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I came to know a gentleman who, years before we met, sold the business he and his late father had operated for more than three decades.

He did very well in the transaction but failed to prepare his family for the “sudden wealth” that poured into their lives. Lacking adequate guidance, some family members spent too much, and others made impulsive financial decisions. Soon enough, rifts developed as a lack of sound financial planning and management. The mistake resulted in missed opportunities, squandered resources, and hurt feelings.

Life changing

1. The need to focus your time and effort on finding a buyer and executing the deal; and

2. The need for continuous personal and family wealth management – a process that can foster an enduring legacy of multi-generational prosperity.

Other financial considerations in and around the sale of a family business include doing right by employees and weighing the best U.S. locations for owners to reside before and after the deal is done.

Steps to take

A successful business sale stems from meticulous preparation – which includes these six tasks:

1. With help from accountants, lawyers, and business brokers, owners must gather and organize financial records, contracts, and other vital documents. In this, and at every stage leading to the actual sale, confidentiality is paramount. To keep from unsettling employees, suppliers, and customers, share sensitive information exclusively with trusted advisors and, eventually, with qualified buyers who have signed non-disclosure agreements.

3. As a seller, work closely with your financial advisors and accountants to:

    • Ensure that your financial statements are accurate; and
    • Identify areas for improvement.

4. Another task on the way to a business transaction is a 360-degree checkup on business insurance, employee benefits, and retirement plans to ensure everything is optimized for sale.

5. Next up (and perhaps most important) is crafting a narrative. You can call this a “targeted marketing strategy,” but it boils down to telling a truthful and compelling story that highlights the strengths, competitive advantages, and growth potential of your business. Work with confidential advisors to craft a clear story designed to resonate with would-be buyers.

It can be difficult, but securing a great sale requires maintaining your patience and composure through the inevitable ups and downs of working toward a deal.

The sale of a family-owned business can result in substantial financial gain and should be planned for years in advance. Working with wealth-management professionals with experience in sudden-wealth transitions is the best way to prepare. Collaborating with you, these experts can help you:

  • Craft a comprehensive financial plan that addresses long-term goals, risk tolerances, and family values;
  • Educate family members on responsible money management, including the psychological impacts of sudden wealth, and the need for open and frank communication;
  • Embrace a legacy mindset by developing a plan for passing wealth, values, and wisdom to future generations;
  • Establish effective family governance structures to ensure communication, decision-making, and wealth transfer across generations;
  • Build a reliable support network of trusted advisors – perhaps in the context of family office services associated with ultra-high-net-worth families;
  • Preserve and grow wealth through diversification, risk management, and other protective measures;
  • Adapt lifestyles – including optimal places of domicile – in ways that balance prudent financial management with the business of enjoying life;
  • Explore philanthropic opportunities aligned with family values, establishing a lasting legacy – and a source of family cohesion in the absence of an operating business;
  • Prioritize family members’ emotional well-being and make support available when and as needed. New wealth can cause great stress for some; and
  • Safeguard privacy and physical security.

Defining characteristics

In my experience, family business owners who thrive after selling the enterprise have these three traits in common:

1. They keep their egos in check enough to seek second, even third, opinions from independent experts.

2. They choose capable professional advisors: Experts who can see beyond their expertise and are happy to function as members of a team working on their client’s behalf.

3. They entrust oversight of their team of professionals to a qualified fiduciary advisor who can coordinate accountants, attorneys, insurance agents, business brokers, etc.

Selling a family-owned business ushers in new priorities. By adhering to best practices for the sale and addressing wealth-management considerations before and after the deal is inked, families can confidently navigate a new world of wealth.

Selling a business and managing sudden wealth calls for guidance from trusted advisors and a consistently mindful approach. Striking this balance bodes for a prosperous future where the legacy of your family is secured, and future generations can thrive.