How to effectively go about selling the family business

If you have decided to one day sell your company to a third party, there is a lot of ground to cover before you are sipping champagne at the closing. Any misstep along the road to a closing can derail a transaction thus destroying your ticket to financial security and often the business itself. Proper preparation for the transaction can remove many of the obstacles along the path to closing and save time. Remember, time is the ally of buyers, not sellers.


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  • ask, “What did you expect?”
  • leave well enough alone
  • prepare, prepare, prepare
  • evaluate your management team
  • motivate key employees to stay

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  • cut corners, make guarantees or promises, or count chickens before they hatch
  • make big investments
  • cut your margins
  • underestimate a buyer’s intelligence

Kevin Short‘s recommendation to ExpertBeacon readers: Do

Do ask, “What did you expect?”

Somewhere along the line, many owners say to a child, “Someday, all of this will be yours,” and never give it another thought. Those children, however, have thought, long and hard about taking the reins. If you can’t remember exactly what you said ten, fifteen or twenty years ago to a child, ask! When parents neglect to consider a child’s expectations—especially a child active in the business—they can unleash a monster. Be prepared to explain and defend your decision to sell to a third party.

Do leave well enough alone

If selling is on your radar, you should consider all of your hiring and firing decisions from the perspective of a future owner. If you were buying a company, wouldn’t you want to hire and fire as you saw fit? Unless you have a serious personnel problem, don’t tinker. Set performance standards, motivate and incentivize your management team. Competent management teams with track records of success attract buyers with generous offers.

Do prepare, prepare, prepare

Before you take your company to market and subject it to the scrutiny of potential buyers, have your attorney perform a legal audit. He or she will review contracts and make sure they are assignable. You’ll be asked to account for every share of corporate stock and your attorney may want to subject them to buy-back agreements. Every moment and dime you spend in this effort will pay off during the sale process.

Do evaluate your management team

Buyers will look at (and pay for) for the management team that will run the business after you leave. Can it run your company successfully without you? If so, you have a valuable business. If you aren’t sure, retain a consultant to evaluate each team member. As part of the sale process, you must tell a compelling story to a buyer who has never likely heard of your business. The highlight of that story is your management team.

Do motivate key employees to stay

One of the biggest elements of a company’s value to buyers is its management team. Will yours stay with the company after you leave? Unless you motivate them to do so using Stay Bonus Plans (incorporating non-compete clauses if appropriate in your state), you really don’t know. Neither does a buyer. Buyers mitigate risk by lowering their offers so if your management team might exit when you do, expect a lower offer from buyers.

Kevin Short‘s professional advice to ExpertBeacon readers: Don't

Do not cut corners, make guarantees or promises, or count chickens before they hatch

In a prior article, we outlined several don’ts for owners considering the sale of family businesses. The same warnings apply to owners who have already decided to sell. These include: don’t scrimp on preparing your financials, extract yourself from guarantees, don’t make promises to vendors or customers that a buyer can’t keep and don’t talk about the sale until after closing.

Do not make big investments

The time to invest significant cash in your business (as in capital equipment) is not once you’ve decided to sell. Rarely do we see owners/sellers recoup their investment in better sale prices. Invest organically, when and in what your company requires. Don’t invest simply to impress a buyer.

Do not cut your margins

Sellers are often tempted to boost their companies’ sales numbers by cutting their normal margins. In looking at several years of financials, buyers will discover what you’ve done, but worse, they will wonder how else you’ve massaged the numbers. When buyers lose faith in your credibility, they react in one of two ways: by reducing their offers or walking away from the deal.

Do not underestimate a buyer’s intelligence

Cash flow is king, but trying to improve it by accelerating your collection of accounts receivable or becoming sluggish in your payment of accounts payable is not going to go unnoticed. Buyers will see what you’ve tried to do and interpret your actions as less-than honorable. The relationship between buyer and seller is tough enough: don’t make trusting each other impossible.


In any sale to a third party, time favors the buyer. The better prepared you and your company are to withstand a buyer’s examination, the more quickly you can move from a Letter of Intent to the closing table. There are a host of obstacles that can derail the sale process. Don’t let a lack of preparation be one of them.

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