Family Businesses: What You Need to Know

Family owned businesses are great assets/contributors to the economy. In fact, in the US alone, there are approximately 5.5 million family owned and controlled businesses.[1]  While much of the world’s wealth is a byproduct of family-owned businesses, the fact is that most are not actually prepared to sell in a way that will profit the owners for their life’s work.

Let’s take a look at some pros & cons of conveying your business to a family member:



Family owned businesses tend to have an average lifespan of 24 years. About 40% of family-owned businesses are successfully passed down to a second-generation with only about 13% passed down to a third generation. [2]

Familiarity with Your Partners:

Most times with family owned businesses, family members will exhibit high levels of commitment and shared common goals of the business. Family members will also have a built-in familiarity and support system within the business itself. With these thoughts in mind, you can trust that your business will be passing into hands that have a built-in desire to see it succeed and maintain longevity.


Less Value on Sell of Business:

One key disadvantage is that a family business owner will typically receive less value for their business than engaging the sale with an independent third party.  Selling to an independent third party can often force a family business owner to also agree to a lower value in an effort to negotiate the retention of jobs and incomes for the family members they wish to remain with the business after the sale.

Handling Multiple Owners and/or Decision Makers

If there are multiple owners and/or decision makers in the family-owned business and the business is being sold to a third party, it is important to appoint one family member to represent the negotiations. Having multiple decision makers at this critical step in the process of conveying the business to a third-party owner can lead to numerous issues and headaches for both the buyer and seller.

 Overall, this article highlights just a few of the pros and cons involved in conveying your business to new ownership once you decide it is time to retire or move on to a new venture.  If you are just beginning or actively considering transitioning your business to new ownership, please do not hesitate to reach out to us for advice and assistance.



Otis Florence, Business Brokers & Consultants

Copyright: Business Brokerage Press, Inc.


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