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  • Financing Your Business Transition
    Game Plan
    In-Depth

    Option 3: Sell to Your Family

    AdvantagesAdvantages

    advantages

    • Familiarity, ease. You know, love and trust your family. Keeping it all in the family can give you a sense of comfort. Plus a healthy, thriving business could become a family legacy.
    • Continuity. If you have a strong bond with your children and they agree with your way of thinking and operating the business, this can provide the smoothest transition. You could plan for this—and groom them—years in advance.
    • Flexible terms possible. There are many ways to structure this type of sale. For example, you could receive a stream of income spread out over many years through an installment sale or a private annuity.
    DisadvantagesDisadvantages

    disadvantages

    • Family jealousies or rivalries. If your family members, particularly children, don’t get along or see eye to eye, this could be a dangerous, risky situation. Assuming you leave the business to your children, if they don’t get along well, this could be a recipe for frustration, resentments and possible failure.
    • What if your children aren’t interested or qualified? Try to be objective. Are your children qualified enough and interested enough to take the business to the next level? Do they deserve this opportunity? What’s best for the business? Are your family members best qualified to succeed relative to an outright sale to another firm or a sale to the company’s employees?
    Deciding FactorDeciding Factor

    deciding factor

    Do you have family members who are capable of running the business—and have the knowledge and desire to do so? Also, consider how this business sale may change the dynamic among your loved ones.

    Game PlanGame Plan

    Game Plan

    • Sit down with your family and discuss your intentions and invite honest responses. Gauge everyone’s level of interest.
    • Spend time with your children and bring them up to speed about running the business.
    • If passing on the business to your children or keeping it in the family is likely to be seen favorably by customers and the community, plan to promote and advertise it.