PREVIOUSLY, WE LISTED the most popular options for selling your signshop. Now, let’s dive deeper into the first, and many would say preferable, option — selling to a family member.
Because I get paid exactly $0 per word, let’s go for broke and back up a bit, going a little off topic to lay the groundwork for the discussion at hand. Should you actually hire a family member?
Many signshops are “family businesses,” ones in which multiple members of a family work in the operation. Obviously, there are pros and cons to working with family members.
Pros:
- There’s an opportunity to spend additional time with loved members of your family.
- There’s a great feeling of being able to not only support a loved one, but to also see them grow, develop and succeed.
- There can be a higher degree of trust with a family member vs. someone completely unrelated to you.
- Working with family is a great story for your clients, who like knowing they are supporting a locally owned family business.
Cons:
- It’s more difficult to take time off together as a family without stressing the remaining staff.
- It can be difficult to enforce boundaries, both at work and at home.
- It can be challenging to combat staff assumptions of favoritism.
- It can be stressful for the family if there are problems at work or someone needs to be disciplined or fired.
- It can be a little too much “togetherness” and just because one relative is skilled in ownership or signmaking, that doesn’t mean another relative may be.
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Some of these “cons” can be avoided with a bit of foresight and a lot of chutzpah. Have you considered writing a special “agreement” before hiring family members, in which you outline expectations, boundaries and preferences, and have all affected family members acknowledge and sign? In this way, you’ve got everything out on the table, expectations are clear and agreed upon. And like all good contracts (marriage, equipment, rentals) you may never even have to look at it again. If you are interested in seeing a sample of an agreement I used in my former business, email me at paula@paulafargoconsulting.com.
So, you’ve made the jump and hired a family member. You’ve enjoyed working with them and they are good at their job. Your team has accepted them in their role, and they want to keep working at the shop.
Should you consider selling to them once you’ve decided to retire and leave the business?
That’s an excellent question and I’m glad you asked!
You should now ask yourself the following questions:
- Does this family member have the capability to own and operate the business without you?
- Does this family member want to buy the business, or are they just trying to please you?
- Does this family member have the resources needed to buy the business?
- Will you have to offer financing for the deal and, if so, can you afford to do so?
- What will happen if this family member doesn’t do a good job as owner?
- Are you prepared for challenges to your personal relationship if things go south at work?
Let’s say you have positive responses to all the above concerns, so what next?
Speaking from personal experience (buying from a family member, not selling to one), I strongly suggest (did I emphasize “strongly” strongly enough? If not, change that to insist) that each party retains their own advisors in the transaction. You as the owner will have your own lawyer and accountant; make sure your buying family member also retains their own counsel. You will thank me for this advice when you are able to maintain a wonderful relationship with someone who doesn’t feel that you took advantage of them.
If you are not interested in selling to the family member at lower than market price, make sure you either get an independent valuation, or let each accountant do a valuation to see how you compare. Be transparent with the family member about what being an owner entails; even if they see you at work every day, no one really understands what it’s like to be a small business owner until they are staring an unmeetable payroll in the eye on a Thursday night. Give them the good, the bad, and most of all, the ugly. If they aren’t right for this position, best to find out before the papers are signed.
Set up a reasonable timetable and expectations:
- Who is going to write the sales contract and when?
- How long will the contract take to review?
- When ideally should settlement be?
- How will you get paid?
- What does training/onboarding in their new role look like?
- Will you have a role in the company once you sell?
- Will you be available to the new owner once you sell?
Selling to a family member can be a marvelous thing — something to be proud of, as so few family businesses successfully transfer from generation to generation. This option is not without pitfalls, though, so going into it with open eyes will help head off future issues at the pass. And please don’t make the classic “assuming” mistake, taking for granted that your family member wants to step into your shoes. Just ask and pray that you’ve done a good job over the years of earning and developing trust with your kin.
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