Family Owned Companies

Family Owned Companies

Exit strategies for SME owners are invariably linked to the succession plan of the company. For family owned SME’s exiting the company and handing over the reins to the next generation is a lot harder as there is little in the way of surplus cash on hand to pay off the original founders. In some (usually successful SME’s) there are dysfunctional differences between the older and newer generations on how the business is perceived with changes in the macro environment and/or the introduction of technology.

Whilst the younger generation would be happy to see off the older generation as soon as possible they are invariably unable to muster the resources to pay off the older generation. Delayed payments do not recognise the risk of handing over the reins of the company to the next generation

The situation is usually complicated even further if the business is owned by a family trust where some of the children work in the family business and others do not.

Key benefits of designing proper exit strategies are;

1. They preserve the original reputation and branding of the company by introducing a formal succession plan;
2. They provide an Earnings Based Valuation of the company;
3. They provide for a payout plan from the resources of the firm by designing ‘options’ that protect both parties and link these options to the gradual transfer of ownership;
4. They permit the original owners to stay on in an advisory capacity during the transition.

The Busines Farm specialises in succession plans and exit strategies.

If you do have any questions please feel free to contact Allan Rodrigues on allan.rodrigues@thebusinessfarm.com.au or Sam Fairhall in New Zealand on sam.fairhall@thebusinessfarm.co.nz