Succession Conflict in Family Business: Pain is Unavoidable. Suffering is Optional.

When it comes to family business succession, pain is unavoidable. Even in the happiest, most loving families, there will be moments of disagreement and dissension. It’s unavoidable. That’s because the goal of a family is a loving relationship. But in business, goals must always include results, even if hard-fought. 

So the acknowledgement implicit in family business is: there will be pain. But suffering is optional.

That is the key message InterimExecs CEO Robert Jordan sends in this lively 7-minute video about family business succession conflict:

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Quality of Earnings Report: The Secret Weapon Buyers Won’t Tell Owners About

Are you planning to sell your company in the next year or two? 

If so, think about commissioning your own Quality of Earnings report — BEFORE you go to market. Why? Because your buyer will commission one. And it could mean you’ll be leaving money on the table.

A QOE is the business valuation standard prospective buyers use to determine a final purchase price for target companies. If you haven’t commissioned your own, you’ll by necessity be relying on the one your acquirer commissions.

As InterimExecs CEO Robert Jordan said in a recent webinar (scroll down to watch the 8-minute video), consider a middle market business owner who has signed a letter of intent agreeing to sell the company to a private equity fund for 10 times earnings. He believes EBITDA to be $10 million and expects to close for $100 million.

Then the acquirer commissions a QOE to ensure this is a solid investment decision. The report comes back with an adjusted EBITDA of $9.5 million. BAM! The closing price just dropped by $5 million.

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Business Exit Strategy Guide for Owners: Identifying Potential Successors

Choosing the person who will be your successor is the second step in this business exit process. The first step is identifying where the company will be when it’s time for the successor to step into a leadership role. Do you expect the company to be sailing along at an even keel, continuing to do what it already does so well? Or are there rougher waters ahead that will require more creative leadership?

Having a keen idea of where your company will be when you plan to step away from daily leadership is critical to understanding what competencies and skills the new leader will need – and to maximizing the worth of the organization as you convert your ownership interests into cash.

Once you have a good idea of that, it’s time to begin searching for just the right person to lead your company into the future.

And, a side note: Even if your exit strategy is to sell the company, you cannot skip this step! The buyer will want to know that you have made plans for a smooth transfer of leadership.

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