Sell Business to Children

Lynn and Ted do business succession planning.

Lynn and Ted had a philosophy class together in college.  She was majoring in psychology, and he was majoring in engineering.  Ted sat in the back of the class.  Lynn sat on the front row.  When the professor asked questions she was usually the first one to raise her hand.  She was very positive.   Curious.  Enthusiastic.   Generous in how she viewed human nature.  And beautiful. He followed her out and invited her to go to coffee.

Ted got a job with an engineering and construction firm, Lynn went into human resources, and they married.  They have two girls and a boy.

What each of us values determines what we do with our money.  Let’s see what Lynn’s and Ted’s values are.  Both are high in Economic Value (rank higher than 97% and 77% of us), so they want to have a significant amount of money to fund their lifestyle.  Since both also rank high in Theoretical Value (at 75% and 85% of us), they also want to be sure that they have considered all of the possible options and the advantages and disadvantages of each option before they make plans.

Ted’s old firm designed the structure that the client wanted to build, built it, and leased equipment from equipment companies to build the structure.  His firm paid a lot of money to lease equipment to do construction.

Ted worked at the company for 5 years.  He did his homework and figured out how to lease equipment to his firm at a lower cost than they were paying and still make a nice profit.  He bought an equipment leasing firm that had a loyal client base.  In the process of finding a company to buy he went to the Small Business Administration and met Paul, a former owner of an equipment firm who sold it and then volunteered to help new business owners get started.  Ted and Paul have been friends for many years now.

Ted is a design engineer.  So, he leases equipment for others to build jobs, and he still designs and builds structures for clients.   And builds them with his equipment, of course.

Lynn loves doing HR because she is higher than 65% of us  in Nurturing  and higher than 75% of us in Religious Value  – so she needs to do something to make life better for people.  At 77% in Economic Value she loves managing the company money.

Now Ted and Lynn are ready to make plans to sell the business. Will any of their children want to buy the business?  Ted and Lynn will find out when they outline their business succession plan to the children.  If any of them want to buy the business then they will have to meet the requirements set out in the business succession plan.  If none of them want to buy the business then Ted and Lynn will sell it to someone else.

But first Ted puts the business in its most profitable position.

The Master Plan

1. He puts in place the Sales Management System that his sales and marketing consultant designed for him.

2.  He institutes a Lean Engineering and Construction System that cuts costs and, therefore, increases his profit margin.

3.  Dr. Knolle did a Desk Manual Workshop© for his company.  This Desk Manual System© documents the changes from Lean Engineering and Construction.  It also explains exactly how each job in the company is done now.  A job map connects the jobs in the company in a Company Work Flow Chart.

Consultants that You Might Want to Consider Using to Increase Profits and Position Your Business to Sell

 

1.  Jim C. Sorenson:  jcsorensen@msn.com.  Jim is a business broker who helps you prepare your business to be in its most profitable condition when you are ready to sell.  713-468-9933.

2.  Craig Klein:  cklein@salesnexus.com.   You might want to discuss your Sales Management System with Craig.  832-428-9995.

3.  Mark Graber:   mgraber@expensereductionanalysts.com.  Mark will do a free needs assessment for you.  His company has saved client companies up to 20% in administrative business costs.  713-851-6606.

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What do Ted and Lynn do now?

They look at what year they want to sell the company.  With The Master Plan:  They have a record on the computer of more sales across the years, cuts in costs, and what each employee does in each job.  So when they do sell the business, these will have been in place for years before they put the business on the market – at exactly the right time.

Now open this Chart and ask

How do Ted and Lynn do business succession planning?  Read 1.–12.

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Ted’s Dominance helps him to be an impressive leader that inspires people who work for him.  Across the years the business experiences substantial and profitable growth.

How do Ted and Lynn manage their money so that they get to keep it?

They realize that they do not know which employees they can trust to handle the money.  Lynn took bookkeeping courses, got a feel for business costs, and manages the company money.  Her presence and knowledge about accounts receivable, cash flow, and expenses work together to contribute to the business being profitable and to avoiding employees being tempted to embezzle.

She also runs HR.  Her strengths in Tendency to Read Feelings and Nurturance (75% and 65% respectively) help her run HR.  She has good sense about who to hire, who to fire, and who to promote.

What will happen to the firm when they retire?   They need to plan for that now.

They wonder, “Will any of the children want to work in the family business and eventually buy it?”

The children work in the business in the summer – learn about it and see how they like it.  They get to know the employees and learn what it takes to get and keep this business profitable.

What if all three of them want to work in the business?

Let’s assume that they do.    Ted and Lynn need to find out:  which children (1) want to run the business and (2) can run each business.

They design a training program for the CEO, CFO, COO and other key positions.  If a child wants to have one of these positions it is clear what s/he needs to do to be a candidate for this position.

For example:  A CEO candidate must (1) get an engineering degree, (2) get an mba, (3) work in a competitor’s business for at least three years, and (4) do an internship to learn all business functions.  Although a child is considered before company employees, a candidate must meet all criteria.

Ted and Lynn also may want to plan over time for people to move into General Manager, Operations Manager, HR Manager, Accounts Receivable Manager, Accounts Payable Manager to name a few of the people in these positions.

What Ted and Lynn are doing is called business succession planning.

As Ted and Lynn do business succession planning how do they find out what personality strengths their children and their employees have? 

They could get Personality Strength Assessments for CEO, CFO, COO candidates as well as those being considered for other Officer and Manager positions.  Whether they are family members, managers, employees, or people being considered for key positions from the outside.

How do the children decide whether or not they want to work in the family business?

They will weigh a number of factors.

1.  Do they like working in the business enough to make a career here?

2.  Do they have talents or interests which lead them in another direction?

3.  As a child grows up working in the company, s/he will get to know employees and get a feel for what each one does in each job.

What else is it important for Ted and Lynn to do to add objectivity and expertise to business succession planning?

If they do not already have Board members who are not a part of the company, now is a crucial time to add them.  Board members who have run and sold companies can be extremely valuable mentors to everyone as business succession planning takes place.

Outside Board Members

1.  Are good insurance against mom and dad having blindness about their children’s deficiencies that the business needs to have handled in some way.

2.  Are objective people who can advise the children if it is difficult to tell mom or dad, “I really don’t want to work in the business.”

3.  Can give information to either child or parent that might be difficult for one family member to tell another one.

What if none of the children want to buy the business? 

That may be very painful.  But you will get over it.

1.  You have clear standards for every key position.

2.  You control who knows what when.  At the right time you put the word out that you are selling the business.

3.  You may have had a contract with business broker Jim Sorenson to help you plan and implement The Master Plan – or you did it yourself.

4.  With the Master Plan in place your business is in a great place to sell – and bring top dollar.  Jim will help you do that. 

Reasons I May Want to Sell the Business 

1.  I want to spend quality time with my spouse.

2.  I have enough money to have a good retirement.

3. I don’t get to play enough. I am ready to play.

4.  I want to spend time with people I choose to be with just because I like them – not because I have to do business with them.

5.  I want to use my brain in new ways – ways that I choose to use it without the burden of making money.

6.  I want to energize people I spend time with. Have fun with them.  That is how I want to make a difference now.

7.  I want to pass a legacy of my experience to people I like who are younger than me.

8.  I may want to mentor younger people.   For instance the Small Business Administration in my town may have a business mentoring service.  My mentor Paul that I met there helped me.   I am going to rest a while and then check out whether or not I, too, would like to volunteer to help people who are just starting out in a business.

9. Questions I can ask to help people just starting out are:  Is there a product or service that you could provide the company that you work for now that is better and cheaper than one the company buys now?  Could you buy an existing business that does this?  This may be a good way for a budding entrepreneur to get started.

10.  I will travel for pleasure.

11.  If I get really interested in helping a budding entrepreneur, I might travel to help in his or her business, too.  Just for fun.  Be an Outside Board Member.

12.  I get to set my own hours for whatever volunteer work or play I do – as well as my own vacation schedule.

13.  I have hobbies that I want to develop.

14.  I have played tennis and golf for a while.  But not as often as I wanted to.  Now I can.

15.  Of course I want to spend time with the grandchildren.

16.  And I would like to spend time with good friends – just chillin’.

17.  What else do you think of here?

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Can my spouse and I use our PSAs© to decide how to do business succession planning?

Sure.  Use your PSA© to make a chart like this.

You already learned a lot about how a couple can use a PSA© in their business by reading about Ted and Lynn.   You know a lot about your current situation.

1.  Print out this explanation of Ted’s and Lynn’s PSAs© and how they use them to consider selling a business.  Scan this and save it as a document in a folder named  “My PSA©  and Business Succession Planning.”

2.  To order your PSA©:  Go back to the Home Page.   When you take your tests:  Think of yourself as you are when you are at your very best.

3.  After you get your PSAs©:  Use them to help you understand how to use your personality strengths plan how to sell your business and sell it.

4.  The more you think about your strengths the more you will see how to make them work together…and you get to see how they work together for all of your life.

You can do this!

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This website and case study are expert advice about how to use your PSA©.  For more expert advice you can take your PSAs© to an executive coach.

Or you and Dr. Knolle can use your PSA© and Worksheet and strategize together in her office in Houston or Galveston, Texas or on the phone.  Email her from our Contact Us page to set this up.

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Enjoy doing business succession planning and structuring your best life after retirement. 

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