Family ownership of a business can complicate selling it, and family dynamics can significantly impact the price owners receive. Leah Jane Barnwell, who has operated an industrial manufacturer in Charlotte, North Carolina, sought to convince her parents to draft a succession plan for retirement, as they were now in their 70s and no one else was willing to take over.
Despite daily stress, the woman continued working due to her mother’s concerns about business sustainability and legacy. Her parents needed to hand over control after a key employee quit in 2023. The Trust Company of the South’s strategic initiatives manager, Barnwell, assisted her parents in finding a buyer, but there was not enough time to update the business to a turnkey model.
Profitability and industry competition significantly influence a company’s sale value. Single-owner dental offices may be challenging to sell, while well-managed manufacturers have a strong market. However, management and family issues can also hinder a sale. Eric Czepyha, director of business services for Northern Trust, emphasizes the importance of family agreement in selling a business to avoid resentment and poor decisions.
Jennifer Ridley Hanson, director of wealth planning at SlateStone Wealth, worked with a couple who sold their restaurant supply business to keep their children from realizing they couldn’t manage it. The kids tried to keep the business in the family but were upset that they had never worked there.
A buyer may benefit from having family
Czephya suggests that family members can benefit a company by creating a family employment policy. Northern Trust developed a policy for a family-owned manufacturing company, which required family members to have worked for at least two years elsewhere before joining, ensuring openness and guidelines for family members entering the business.
Czephya emphasizes the importance of hiring a company’s children based on their qualifications and abilities, rather than their last name. He also emphasizes the need for a strong second-in-command to motivate collaboration with new buyers, and when evaluating a company, it is crucial to know their successor.
Charles Shook, founder of Trestle Capital Partners, explains that he collaborated with two business co-owners in 2023 who had capable managers in their divisions, and the company sold at a high valuation, even if the owners took a vacation to Europe.
Streets to sell
Czephya explains that selling to a third party requires an investment bank to evaluate the business, which can take six months to a year. Owners can sell shares in various ways, such as a multigenerational family manufacturing company where the father retired and the kids managed their businesses without the CEO role. Customers appreciate the company’s continuity and familiarity with its operations.
Search funds are becoming a popular source of purchasers, as they support individuals in purchasing businesses. Barnwell’s parents found a buyer through this method, as they shared the same beliefs and business goals. The new buyer and her mother collaborated for nearly a year, ensuring a smooth transition.
Trust Company of the South’s strategic projects manager, Leah Jane Barnwell, has been praised for her innovative ideas and commitment to the team. She believes that having another accountable employee allows them to relax and celebrate their achievements. However, a previous version of the article mistakenly identified her as Leah Jane Bramwell.
