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Business Unplugged™
This blog features Carol Roth's tough love on business and entrepreneurship, as well as insights from Carol's community of contributors.

Business Succession Planning for Family Businesses (M&A)

Written By: Carol Roth | No Comments
The reality is that there is no entrepreneurship gene that is passed down from generation to generation.

While any given entrepreneur may have the skills, experience and passion required to make his business successful, there is no guarantee that his heirs will have what it takes, let alone the desire, to successfully pursue the “family business”.

Many owners of family businesses believe that they are doing their heirs a favor by passing down the business.  Usually this is because of emotional ties to the business.  Actually, many families have a large part of their wealth tied up the business, creating an “eggs all in one basket” scenario.  Often the best strategy in a succession is a full or partial sale of the business, so that the heirs can take the proceeds and diversify those in a variety of investments to satisfy income growth and income preservation strategies.

The best way to maximize the value in a sale where the CEO/entrepreneur is looking to retire is to start planning early enough (a minimum of five years before the desired retirement date).  This is because many buyers will want the entrepreneur’s expertise in a transition and an entrepreneur that is going AWOL the day the sale contract is signed will equate to a much lower valuation for the business.  Plus, many financial buyers (who currently account for a large portion of M&A activity, especially for middle market businesses) will only participate in a sale process if the entrepreneur is going to stay on board for some period of time.

Bottom line…an entrepreneur has to start planning early in order to maximize the value to both him and his heirs.

Article written by
Carol Roth is a national media personality, ‘recovering’ investment banker, investor, speaker and author of the New York Times bestselling book, The Entrepreneur Equation. She is a judge on the Mark Burnett (Shark Tank, The Voice, Survivor, The Apprentice) produced technology competition series, America's Greatest Makers, airing on TBS and Host of Microsoft's Office Small Business Academy show. Previously, Carol was the host and co-producer of The Noon Show, a current events talk show on WGN Radio, one of the top stations in the country, and a contributor to CNBC, as well as a frequent guest on Fox News, CNN, Fox Business and other stations. Carol's multimedia commentary covers business and the economy, current events, politics and pop culture topics. Carol has helped her clients complete more than $2 billion in capital raising and M&A transactions. She is a Top 100 Small Business Influencer (2011-2015) and has her own action figure. Twitter: @CarolJSRoth