Not all family businesses are destined to remain within the family.  This is an unfortunate reality and the stats prove this fact out.  Only about 50% of family businesses remain within the family after the second generation and about 15% stay with the family after the third generation.

Sobering statistics.

Depending on the size of your business, the ability for you to retain the both the operational control and the ownership control over your business may be impeded.  This is not because of your abilities; sometimes it is just size.  In this type of instance then, the best options are to:

1. sell – to ensure that maximum value is obtained for your business on the sale

2. retain ownership and bring in professional management – ensure that the business continues to run, the management has satisfactory operational/financial incentives to do a good job

Both of these options can be viable.  You may wish to consider making steps towards option 2 even as having strong management and systems in place should help improve the value of your company.

Let’s break this down.  On a sale, we have previously discussed and reviewed how to maximize the value of your business on a sale.  The two variables:  EBITDA and multiple.  You have the ability to maximize and control both.  The multiple, if you are able to increase this by building infrastructure and turn your entrepreneurial business into an enterprise, has a much greater affect on your business’ value than does EBITDA.    Read more below.

Valuing the business, a reality check.

Simply put, if you can make your business one where you could walk away tomorrow because you have built systems and put in the proper operational team, then you have improved and increased your business’ multiple by many times.

In conclusion, even if you wish to sell the business, you will be maximizing your price and value by doing step 2 first before you sell.

Learn think apply.