FAMILY BUSINESS SUCCESSION
What do you do if you cannot find a successor or a buyer for your family business? Sell to your skilled and experienced workforce! “It’s an answer you may have been looking for.”
57% of family businesses have acknowledged that they would have no choice but to cease trading within one year of a severe illness or death of a current owner.
Only 42% have planned for the family business succession.
Family Business Succession Options
Model 1. “Recycling dad” but what if no one is willing or able to step into dad’s shoes?
Model 2. Next Generation ownership and management
Model 3. Have active next-generation owners with a non-family management team
Model 4. Trade Sale or find a private equity investor
Model 5. Management Buyout – Then the question arises; Can the business then sustain another MBO when the managers/owners are ready to retire?
Model 6. Employee Ownership
6a. Create some liquidy with a minority employee ownership stake. This unlocks a portion of the families business wealth.
6b. 100% of family-owned shares sold by
- Direct share purchase by employees
- In-direct share purchase by a trust.
6c. Combination approach with a percentage retained by the family
This allows the selling family to preserve the business legacy they built whilst realising the capital value that has built up in the company over the years. The equity in the trust is paid out to them from future profits of the employee-owned company over the coming years.
A lot more detail can be found in “Swapping Desks” a story about a family business who tried all the above and eventually stumbled on a little known and inexpensive solution rarely utilised in Australia for succession planning.
Cooperative Development Network (CDN) located in Western Sydney should be able to help you with your options in transferring ownership to your employees. Employee ownership is another form of a “Family Business”. A satisfying option if you have no related family to take the reigns.