If you currently own a family business - especially one that’s been built from the ground up by two or more relatives (a
No doubt you feel the unique combination of pride and responsibility of knowing your efforts aren’t just providing for yourself, but for a portion (if not all) of your extended family as well. You may have a number of employees relying on you to make the right decisions before and during the sale, and many of them are probably family as well.
All in all, you have a serious responsibility that goes beyond the simple question of business valuation and negotiating a profitable deal. After all, this isn’t just a financial transaction.
This is personal.
Getting to know Lawn Master, a fampreneur company for 36 years
Scott Williams, co-owner of Lawn Master, a Pensacola-based lawn maintenance company, discussed owning and operating a family-owned business that may have to consider the question of selling to outsiders in the future. His insights highlight a number of items all family business owners should consider when the possibility of selling the business arises.
Lawn Master was founded by Scott’s father, Joe Williams, in 1981 with two of his brothers-in-law involved as silent partners. In the early 1990’s when Scott and his brother, Jeff graduated from college, they came on board full-time and quickly worked toward buying out their uncles’ stake in the company. Their younger brother, Andy joined the company a few years later, and the four co-owners operate the company to this day.
Unlike many family businesses that are structured to stay within the family automatically, Lawn Master was intentionally structured to remain in the control of the co-owners themselves and not automatically pass on to spouses or children in the event of someone’s death.
As a result, no one in the family is guaranteed - or feels obligated - to inherit the company down the road. No one has to work for the company or assist with running the business if they don’t want to.
“Honestly, I don’t see any interest in taking the company over in the next generation,” Williams said. “My kids and their cousins are all pursuing their own careers and that’s fine. Making a success of business requires passion and a love of the job. If you’re forced into it, that passion just isn’t going to be there. There’s still time, but we need to be prepared for the possibility that we’ll one day need to sell Lawn Master to someone outside the family.”
Vetting your buyer
Discussing this possibility, Williams pointed out some important factors all
“There may be plenty of buyers interested, but we could never decide who to sell the company to based on money alone,” he stated. “This is something we’ve built with our own hands. It’s our life’s work. We have an obligation to our employees - whether they’re actually related or not, we feel like family and we’d want to make sure a buyer will do right by them.”
In a less personal business sale, it’s primarily the buyer who needs to do their homework and vet the company and its owner(s) to make sure they’re getting the best value for their money. But, when you’re considering selling a family business you’ve built from the ground up, you’re going to want to reverse that equation: you need to vet your buyer.
“I’d advise current business owners with a family business they care about to do their due diligence: what are the buyer’s intentions? How do they intend to maintain the reputation you’ve worked hard to establish? How are they going to treat your customers and employees?”Whether they change the name or not, your business is still your family’s legacy. Ask yourself: are you comfortable entrusting it to this individual?
Selling to another fampreneur
“One of the best things about running a family business is the shared feeling of responsibility and loyalty that permeates every decision the owners make,” Williams said. “It’s a powerful motivator for growth, but also for focusing on building something that’s going to last.”
This is the main reason Williams recommends seeking out a buyer intending to run the company as a family business, or to acquire it as part of their existing family business.
“That’s one of the ways Lawn Master has grown over the years: we’ve bought four other lawn care businesses in the area, all of which were owned by individuals who had built their companies to support their own families, or
Citing how Lawn Master has made these acquisitions profitable over the years, Williams explained, “We always focused on customer retention. That’s really what you’re buying when you buy a service business - the customers that company has served and the reputation they’ve built up. Our main goal with every acquisition was to earn those customers’ trust and loyalty by maintaining and improving the level of service they were already used to.”
In many cases, only another family business with the same sense of loyalty and responsibility can accomplish this effectively.
“What it really comes down to,” he concluded, “is deciding what you want your company to look like without you there. For business owners like my father and brothers and me, we would hate to see someone come in and scoop up Lawn Master just to sell it off in pieces or start treating our loyal customers like numbers on a list. No matter how much money we made on that deal, it wouldn’t be worth the price we’d pay.”
So, if you’re a