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MEDIA - PRESS COVERAGE |
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Business sellers have good reason to skip kids
SOURCE: GREEN BAY PRESS GAZETTE November 11, 2007
By Scott Bushkie, CBI, M&AMI
About one-third of our sellers have adult children working in the business—children who will not be taking over and buying the company. That used to be a red flag for buyers, but expectations are changing.
Today, only about 30 percent of family-owned businesses pass to a second generation. Longer life expectancies and shifting markets will likely drive that number even lower.
The market is changing. While many of our current sellers are competing on a local or national level, their successors will need to think globally. These days, you have to be that much better at what you do, and plenty of kids just aren’t ready to compete on that scale.
Often, the children just don’t want the business. They don’t want the debt load or the responsibility of providing a livelihood for a team of employees.
They may have waited at home while their parents spent long hours at work and can’t imagine making the same kind of sacrifices.
That’s exactly what we heard from one recent seller. He talked to his son about taking over the company and was told, “Frankly Dad, I don’t want to work that hard.”
But it’s not all about the kids’ wishes. The cost of retirement is changing. According to Smith Barney, in the 1980s the average person spent just 13.6 years in retirement. Today that number is closer to 25 years.
People can’t afford to sell the business to their kids anymore. Those transitions typically come with years of seller financing. After all their hard work, sellers want a comfortable retirement, with freedom and money to enjoy it.
Parents seek outside owners because they truly want to walk away from the business. Set the kids up as the new management and it is possible that the responsibility for the business will never really leave. If it’s on the kids’ shoulders, it’s on the parents’ shoulders. Everyone feels the pressure to succeed.
You can still take care of your kids and ensure their future with the business. Sellers have secured a place for their son or daughter by tying them in with an employment contract or a minority share.
Of course, other parents recognize their children just aren’t ready to take over the business. Some sellers tell us, quite frankly, their children are just too immature or have other professional interests. Business owners want their company to remain a success, and it takes strong character to admit that your son or daughter won’t make the grade.
Finding new ownership can be the best move for you, the business, and the children. The buyer comes with fresh energy and new perspective, sometimes bringing better expertise or valuable synergies.
With someone else in charge, the kids can have better life balance and still provide value to the company, but they won’t have the weight of the world on their shoulders. Meanwhile, you’ll be free to enjoy your retirement—without obligations, emotions, or financial burdens tying you to the business.
Scott Bushkie is President of Cornerstone Business Services, a lower-middle market M&A firm with offices throughout the upper
Midwest
. Reach him by phone at (920) 436.9890
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