Family businesses with no one to take over

Many owners spent years assuming a son or daughter would take over one day. Then the children built lives of their own: a career in another field, a home in another city, and no wish to run a plumbing company that starts its day at 6 a.m.

That leaves an owner with a business they care about and no obvious next owner. For a careful buyer, these companies can be a good fit, and their owners are often open to selling to someone outside the family. But the conversation is different from most sales, because it's about a family as much as a business.

Why these owners are often open to a buyer

• The hardest decision may be behind them. Accepting that the children won't take over is often the painful part. Once an owner has made peace with it, selling becomes a practical question.
• The other options can be worse. Closing down means letting staff go and getting little for decades of work. Selling to a large competitor may mean the name disappears. A buyer who wants to run the company as it is can be the most appealing choice.
• They want the business to continue. A buyer who keeps the name, the staff and the standards offers something no shutdown can.
• They can plan ahead, if the decision comes before a health problem forces a rushed sale.

What makes these sales different

More than one person has a say. A spouse, children or siblings may weigh in even if they don't own any of it. Sometimes family members do own part of the company, perhaps through an inheritance. Learn early who owns what and who needs to agree.

Family members may work there. A spouse who keeps the books, a son who runs a crew but doesn't want to own the place, a niece at the front desk. Some will want to stay after the sale and some won't. Some may be paid more or less than the job is worth. Each of these affects your plans and the numbers.

The family may own the building. It's common for the family to own the property and rent it to the company. That lease becomes a large part of the deal, and the rent may be above or below what the space would rent for on the open market.

Feelings run deep. A parent or grandparent may have founded the company. The owner may feel they're letting someone down by selling. Decisions can take longer, and they can change direction.

The children may change their minds. Sometimes a son or daughter who said no for years takes a second look once a real buyer appears. Be ready for that. It's their family's business, and that's their right.

How to approach respectfully

• Don't assume the family story. You might guess there's no successor from the owner's age or how long the company has been around. Don't open with it. Let the owner tell you, in their own time.
• Start with the history. Ask how the company began. Most owners enjoy telling that story, and it tells you what matters to them.
• Be honest about who you are. Share your background, why this kind of business interests you, and whether you'd run it yourself. Never present yourself as something you're not.
• Respect the family's role. If the owner wants a spouse or child in a meeting, welcome them. Never try to go around anyone.
• Talk about the people early, including family employees. Ask who would want to stay and in what role, and be honest about what you can offer.
• Give it time. Families need to talk among themselves. Follow up politely and don't press for a decision.

The worries every seller has about staff, customers and getting paid all apply here, often more strongly. What owners worry about goes through them one by one.

Questions that open real conversations

• "How did the business get started?"
• "What would you want to stay the same after you step back?"
• "Is anyone else in the family part of a decision like this?"
• "Are there family members working here who would want to stay on?"
• "What would a good outcome look like for you and your family?"

What to check carefully

Family businesses are often well run, but they tend to have a few things worth a closer look:

• Family pay versus the work done. Someone may be paid without doing much, or doing a lot without being paid. After the sale, you'll pay a fair wage for every job that needs doing.
• Deals with relatives. Rent paid to a family member, or supplies bought from a cousin's company, may not be at normal prices. Find out what they'd cost on the open market.
• Knowledge that lives in people's heads. Pricing, supplier relationships and how the books are kept may never have been written down. Plan a handover long enough to learn them.
• Personal and business spending mixed together. Have an accountant who works on business purchases review the books.
• Who has to sign. Ask your attorney to confirm who must approve the sale.

A deal the family can live with

Many families care about more than the price. Common wishes include keeping the name, a role for a family member for a while, payments spread over time, or keeping the building and renting it to the new owner. Each of these has value to the family and a cost or benefit to you, which is why it pays to talk about them openly. Price versus terms explains how the structure of a deal changes what it's worth to each side.

Be careful not to agree to something you can't keep. Promising a job to a family member who isn't a good fit, or promising to keep the name forever, can create problems later. It's better to say what you can commit to and put it in writing.

What to do this week

• If you're writing to owners, draft a version for long-established family companies that leads with respect for what they built and asks about the company's story.
• Write a short, honest statement of how you'd approach the current staff, including family members.
• List the family questions you'll need answered: who owns it, who works there, who owns the building, and who needs to agree.
• When you meet an owner, listen more than you talk. The family story will come out when they're ready to tell it.