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Selling to the Next Generation?

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One of the most difficult issues that owners face when family members are working in the business is the question of whether they are they obligated to sell the business to a family member.

And if so, should the family member get preferential treatment? Obviously, there is no problem when you have a strong family member and the rest of the family concurs, but how often does this happen?

I once had a client who insisted that his son was not capable of running the business and the client could not comprehend that he had the money to purchase the business.

I proceeded to find a buyer and an offer was made. The client was in the process of reviewing the offer and discussed it with his family. The son felt that the offer was too low and wanted to make an offer. The client was dumbfounded, but gave the son two weeks to line up the funding. The son had some wealthy friends and they agreed to fund the transaction at similar terms and conditions.

Before accepting the son's offer, I contacted the original buyer and told him he would have to do better if he wanted the business. He asked for a day to review his offer. The next day, he faxed us a revised offer for an additional $250,000. The son was not able to meet this new offer. Naturally, there were some bitter feelings within the family.

This type of situation could have been avoided if the owner had planned ahead and communicated plans to members of the family.

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