Exiting a family business can be very challenging – just what are the rules of engagement? How formal or informal should it be? How much should be based on good faith and trust?
Our guest this week, Kurt Theriault, managed to navigate through all of the moral dilemmas and come to an arrangement to buy out his father’s share of his business, only for the Great Recession to throw a huge wrench in the deal. There was eventually a happy ending, when a surprise offer came in that allowed them both to exit the business.
In one sense this is a cautionary tale about what can happen if you avoid tough conversations with your relatives and don’t value your business properly, in another sense it serves as a shining example of what can be achieved once you get your exit planning right.
How to sell a family business and how not to sell a family business: the moral of the story, with Kurt Theriault
In this week’s episode Kurt discusses the ups and the downs of exiting a family business, and how learning from the mistakes of negotiating with his father helped streamline the business to a point where it attracted a surprise takeover. See below for some of the highlights of the conversation:
Use multiple sources to value your business:
Kurt regrets only using one opinion. This process is especially important when dealing with family members inside the same business, i.e. if more than one party agrees on a valuation based on a wide range of factors, it is more likely to stand up to the rigors of negotiation and solidifying a deal.
Put a value on your intellectual property:
However many clients you may have, the real long-term value in the business is the unique nature of what you do. Clients can disappear overnight, especially when someone exits a business, so if it is possible to monetize the concepts that underpin your day-to-day business, then you should.
Create an advisory board:
This was a core building block for Kurt. Involving impartial 3rd parties in the valuation/streamlining of a business can be invaluable during the exit process.
Hire senior employees with their own client base before exit:
It’s vital to assure potential buyers that the business has a sustainable and profitable future after the owner leaves the business. This is a surefire way of doing just that.
Understand the value of business support groups:
This helped define Kurt’s entire future. It helped with his exit and it gave him his next venture.
How did he value the company?
He used one external source to name a price.
What motivated him to sell?
The value of the offer and the realization via his peer group that he could do fulfilling work outside of his current business.
What did he do afterwards?
He was offered an opportunity to be a partner in a peer group/support business for SEOs and business owners.
Wise words for the road:
“Business peer groups are vital. Everybody’s got blindspots that they can’t see… if you’ve got 12 or 13 people living in your shoes as an entrepreneur, they’ll help you”
“The hard part of being an entrepreneur is: where do you go to get your ideas?”
“Everyone should spend more time saying: what do I really want out of the business?”
Kurt’s peer group business: