them go to a bank like any other buyer as it’s a test of character if they’ll sign “their life away” to do the deal.)
- Sell all or part to an ESOP. (Usually need ~$2 million of earnings, it’s complicated, expensive, and has tax advantages to the seller and lender.)
- Sell on the open market. (Usually the way to get the most money, make a clean break, or get rollover equity for a future cash event.)
- Hold on to it and take distributions. (And hope management can keep it growing and vibrant.)
We believe in client education, which is why we have five books on the buying and selling of businesses.
“To err is human. To blame someone else is politics.” Hubert Humphrey
“When I feel the heat, I see the light.” Everett Dirkson