June 15, 2022 by Interchange Capital Partners
By Brian Baum, CEPA®, CFP®
The decision to sell a family business is never taken lightly. At Interchange Capital Partners, we understand that family-owned businesses carry deep personal, financial, and generational significance. For some families, selling may mark the beginning of a new chapter that aligns better with their evolving priorities, whether that’s enhancing financial flexibility, diversifying family wealth, or addressing leadership needs. While the traditional ideal is to pass a business on to the next generation, sometimes the best choice involves exploring other paths to preserve both family harmony and business value. Let’s review five compelling reasons why selling your family business might be the right move for your situation.
Selling Can Be an Effective Cash-Out Strategy
Though many business owners struggle with the idea of selling the business they’ve put their heart and soul into, in some cases it can be an effective cash-out strategy. This is especially true if you have large amounts of your personal wealth tied to the business, as is the case for many family business owners.
Rather than passing the business to the next generation and hoping to structure the transfer in a way that provides for you in retirement, you can choose an outright sale that would cover your retirement lifestyle and put you in a position to leave a lasting legacy for your loved ones.
Not only that, but selling is also an effective way to add liquidity to your finances, freeing up resources for other financial goals, investments, or business opportunities. There is much more flexibility with how you can use your financial resources when they are not tied up in a family business.
The Next Generation May Be Unprepared
Despite your best intentions and desires, the next generation of business leaders may simply be unprepared to take on the role. They may lack the skills, leadership ability, or desire to take over the business, making it nearly impossible to design a succession plan without bringing third-party management to the table.
Though it may be disappointing and different from how you always imagined your business would look, it does not necessarily have to be a bad thing. Selling the business can help you avoid potential disappointment or financial ruin if an unprepared next generation were to take over and squander your hard work.
The Business May Require Specialized Leadership
Another reason why selling may be a better option is if your business will require specialized leadership in the future. The underlying business may be in solid shape right now, but if the longevity of the company requires leadership resources you and your family do not possess, it could cause problems down the line. It can be easy to lose sight of the long term when your business is thriving in the moment, but this is a mistake that can lead to devastating consequences over time.
Don’t let your desire to keep your business in the family override the wise decisions that will help keep the company running for decades down the road. Selling can be a great way to provide innovation and longevity to your business while freeing up resources for you and your family to invest in other ventures.
Reduce Negative Ownership Dynamics
Though it can be hard to admit, sometimes ownership dynamics can create tension and negativity with non-family officers and stakeholders. This is often the case when family members are automatically given roles, whether qualified or not, or if they are not held accountable for their responsibilities in the company.
Nepotism of all forms is a red flag for shareholders, and it also serves to create tension and resentment among non-family employees. These negative dynamics can be avoided by selling the company to a third party who is competent and qualified to take over the leadership of the business.
Businesses (and Families) Naturally Change Over Time
Like everything else, businesses and families are not immune to the natural tendency to change over time. If your family business is only thriving right now because the current patriarch or matriarch has always held things together with their unique abilities or relationships, there may be major problems on the horizon. It is not reasonable to expect that the next generation will be able to fill the exact same role and possess the exact same skills as their predecessors.
Instead, it may be time to pass on the torch to someone else who either possesses those unique skills or who can provide the leadership and innovation necessary to take the business to the next phase in its life cycle. All businesses have life cycles, and it’s important to recognize when it’s time to pass on the reins.
Making the Right Choice
Selling a family business is a significant decision, often filled with emotion and complexity. It’s a transition that calls for clarity, thoughtful planning, and the alignment of family and business objectives. At Interchange Capital Partners, we collaborate with family business owners to evaluate their unique circumstances and build strategies that address both immediate and long-term goals. If you’re considering a sale or seeking guidance on navigating your family business’s future, we’re here to help. Reach out to us at team@interchangecp.com or call our office at 412-307-4230 to start the conversation.
About Brian
Brian Baum is the CEO & President of Interchange Capital Partners, where he leads the development of innovative strategies tailored to the unique needs of private and multi-generational companies. Early in his career, Brian conducted over 1,000 interviews with CEOs, Presidents, and Chairmen of privately held companies, uncovering a critical insight: the larger the company, the more likely the owners were to struggle with complex family, business, and ownership dynamics. Even more striking was the realization that many of these business leaders were unaware of these complexities and the sophisticated level of advice needed to effectively navigate them.
Armed with this understanding, Brian has been instrumental in reshaping Interchange’s focus, aligning its services with the lifecycle of generational transitions. His approach provides owners with expert guidance through the critical phases before, during, and after an ownership change, addressing both the immediate needs and the long-term vision of the business and family. Under Brian’s leadership, Interchange has become a leading resource for business owners seeking to solve intricate challenges and create lasting value.
Brian's vision extends beyond traditional financial advice; he positions Interchange as a family business advisory firm, recognizing the interconnectedness of family and business in creating enduring success. His leadership is not only about working to optimize financial outcomes but also about enhancing the overall well-being of the families he serves. Interchange’s work involves coordinating all aspects of a family's financial, business, and ownership strategies, akin to managing an outsourced family office, ensuring that no aspect is overlooked.
Brian’s educational background includes a Bachelor of Arts from Penn State University, where he majored in Psychology and minored in Business. He is also a Certified Exit Planning Advisor (CEPA) and a CERTIFIED FINANCIAL PLANNER™ (CFP®).
Outside of work, Brian enjoys spending quality time with his wife, Natalie, and their two daughters, Quinn and Blair. He is an avid golfer and enjoys the occasional scotch and cigar. To learn more about Brian, connect with him on LinkedIn.
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