If you and your family are considering the sale of the family business, and maybe considering an actual offer on the table, there is some business thinking that should enter the mix. This is especially true when it is your exit from the business.
Consider the warning alarm sounded by Forbes in a recent article titled “You've Finally Sold Your Business: Now The Ugly Negotiations Really Begin.”
It is in the interests of most sellers to make the price of the business dependent upon its future success. Consequently, there is some money upfront with a promise for full payment upon full performance. Sometimes, the idea is just to stagger full payments for the sake of financing.
Plans like these can give both buyer and seller the best of both worlds, or it can mean a world of litigation when there is a disagreement or things go wrong. Remember, when planning for the sale of the family business, it really does matter just how you sell the business and it pays to be aware of the issues in advance. Read the original article for a number of common scenarios.
Finally, do not forget that the family business is likely an important part of your estate, too. More often than not, the family business is your estate. If that is the case, then be mindful to structure the sale in accordance with the family needs.
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Reference: Forbes (February 21, 2014) “You've Finally Sold Your Business: Now The Ugly Negotiations Really Begin”