The Mitsubishi model of a company built to last the ages still exists, but with the advent of the tech industry and the accompanying startup culture, many old-school concepts of a generational business lineage, past and future, are harder and harder to find.
Along with startup billionaires came startup billionaires who made their billions and dumped the company. They got in, they got out—and the getting out was planned for from the inception. This is fine when that’s the strategy, but what if your business founders intended that no one get out, ever? (We’ll always need buggy whips!) Maybe you are a second or third-generation owner of a family business and, for whatever reason, the big exit sign is the only one lighting up your path.
The Mitsubishi model of a company built to last the ages still exists, but with the advent of the tech industry and the accompanying startup culture, many old-school concepts of a generational business lineage, past and future, are harder and harder to find.
Along with startup billionaires came startup billionaires who made their billions and dumped the company. They got in, they got out—and the getting out was planned for from the inception. This is fine when that’s the strategy, but what if your business founders intended that no one get out, ever? (We’ll always need buggy whips!) Maybe you are a second or third generation owner of a family business and, for whatever reason, the big exit sign is the only one lighting up your path.
The Begats
Family businesses have a unique strength in that they can plan in terms of generations not quarters , however sometimes keeping a business going is simply no longer an option. Perhaps the relevant family members want to farm squash in Botswana instead or have strong feelings about sustainability or other personal considerations. Maybe they just don’t want to be in business and that door is closing—possibly slamming. So, how to get out with fingers and toes intact?
Before you start considering an exit process, sit down with the rest of the owners and discuss pros and cons and look dispassionately at whether now might be the right time. Ideally, everyone involved, or even some of them, would agree on how divestiture could be approached. What critical factors must be considered? Make a list and include everything from the timeline, minimum sale price (if that’s relevant), which experts will be engaged, how the principals will be updated and who has the ultimate mandate to make decisions.
No Failure
For most family business owners, the thought of closing the metaphorical or literal doors will inspire strong emotions. Some will be thrilled to be rid of the whole thing, others will fret and even grieve. Either way, the exit process is probably not going to be a stroll in the park. Closing any business is full of unexpected feelings and drama—and you can add family dynamics for more considerations, opinions and agendas.
According to Eva Fischer Hansen, former chairperson of the board at Brunata, who recently headed their $100 million exit,
Many families think of selling as an admission of failure, however, this is not the case. There could be many factors that result in a sale being the right strategic move on both a business and familial level.
Begin at the Beginning
Whether the urge to chuck everything is just a niggle or is now roaring in your ears, it’s best to act, not just lose sleep. Making a start, any start, can be viewed as a type of battle-exercise—just going through the motions doesn’t necessarily mean going ahead with the process. The exercise in itself can provide valuable feedback and validation, and help build a stronger business for whomever takes over, even if that’s the bank.
Fallback Position
And of course just because you’re entertaining the idea of an exit doesn’t necessarily mean you have to go through with it.
Once you have collectively decided to exit remember that actually doing it is final and a big step, so don’t expect instant results. Depending on the size, complexity and location of the company or subsidiaries, the time from deciding to exit and actually turning off the lights can typically take anywhere from 10 months to 5 years.
Status Updates
In all aspects of business, one of the most crucial factors for success is internal communication. Although you might have a mandate from family members to act on their behalf, they will still want to know what’s happening. Agree ahead of time on how everyone will be updated and then be sure to follow through because the last thing you need is Aunt Alice howling that she didn’t hear about that decision and wants to reverse it…
Learn From the Process
In addition to being tough on you, exiting will put additional stress on your family relationships. However, the process can also offer a lot in the form of personal growth. Says Hansen, “By remaining actively involved in the process, while consulting with the experts that you brought in, you can learn even more about business and this experience can be great to use in future.”
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