By Marios Loucaides
A common response from family business owners when asked the above question is, "Let them make an offer, and we'll see." If asked about the value of the business, there is usually no clear answer. Most owners are emotionally attached to their businesses. They like receiving offers for sale, but only as a compliment, not a sincere intention to sell unless the right price is offered. It's very challenging to lose your identity, purpose, and the accompanying recognition, no matter how good the price is. Besides, sometimes having too much money can be a problem. Yes, you read that correctly, for people who lived modestly, and the bulk of their income was invested in the business, the sudden influx and management of significant amounts of money at home can be quite difficult.
The possibility of selling should always be considered, even if it's not a desire. We recognize that all business founders share some common traits, such as hard work, vision, and determination. Another common characteristic among entrepreneurs is the need for eventual succession, both in terms of ownership and control of the business. Most aim for a successful transition to the next generation, their children, but that's not always feasible. Succession planning, like retirement, is not a pleasant activity; it reminds us that we are not immortal and brings us a step closer to death. It deprives us of our identity and the power that comes with the position. Therefore, many prefer to be forgotten in the daily grind, focusing on hard work and operational matters, and avoiding confronting reality.
Who and when the next owner of your business will be is a significant change that requires time and effort, which unfortunately most of us ignore (75% of family businesses worldwide lack a succession plan. As a result, less than 1 in 3 businesses are successfully transferred to the next generation, even fewer in Cyprus).
Now, while we talk about succession with priority to the next generation, have we ever considered selling our business? Unfortunately, this question is rarely raised, mainly for emotional and ego-driven reasons. Most owners claim they built the business for their children, and selling it would be considered a failure. However, the reality is that they built it for themselves, their identity, and their ego, even if they didn't fully enjoy the fruits of their labor as much as they should have. They must acknowledge the success, which resulted from hard work and challenges, passed on to the next generations.
The possibility of selling should always be among the options for a family business, even if it's not a desire. We should always be aware of the value of our business and continuously work to increase it so that if we ever choose to sell, we are prepared. Simultaneously, we need to build the foundation to overcome the emotional attachment to the business, so if conditions offer an opportunity, we are more prepared to take the big step. Additionally, with this approach, we can measure the progress of the company and ensure that the next generation doesn't inherit a business burdened with debt, while the previous generation complains that they handed over a successful business (measured only by turnover), which the new generation destroyed. Finally, we may decide that only one or some of the descendants will take over the business, perhaps those working in it, and the rest will be given equivalent wealth. Understanding the value of the business helps us do this more easily and objectively. Moreover, if there are data from similar companies in the industry, we can compare and see what we can do to improve. Knowledge and transparency can only lead to improvement.
There are several reasons why the possibility of selling should be considered for a family business:
- There is no next generation.
- The next generation is not interested or is interested in other things.
- The next generation cannot manage the business with increased risks for both the business and the family.
- The next generation is scattered around the world.
- The next generation is too numerous to absorb the entire family into the business.
- The family decided to focus on other areas.
- The sector is facing challenges.
- Economic conditions are favorable for selling.
- An opportunity has arisen that we believe won't be repeated.
In the current economic climate in Cyprus, there is significant interest in acquisitions in various sectors and minimal interest in selling. If we apply the principle of Supply and Demand (which there is no reason not to), then the economic conditions are favorable for being prepared for the possibility of selling. As a first step, I recommend utilizing specialized advisory services to get an external opinion on our business. Excuses like not having time for 1,000 reasons are not enough.
Mr. Loukaides is the founder of Synpraxis Management Services.
[This article was translated from its Greek original]
